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February 27, 2009

As Paul Krugman observes in The New York Times we have zombie banks, unable to supply the credit the economy needs. He adds that to end their zombiehood the banks need more capital. But they can’t raise more capital from private investors. So the government has to supply the necessary funds.

Rowsoncapitalism.jpg Martin Rowson

Krugman adds that what we have now isn’t private enterprise, it’s lemon socialism: banks get the upside but taxpayers bear the risks. And it’s perpetuating zombie banks, blocking economic recovery.

| Posted by Gary Sauer-Thompson at 6:42 AM | | Comments (1)


Godfrey Hodgson at Open Democracy, says re the US:

no one really knows what to do about the cloud of "toxic assets" that clog American banks' balance-sheets. Some advise that they be consigned to "bad banks", like a virus hunted into a vault; others think government insurance is a better way to enable banks to draw a line under these loans and securities that are so hard to evaluate.