Wednesday, February 10, 2010

What we need is an overhaul

by Morris A. Davis, Assistant Professor of Real Estate at the Wisconsin School of Business

Check this out. I'm not a fan of Krugman's but he is right on the mark here.

Obama's economic team is just awful. It needs an overhaul. The new team should:

(a) shift center-left with respect to Wall Street. The team should (i) break up the existing big banks--wipe out the equity, fire all top management, and boards of directors, and turn control to debt holders--and (ii) re-enact Glass Steagall.

The largest banks are all zombie banks. They are all in survival mode now, which is why they aren't lending (except when directly encouraged by the government). They are trying to stockpile cash to survive the upcoming massive losses on commercial and jumbo mortgages.

(b) shift center-right with respect to taxes and job growth (i.e. less talk about stimulus, more temporary targeted tax cuts for firms and employers to stimulate job growth--yes, it works if done properly).

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