In his latest Op-ed Krugman seems to be getting closer to the nub of it. Just a little further Paul you are almost home.
Much discussion of the toxic-asset plan has focused on the details and the arithmetic, and rightly so. Beyond that, however, what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.
To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.
But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.
As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.
Once krugman integrates some notion of stagnant wages and the privatization of debt via the massive extension of consumer credit he will arrive at an indictment of a growth model that goes well beyond a bloated financial sector. He will, in short, end up indicting the very neoliberal growth model he once so proudly shilled for.