Krugman asks, and answers "politics" (that is, right wing bromides like "government is the problem"). Of course:

Yves on Krugman's column today. She writes:

My big beef is that he didn’t go far enough and is WAAY too forgiving of the motivations and actions of Larry Summers and by extension, Team Obama.

Somebody kidnapped Paul Krugman at that White House dinner, didn't they? Krugman wrote:

Why the change in tone? Administration officials are furious at the way the financial industry, just months after receiving a gigantic taxpayer bailout, is lobbying fiercely against serious reform. But you have to wonder what they expected to happen. They followed a softly, softly policy, providing aid with few strings, back when all of Wall Street was on the ropes; this left them with very little leverage over firms like Goldman that are now, once again, making a lot of money.

Yves comments:

So said Pyrrhus, of the Pyrrhic Victory. And Professor Krugman:

So the odds now are that the [health care reform] thing hangs together, and reform is indeed enacted this year. It will be a highly flawed product; we’ll probably spend much of the next decade trying to fix it.

But it does look as if it’s going to happen. And that will be a huge victory for ["]progressives["].

In what universe does a policy that we know going in will take 10 years to fix get declared a victory?

Nobelist All-Star Celebrity Cage Death Match! I always did enjoy an intellectual splatterfest, and I know who I'm rooting for: Salt Water (Princeton; MIT) vs. Fresh Water (Chicago).

But what next?

Paul Krugman today lays it all out: how Big Government has been what has stood between us and a 1930s-style Great Depression (even as he acknowledges that they could have done a better job of it). Some excerpts: (but read the whole thing!)

I heard you say that we aren’t going to have a second Great Depression. What saved us?

The answer, basically, is Big Government.

So the government fixed things? Does everyone go back to work tomorrow?

Just to be clear: the economic situation remains terrible. We haven’t yet reached the point at which things are actually improving; for now, all we have to celebrate are indications that things are getting worse more slowly.

[...]

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Krugman explains. [Note: two posts]

You really must see his chart. It's my new second-favorite chart, after this one.

Sarah asked about this awhile ago. Maybe he saw her post? ;-)

Paul Krugman explains single payer. Under the headline -- get this:

Irresponsible punditry

I'm with Cohen on this one. That's a FAIL.

In fact, two FAILs. One for the late date; the second for the complete lack of awareness that the date is late.

NOTE Here's Krugman's single payer blogging oeuvre. How'd that "single payer's not politically possible" trout get in the milk, anyhow?

Krugman has finally broken his silence on HR 676:

1. If I could start from scratch, I’d go for single-payer. Where introducing single-payer has proved politically possible, it’s been a smashing success.

2. However, there are other systems that also work well. The Netherlands, for example, relies largely on private insurers, although they’re tightly regulated and there are extensive cross-subsidies. And they have universal care at much lower expense than we do. So single-payer isn’t the unique ideal.

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There's been some buzz about Michael Hirsch's Newsweek essay on why Washington ignores Joseph Stiglitz.

Krugman chimes in to disagree and he seems to be getting his shrill back, just a bit:

But the larger story is the absence of a progressive-economist wing. A lot of people supported Obama over Clinton in the primaries because they thought Clinton would bring back the Rubin team; and what Obama has done is … bring back the Rubin team. Even the advisory council, which is supposed to bring in skeptical views, does so by bringing in, um, Marty Feldstein.

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After I read this horrific story in the Times about Obama selling out even the public option (Bloomberg has the same story), I went look at Krugman's blog -- since Krugman believes, correctly, that you can't reform health care without conflict -- and found Krugman got there first:

Really bad news on the health care front. After making the case for a public option, and doing it very well [which is not to say that the case is good --lambert], Obama said this:

“We have not drawn lines in the sand other than that reform has to control costs and that it has to provide relief to people who don’t have health insurance or are underinsured,” Mr. Obama said. “Those are the broad parameters that we’ve discussed.”

There he goes again, gratuitously making a big gift to the other side.

My big fear about Obama has always been not that he doesn’t understand the issues, but that his urge to compromise — his vision of himself as a politician who transcends the old partisan divisions — will lead him to negotiate with himself, and give away far too much. He did that on the stimulus bill, where he offered an inadequate plan in order to win bipartisan support, then got nothing in return — and was forced to reduce the plan further so that Susan Collins could claim her pound of flesh.

And now he’s done it on a key component of health care reform. What was the point of signaling, right at this crucial moment, that he’s willing to give away the public plan? Let alone doing it at the very moment that he was making such a good case for it?

Well, as soon as you take the view that the Finance Wing of the FKDP, and their leader, Obama, view the "key component" of health care reform as preserving the business model of for-profit insurance, then everything falls into place, doesn't it?

Can anyone guess what they are?

