Austan Goolsbee, of the White House Council of Economic Advisers responds to Paul Krugman on Hardball. (ht (= hat tip) David)
A couple of comments: Goolsbee claims "if the private guy makes money, the government makes money. If the private guy loses money, the government loses money." Goolsbee is correct on an individual pool, but investors can buy multiple pools and Nemo has an excellent example of how the investors can make money, and the government lose money.
Goolsbee should read that example.
At 4:40 Goolsbee essentially agrees with Krugman's column:
[T]he Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.It's not a complete one-way bet on any individual pool because the investors do put a small amount of money down - and that small amount is at risk. But Krugman was referring to the non-recourse debt and he is correct.
BTW, Tanta once ripped Goolsbee - very funny: Dr. Goolsbee: I’ll Stop Impersonating an Economist If You Quit Underwriting Mortgage Loans
The administration's initial approach contrasted with those of the last two White Houses. Robert Rubin left Goldman Sachs Group to become one of Bill Clinton's top economic advisers, and convinced the new president that what was good for Wall Street was good for America. Under President George W. Bush, the administration "looked up to and admired Wall Street," says one banker. "The Obama folks don't even like us."
(DoctoRx here.: But that's all over now. Hundreds of billions in Federal money is much better than "like". It's true love.)
Goldman Sachs President Gary Cohn saw the contrast in person when he visited Chief of Staff Rahm Emanuel in early March. Goldman executives wanted to be part of the dialogue reshaping their industry, according to one Goldman executive. Instead, Mr. Emanuel lectured about how Wall Street "mispriced risk" and then expected Uncle Sam to pay the price for it. "My shareholders are called taxpayers," said Mr. Emanuel, who had previously worked for about two years as an investment banker.
The article concludes:
The banks' message: If you want our help to get credit flowing again to consumers and businesses, stop the rush to penalize our bonuses.
(DoctoRx here.: That's why they call them banksters!)