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.

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.

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Posted by: Peter S Stock | February 28, 2009 9:51 AM