“Ersatz Capitalism”, a.k.a. Crony Capitalism, aka Lemon Socialism, aka Obama Plan for Banks

Joseph Stiglitz (Nobel economist) writes in the NY Times (registration may be req’d) how the the Obama/Geithner plan is bad for taxpayers and ordinary citizens.  This is not real capitalism folks, it’s gamed capitalism for the oligarchs.

The main problem is not a lack of liquidity. If it were, then a far simpler program would work: just provide the funds without loan guarantees. The real issue is that the banks made bad loans in a bubble and were highly leveraged. They have lost their capital, and this capital has to be replaced

Paying fair market values for the assets will not work. Only by overpaying for the assets will the banks be adequately recapitalized. But overpaying for the assets simply shifts the losses to the government. In other words, the Geithner plan works only if and when the taxpayer loses big time. Continue reading