Geithner-Krugman Feud Comes To A Head On Sunday Shows (VIDEO)


The high-profile policy duel between Tim Geithner and Paul Krugman came to a head on Sunday. Following the Treasury Secretary's appearance on ABC's "This Week (read/watch that interview here), Krugman participated in the panel session and made clear that he hadn't yet been convinced.

"It's a plan to rearrange the deck chairs and hope that that keeps us from hitting the iceberg," the Nobel Prize-winning economist said of Geithner's bank plan. "They've done some things very fast, but they've been very small things ... There's no way this could be enough."


On "Meet the Press," Geithner was asked to respond to the critiques Krugman has written about Treasury's financial rescue proposal. Geithner defended the bad assets buying plan, which Krugman called "trash for cash," arguing that it was a "critical" part of the administration plan. He asserted that the alternatives were worse. "Life is about choices, about alternatives," the Treasury Secretary said. "This is a better way to help get the markets working again."

"The investors' money is at risk. They can lose all their money. Now, again, you have to compare these to the alternatives. The alternative scheme, the government in our view, will be taking on much more risk. The taxpayer will be much more exposed to losses. Life is about choices, about alternatives. This is a better way to help get the markets working again. ... What we're trying to do is get the entire financial system, our complicated system, working again so that we get credit where it needs to go in the economy and that requires strengthening our banking system. It requires making sure there's enough capital to withstand a deeper recession, and we're going to make sure that capital comes with conditions to make sure banks restructure, that there's accountability for management, that the firms emerge stronger not weaker, and there are tough conditions to protect the taxpayer. ... This is not going to solve our problems, but it is a critical part of the solution and we think it's the best approach to protect the taxpayer and make sure that the market is working with us."

In order to bring confidence back to the markets, Geithner added, the rules of the program "cannot change."


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