Meltzer Calls Paulson Plan Social Democracy at Its Worst

Discussion in 'Politics' started by JustChristian, Sep 19, 2008.

  1. JustChristian

    JustChristian
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    Meltzer Calls Paulson Plan Social Democracy at Its Worst
    By Bob Willis

    Sept. 19 (Bloomberg) -- Federal Reserve historian Allan Meltzer said U.S. government efforts to cleanse financial institutions of troubled loans shouldn't be financed by taxpayers.

    ``I certainly don't think this is the taxpayers' problem,'' said Meltzer, a professor of political economy at Carnegie Mellon University in Pittsburgh. ``This is not a place exactly with a great big surplus that can afford to do these things. This is social democracy at its worst.''

    The 80-year-old economist spoke in an interview after Treasury Secretary Henry Paulson said in Washington that proposed measures to rid banks of troubled assets and shore up financial institutions would cost ``hundreds of billions.''

    ``If they remove financial losses from the financial institution,'' the government should ensure that ``the financial company will still owe the money,'' he said. ``Civilized countries like Chile do that.''

    Paulson told a press conference that economic policy makers would meet with congressional leaders over the weekend to prepare a program to remove ``illiquid assets'' from banks' books, while ``including features that protect the taxpayer to the maximum extent possible.''

    The proposal is a recognition that earlier efforts failed to revive financial and housing markets. The government took over American International Group Inc., Fannie Mae and Freddie Mac in the past 12 days, a period when Lehman Brothers Holdings Inc. filed for bankruptcy and Americans pulled a record $89 billion from money-market funds.

    To contact the reporter on this story: Bob Willis in Washington at [email protected]
    Last Updated: September 19, 2008 12:03 EDT
     
  2. JustChristian

    JustChristian
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    The auther is a professor of economics at Carnegie Mellon.
     

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