Sir, We've Lost Stiglitz! Damn!

Joseph Stiglitz has been critical of the Obama bank rescue plan, but he really unloads here: Stiglitz Says White House Ties to Wall Street Doom Bank Rescue

The Obama administration’s bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

Stiglitz is hardly a right-wing ideologue. Quite the opposite. And yet, he is bluntly accusing the Obama administration of being beholden to Wall Street.

It is actually quite shocking to me that people like him and Paul Krugman - whom you would expect to be natural allies and supporters of the administration - have been so blunt and unstinting of their criticism of Obama's efforts in bailing out the finance system. Salon has published a pretty good list of Obama's most prominent and caustic critics. Except for Ron Paul and Michelle Bachmann, it's a list of heavy hitting economists, most from the center and the Left (they might have included Robert Reisch and Robert Kuttner, also, both of whom are from the progressive side).

That Obama, Indispensable Man, and the rest are pressing forward with their plans despite their extreme unpopularity with the public, and in the face of severe criticism from their natural allies in the economics profession strikes me as ominous. No one believes the plans will work. The stress tests and toxic asset purchase plans are widely seen as shams intended to distract taxpayers from the trillions in liabilities they have been asked to take on. And yet they persist.