[Welcome, Naked Capitalist readers!* If any of you have tips for this series, please feel free to mail me at lambert_strether DOT corrente AT yahoo DOT com. --lambert]

To see why I'm asking this question (after a lapse of a few days) see the posts at Day 1 and Day 2, and here. Now (after reading Krugman today) read James Galbraith:

As a result of the administration's determination to save the big banks, we will emerge from this slump with an unreformed financial sector in the hands of the same people who produced the disaster in the first place. While some bad assets will recover value, many will not, and losses will either go unrecognized or they will be transferred, via the public-private partnerships, first off the balance sheets of the banks and then to the taxpayer, when the mortgages default, via the non-recourse feature of the FDIC's loans. We could assess the likelihood of this happening, if we chose, by the simple step of auditing the loan tapes underlying a fair sample of sub-prime securities, to determine the prevalence of missing documentation, misrepresentation and prima facie fraud. [Fraud that I believe, with Bill Black, amounts to accounting control fraud.] Such a study would constitute minimum due diligence and that fact that one is not underway is a very bad sign.

Doing due diligence before we throw another few trillions at the banks after the stress test kabuki has been performed would seem to be the baseline for any responsible policy maker.

So why isn't Krugman calling for it?

Explaining why the latest floated plan from Obama's "top economic advisors" (is that you, Timmy and Larry?) doesn't make sense.

The proposal is to "stretch" (the NYTimes' word) the bailout funds by converting the existing loans to the biggest banks into common stock. This turns the loans into capital for the banks, thus improving their balance sheets, and good things ensue (or so we are told). Because, uh-oh! the stress test are expected to show that some big banks, including my own personal parasite BoA, are in need of more capital. (I know the feeling!)

Quoth the Times:

The Shrill One's absence from the fray was "partly medical."

From Krugman's home page at the Times:

Just sayin.

Come on. This story's been cooking since at least February, Hamsher's on the case, everybody who is anybody in Princeton listens to Bill Moyers, and the OFB think the story's important enough to shoot the messenger (and miss. Snicker).

And if Black is right, and accounting control fraud by the banksters is at the heart of our financial crisis, that has huge implications: Morally, legally, financially, politically. (That's why a Pecora Commission is on the "Make him do it" list.) And if he's wrong, it would really help to know that, and cross that worry off.

But Krugman's been silent. Curious, no?  Read more…

The story is "out there" (I'll get to the newest Barron's shortly), and so far, Krugman's been silent. Neither agreement, nor debunking.

It's definitely night time for the economy, so why isn't the dog barking? Curious!

Option Armageddon:

Research firm KBW says Wells Fargo may need to raise $50 billion in order to pay back $25 billion of TARP capital and to cover expected loan losses as the economic slump deepens.  (Bloomberg)

KBW expects $120 billion of “stress” losses at Wells Fargo, assuming the recession continues through the first quarter of 2010 and unemployment reaches 12 percent….

KBW is also questioning the quality of Wells’ Q1 earnings figure released last Thursday:

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Missed The Shrill One's column yesterday, where he asks this question:

Why has the Obama administration been silent, at least so far, about one of President Obama’s key promises during last year’s campaign — the promise of guaranteed health care for all Americans?

And his answer:

A long piece, in Rolling Stone. I won't try to, ahem, summarize him here, the work is very dense and any attempt to condense it I fear would leave out something important. Go and read, please.

If you're up and not otherwise occupied Monday morning (I'll be teaching, alas) you can watch Paul Krugman give his Nobel Prize lecture live here.

3:00 - 3:50 Stockholm time translates into 9:00 - 9:50 AM ET according to this.

The title of the talk is "Increasing Returns". Should be interesting.

On deficit spending and the need for boldness in addressing our economic woes:

Jamie Galbraith responds to the question posed by the National Journal, "Is the deficit a threat to future recovery?"

James K. Galbraith, National Journal: No. The question is grossly misconceived. Right now and for the immediate future, the budget deficit is the only source of demand that can fuel a recovery. Our present problem is not that it is too big, but that it is too small. Far too small.

Joe Stiglitz in the NY Times:

A $1 Trillion Answer
By JOSEPH E. STIGLITZ
Published: November 29, 2008

WHAT President-elect Barack Obama will need to do is horribly complicated but also very clear.

First, he must stop the economy from going deeper into recession. Then he needs to bring about a robust recovery, preferably in ways that support the long-term needs of the United States: by repairing our neglected public works, invigorating our technological leadership, making our society greener, fixing our health care problems, healing our social and economic divide, and restoring our social compact.

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Nice guys do finish first sometimes.

"Paul Krugman, a professor at Princeton University and an Op-Ed columnist for The New York Times, was awarded the Nobel Memorial Prize in Economic Science on Monday.

Mr. Krugman received the award for his work on international trade and economic geography. ..."

On his blog, The Conscience of a Liberal , he says:

"A funny thing happened to me this morning …"

Pharmacy Information weblog

U.S., the Oxford style debate series sponsored by The Rosenkranz Foundation, announced the results of the first debate of its Fall 2008 season on the motion, “Universal health coverage should be the federal government’s responsibility.” A sold out audience at Rockefeller University’s Caspary Auditorium, New York City voted 58% for the motion and 34% against at the conclusion of the debate. 8% were undecided.