BUSINESS

Krugman: Citigroup Bailout Necessary, But Structured Outrageously

One economist who's not pleased with the way the bailout of Citigroup is structured is Nobel Prize winner, and Princeton economics professor, Paul Krugman. Krugman acknowledged that the bailout was necessary, but wrote on his blog that the structure of this bailout is an 'outrage':

A bailout was necessary -- but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.

Krugman also criticized the details of the Citi bailout on CBS' The Early Show:

"If Citigroup had not been bailed out, then the whole financial system could collapse," said Princeton economics professor Paul Krugman on CBS' The Early Show.

But is the government bailout of Citigroup well-structured, and are taxpayers getting a fair deal here?

Krugman, author of "The Return of Depression Economics and the Crisis of 2008" (Norton), says on first read, no.

"Most of the people who have looked at it, the small hours of this morning, have said this is a lot of taxpayer risk in return for not much," Krugman told co-anchor Maggie Rodriguez.

"It looks like a very sweet deal for Citigroup management, very sweet deal for Citigroup shareholders, to the extent they have anything left - not very good for the taxpayer. This was not good."

With other bailouts seemingly having done nothing to boost consumer confidence, Rodriguez asked, why do it if it is not well-structured?

"Well, you know, things could be worse, you know? That's been the moral of this crisis: things can always be worse,' Krugman said, "and they have been getting worse.

"Things could be much worse than they are. It's what hasn't happened, not what has, is the justification. We had to do this, but we should have done it better."

Wall Street cheered the news of Citigroup's bailout with stocks rising sharply.