What Geithner critics -- and there are many -- never seem to address is that the banks hold multiple trillions of dollars of bad-bet assets, and the Treasury secretary has only $350 billion in TARP moneys to play with. Leveraging private-sector dollars to expand the impact of that congressionally authorized sum seems, in principle, a bright idea.
Krugman would prefer that Geithner put a stake through the hearts of the zombie banks with federal receivership -- aka "nationalization." But neither Geithner, nor Obama for that matter, has the authority to force that to happen. That troubled road runs through Congress. (To say nothing of foreign capitals: A U.S. nationalization of a multinational conglomerate like Citigroup has reverberations in the halls of power of Mexico and other countries where Citi has tentacles.)
Obama & Co. are astute enough to have calculated that the price paid in political capital to achieve the Krugmanian ideal -- aka The Swedish Solution -- would likely be so great as to foreclose the possibility of passing universal healthcare or climate legislation.
And though the ins and outs of Geithner's plan are considerably above my pay grade, in its broad strokes it seems to offer a way to price and liquidate a huge chunk of heretofore immovable assets. That's progress.
What do you make of Geithner's plan?