Luigi Zingales: Why Paulson Is Wrong

Last week, my colleagues Doug Diamond and Anil Kashyap guest-blogged on the financial crisis.

The response to their piece was amazing. At one point, their blog post was the second-most-emailed article of the day for the entire New York Times, even though it wasn’t even in the printed version of the paper — just on our blog.

I can’t remember ever seeing a blog post make the most-emailed list.

After that kind of reaction, how could I pass up the opportunity to publicize the ideas of Luigi Zingales, another one of my colleagues, whose provocative piece is entitled “Why Paulson Is Wrong.”

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  1. Imad Qureshi says:

    This is so much better than the last one. This is socialized capitalism and its not right.

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  2. Mike B says:

    One could also say that the taxpayers who have taken advantage of this easy credit deserve to pay back what they borrowed and learn to save more and not live beyond their means. It takes two to complete a transaction, one to lend and one to borrow. Nobody forced people to buy McMansions in Exurban areas, 12 mpg SUV’s and granite counter tops with built-in plasma TVs.

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  3. George Khoury says:

    What a great piece – a direct challenge to the people (just about everyone in the media) who say the bailout is distasteful but “necessary.”

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  4. Tristan says:

    This is a clear, to the point, description of the problems with the proposed bailout. It also offers a good alternative.

    I’m going to email this out to as many people as I can think of, and will be sure to include my senator on that list.

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  5. Craig says:

    HTML is more accessible than PDF’s. This inaccessibility will be one of the reasons this isn’t as popular.

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  6. Dave says:

    This is amazing…To have not at least looked at this possibility and brought it to public debate just underscores the arrogance of the current administration holds against the very people who elected it. $700+ billion of our tax dollars to benifit a few corporations as corporate welfare is not right.

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  7. David Heigham says:

    Zingales has a sketch plan of what should be done. Paulson has merely said a lot of taxpayers credit will be needed to do something not properly described.

    Score 1 to Zingales, 0 to Paulson.

    Zingales is proposing measures that have worked in the past. Paulson is proposing unproven ideas.

    Score 1 more to Zingales, 0 to Paulson.

    Zingales does not question Paulson’s premise that drastic measures had to be taken in a hurry. However, I do not think I was alone in thinking that the market had probably touched bottom on Thursday the 18th. Short traders had just burnt their fingers on the terms of the AIG and HBOS takeovers. Morgan Stanley had signalled they would pay the market price for extra capital from China, and a couple of British banks had quietly raised a couple of $ billion from normal investors.

    Score 0 to Zingales, 0 to Paulson

    Paulson has said nothing about the fundamental need to increase the eqity capital base of the financial institutions to compensate for their losses and to allow the lower levels of leverage that are likely to be the norm for some years to come. Zingales has that in the core of his propsals.

    Score 1 more to Zingales, 0 to Paulson.

    Overall, it would be a great relief if Zingales would take on a big job in Washington for a while. Just to give Hank Paulson time to de-stress and re-focus, of course.

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  8. 4Justice says:

    I don’t know guys but this democracy thing is getting a bit too costly.

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