I also believe that conventional monetary policy is tapped out, and unconventional monetary policy is of doubtful efficacy. So I am in favor of doing something else on the banking/finance side. My favorite idea right now is that of nationalizing Fannie Mae and Freddie Mac completely and unleashing them to buy up every single mortgage in the country at market rates. Their ability to borrow at the Treasury rate means that they should be able to make money by doing this. When they own mortgages they can renegotiate and refinance them all with the public interest in mind. And as they squeeze banks out of the mortgage business the fact that banks are looking for yield should push other financial asset prices up—and make it possible for those businesses that should be expanding to get financing right now on terms that make expansion profitable.
So at the moment my preliminary judgment of the Obama fiscal boost is that it is a good first bid, but that the administration ought to be doing a lot more.
J Bradford Delong, Department of Economics, U.C. Berkeley, writing back in January of 2009. The Fed might as well have read this excerpt as their recent official testimony to congress. It seemed to me Bernanke said, “Anyone got any ideas? I’m open to brainstorming here!”
Benny’s testimony: http://www.youtube.com/watch?v=mVqBOBxJ1lM
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snikolhaus posted this
I'm Nikolaus Bauman 