Paul Krugman, Princeton University professor, New York Times op-ed columnist and winner of the 2008 Nobel Prize for Economics, had been very critical of Treasury Secretary Henry Paulson’s original bailout plan, saying it was distorted by ideology.
Today, however, Krugman told CNBC he thinks the new plan, which will inject $250 billion into U.S. banks, “looks much better.”
“In the last six days this thing has come together with a plan that really does address the critical problem of inadequate capital at the banks (and) addresses the need for guarantees to calm the markets down," said Krugman. "We don’t know this is going to work, I wish we were sure, but this is a much better. For the first time I’m starting to feel that policy is really getting some traction on the crisis.”
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Even with the new bailout plan, Krugman thinks we're headed toward a "serious recession."
"Even before the financial markets went crazy four weeks ago…there was a lot of downward momentum in the economy, and this isn’t going to reverse that. This is just preventing that from getting much worse.”
“I think this is the right thing for the immediate financial crisis, but I would say let’s have aid to state and local governments, let’s have public spending, let’s have some expanded unemployment benefits, partly because people need it, partly to put cash in the hands of people who are likely to spend it.”
http://www.cnbc.com/id/27180035
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