Resolution Trust Corporation

We asked Dean Baker, co-director of the Center for Economic and Policy Research, to assess Tim Geithner's rescue plan for the financial sector today. (Noam Scheiber already weighed in for us here.) What follows is a condensed version of our conversation. There are still an awful lot of details that we don't know, but I just can't help thinking that this is kind of a Rube Goldberg game to make it difficult to see what's going on. The basic story is that we know we have bankrupt banks, and rather than just take them over, it seems we're shuffling a lot of assets around and guaranteeing others.

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Right now, the question everyone is asking about the Paulson plan is: Will it pass? But the real question they should be asking is: Will it work? To read the headlines, you might figure the details had all been hashed out. But the deal is really just a blueprint for a program with a lot of blanks, to be filled in later. In all fairness, details about derivative pricing aren't exactly Pelosi and Boehner's forte, and it's probably a good thing they've left them to the experts. But that leads us to detail number one: Who will be the experts actually shaping the program?

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Clay Risen is managing editor of Democracy: A Journal of Ideas and a contributing editor at World Trade. His first book, A Nation on Fire: America in the Wake of the King Assassination will appear in January. In recent days, policymakers and financial experts have circled around the idea of creating a government entity--in the model of the Resolution Trust Corporation (RTC)--to buy up failing assets of financial institutions.

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Is there a middle ground on affirmative action, an oasis between radical color-blindness on the right and racial quota-mongering on the left? As President Clinton prepares to unveil his conclusions on the subject, it's hard not to sympathize with his political predicament, but hard also not to anticipate his speech with a sense of dread. Having raised expectations so dramatically, he no longer has the luxury of embracing contradictory positions, or retreating into euphemisms. But is his task impossible?

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