Too Much Wall Street

josephstiglitz.com

Nobel prize-winning economist Joseph Stiglitz has a good op-ed in the New York Times today. It's a criticism of the Obama administration's latest bailout plan for banks for buying up their toxic assets. As Paul Krugman has already publicly proclaimed, Stiglitz is critical of the plan for being heavily favored towards banks and investors with great risk towards taxpayers.

In the plan, taxpayers take about 92% of the risk in the form of matching funds and guaranteed loans to investors. If buying some toxic assets somehow pays off, then investors and taxpayers get some profit, but if the purchases don't pay off, taxpayers are stuck with the vast amount of the losses. Privatized gains, socialized losses.

This is another example of Wall Street having too much of an influence in Washington. Goldman Sachs CEOs were the previous two Treasury secretaries, and Larry Summers and current Treasury Secretary Timothy Geithner are heavily influenced by Wall Street.

There is an article in the May issue of Atlantic Monthly that is getting some publicity. From what I hear and need to read myself, it discusses the US taking on some aspects of a banana republic, one of those aspects being "financial oligarchs" having too much influence in the country.

Anyway, I'm not too pleased with the Obama administration's economic plans. Obama is too afraid of temporarily nationalizing banks which may be the more effective way to go. Let's see some real leadership and less talk from the man.