I’m very frightened… oh, all right, I’ll blog about the financial crisis

Though they have slightly different logics, it appears that Paul Krugman and William Kristol are equally skeptical of the bailout plan.   I’m now going to curl up in a fetal position and hum to myself.  Someone let me know if the world ends.  UPDATE:  In response to commenters, I’ve been asked to post what I ...

Though they have slightly different logics, it appears that Paul Krugman and William Kristol are equally skeptical of the bailout plan.   I'm now going to curl up in a fetal position and hum to myself.  Someone let me know if the world ends.  UPDATE:  In response to commenters, I've been asked to post what I think about the proposed bailout.  Here's what I think:  I think Henry Paulson and Ben Bernanke are pretty smart guys, but that said... Last I checked, the government does not give $700 billion to anyone without any oversight whatsoever.  No one.  The Fed has oversight, the Pentagon has oversight, everyone had oversight.  So that's a non-starter. This is such an obvious non-starter that I have to wonder if that was the point -- i.e., by getting Congress and the media focused on oversight/transparency issues, it diverts attention from other possible means to deal with the crisis. The fundamental problem is that no one knows what the market value of the "toxic debt" really is.  It's somewhere between, say, "seventy cents on the dollar" to "I'll trade you this Apple IIe that I use as a doorstop for $1 million in CDOs."  The government's first job is to get the markets to properly value that debt. One way to do this is for the government to act as the monopsonist and buy it all -- but I know it's not the only way, and I'm pretty sure it's not the best way.  I would love it if either of the major party candidates said, "you know what?  There's a lot of complex s*** going down very quickly, so before I blame anyone for the crisis, let's all take a deep breath and figure this out."  It won't happen, but I can dream. It's weeks like these when I think about calling up some security scholars who like to say that "IPE is a dying field" and say, "so what do you think today, smart guy?" 

Though they have slightly different logics, it appears that Paul Krugman and William Kristol are equally skeptical of the bailout plan.   I’m now going to curl up in a fetal position and hum to myself.  Someone let me know if the world ends.  UPDATE:  In response to commenters, I’ve been asked to post what I think about the proposed bailout.  Here’s what I think: 

  1. I think Henry Paulson and Ben Bernanke are pretty smart guys, but that said…
  2. Last I checked, the government does not give $700 billion to anyone without any oversight whatsoever.  No one.  The Fed has oversight, the Pentagon has oversight, everyone had oversight.  So that’s a non-starter.
  3. This is such an obvious non-starter that I have to wonder if that was the point — i.e., by getting Congress and the media focused on oversight/transparency issues, it diverts attention from other possible means to deal with the crisis.
  4. The fundamental problem is that no one knows what the market value of the “toxic debt” really is.  It’s somewhere between, say, “seventy cents on the dollar” to “I’ll trade you this Apple IIe that I use as a doorstop for $1 million in CDOs.”  The government’s first job is to get the markets to properly value that debt.
  5. One way to do this is for the government to act as the monopsonist and buy it all — but I know it’s not the only way, and I’m pretty sure it’s not the best way. 
  6. I would love it if either of the major party candidates said, “you know what?  There’s a lot of complex s*** going down very quickly, so before I blame anyone for the crisis, let’s all take a deep breath and figure this out.”  It won’t happen, but I can dream.
  7. It’s weeks like these when I think about calling up some security scholars who like to say that “IPE is a dying field” and say, “so what do you think today, smart guy?” 

Daniel W. Drezner is a professor of international politics at Tufts University’s Fletcher School. He blogged regularly for Foreign Policy from 2009 to 2014. Twitter: @dandrezner

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