About a year ago, I sketched a plan to get the banks back into health. Its principle was simple: Instead of handing out massive amounts of cash to the banks with tons of toxic assets clogging their balance sheets, in the hope that that they restart lending, hand the money directly to the so-called “subprime” borrowers so that they continue to service their mortgages. At the time, it sounded utopian, even silly — because the political clout to push for it, let alone to force its implementation was non-existent. Even now, the political force that is required to place this plan in the agenda is still in its embryonic stages, but I believe it is gradually building up.
In this post (in my otherwise neglected blog), I just want to report that — aside from Joseph Stiglitz — there’s another reputed economist just coming around to my approach: Steve Keen. The neat thing is that, unlike me, who only enunciated a principle and sketched the idea, Keen has taken the trouble to model and calibrate carefully the effects of the alternative plan.
[Image borrowed from The Black Commentator: http://www.blackcommentator.com.]