Our quick scan of Paul Krugman’s archives would seem to vindicate him in his dispute with fellow NYT writer Andrew Ross Sorkin.
Quick recap: Sorkin in a post this morning characterised Krugman as having wanted to nationalize all the banks. Krugman blasted that and said he wanted an apology?
So did Krugman really want to nationalize all the banks?
Here’s Krugman’s best defence, a post written on March 11, 2009, right at the bottom and in the fog of war.
I was not saying “nationalize all the banks”; I was saying do what the Swedes did — in tandem with a guarantee on bank liabilities, take the banks with zero or negative capital into receivership. It’s really important that you do this: if you offer a blanket guarantee on the assets of a bank that’s already underwater, you (a) are very likely to take a large hit on taxpayers’ money, without any share in the upside (b) create a huge moral hazard/looting incentive.
Is he picking nits?
We don’t think so. Winding down banks that are technically insolvent is not the same thing as nationalizing all the banks.
Here’s another post where he’s saying that nationalization wouldn’t involve all the banks.
That being said, in retrospect, it’s hard to imagine this approach having worked any better than Geithner’s, given how surprisingly smooth things have gone.
So Sorkin’s critique of Krugman (and perhaps Roubini) is narrowly correct, if overstated.
We’ve pinged Sorkin for comment.
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