THE NEW YORK POST
Even the best and brightest brains in economics the Nobel laureates aren’t unanimous on whether the Treasury’s plan to rid banks of toxic assets will rescue the economy.
Debate arose yesterday among the more than 50 living winners of the acclaimed prize, with a lopsided ratio of 9-to-1 giving Treasury Secretary Tim Geithner’s plan a public thumbs-down.
Three Nobel winners Edward Prescott, president of the Federal Reserve Bank in Minneapolis, and economics Professors Vernon Smith and James Buchanan stood by their joint statement months ago that Congress was playing in fantasyland with the huge bailout.
They call the rescue effort “a triumph of hope over experience to believe that more government will help the United States today.”
Nobel winner and Columbia University Professor Edmund Phelps said Geithner’s plan to buy toxic bank assets “is a non-starter” despite its warm reception on Wall Street.
Nobel economist Robert Aumann said efforts by Federal Reserve boss Ben Bernanke “weren’t smart.”
“The intervention by the regulators will lead to further bankruptcies of banks and insurance companies,” he said. “They are only encouraging institutions to take more risks.”
But economist Michael Spence, a co-winner of the 2001 Nobel, came out in support of Geithner, saying his plan “could work.”
“This program is crucially dependent on the private sector,” he said.
But Spence’s co-winner, Joseph Stiglitz, isn’t so sure.
“You can take the bad assets off the banks, but where are they going to go?” Stiglitz told Bloomberg.
Meanwhile, 2008 winner and Princeton University economist Paul Krugman said he’s so sure the Geithner plan will fail “that it fills me with a sense of despair.”