An Optimistic Take on TARP

If you read Tyler Cowen’s list of theories as to why the TARP/TARP II decision-making has been so murky you’ll see that one possibility that keeps coming up is that it’s deliberately being made confusing so as to confuse people. If you put that together with Obama’s remarks on Sweden and the fact that the plan Geithner announced yesterday does in fact leave open nationalization as a possibility, then I think we need to at least consider the possibility that Obama believes the banks will need to be nationalized but doesn’t believe it’s politically feasible to say this or get congress to agree to it. Thus, he’s unveiled a confusing “non-nationalization” plan that he does think he can put into place and that will, at the end of the day, permit bank nationalization as an option.

The main piece of support I could find for this theory is that in the ABC News interview Obama immediately leaps into a “Japan versus Sweden” discussion, implying that he in fact does believe the banks are insolvent and is merely pretending to have a policy based on a diagnosis of illiquidity.