Economist's View: "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too"

Rep. Paul Ryan (R - WI)

James K. Galbraith

As an anti-dote to Paul Ryan's rebuttal of the President's State of the Union Address (and the commentariat's echo chamber) here is an excellent review of James K. Galbraith's book The Predator State which demonstrates the fraudulent character of the Free Market label claimed by Ryan, et al. The reviewer, Randall Wray observes:

Wherever one finds a sector [of the economy] that still operates reasonably well, one finds remnants of New Deal institutions that support, guarantee, regulate, and leverage private activities, in spheres as diverse as higher education, housing, pensions, healthcare, the military-industrial complex (and the prison-industrial complex). Naturally, even these sectors are endangered as they represent potential riches (witness subprimes, a privatization mess that Wall Street would love to repeat with Social Security). Still, Jamie is hopeful. The ideology of free markets is bankrupt, but the US is not. The path is clear: re-regulation, planning, standards (including wage controls), and coming to grips with the nation’s global responsibilities.

Economist's View: "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too"

h/t Paul Krugman

Galbraith v. Geithner, Goolsbee v. Krugman

Here's the video of James Galbraith's take on how under the Geithner plan th the banks get insulated and the taxpayers take the hit for bad loans.

And here's the Hardball video of Austan Goolsbee, Director of the White House Council of Economic Advisers, scarcely able to disagree with Krugman's point about socializing the losses and privatizing the profits.  Krugman said:

"[T]he Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets."

Since the government will guarantee smtg like 85% of face value, the only loss is the buyer's half of 15%.  If the mortgage proves to be good, or the house has value, then all the gain goes to the buyer.  

Is that right?

So after you view these two videos, please tell me why is the administration doing this?

Is it that ideology makes Congress an insuperable obstacle to nationalization - even though that would get us public control of the banks at low cost (because their obligations exceed their assets) and the public would get the gain if the debt is collected, or the asset sold at a decent price?