We’ve mentioned the perennially gloomy Nouriel Roubini a couple of times here, and not altogether unfavorably. He said correctly earlier this year, “Leveraged risk is a cancer in this market.”

But now that Secretary Paulson and the Bush administration have proposed a $700 billion plan to deal with the problem, Professor Roubini apparently doesn’t like it at all. We would have expected Roubini to react somewhat favorably, but apparently he prefers a plan that directly reduces the mortgage debt of individuals rather than having the government buy the bad mortgages from institutions. (In practice, the plans might wind up with the same results.)

For our part, we agree with Paulson’s dire analysis of what was happening to the credit markets. We have seen in recent days a domino effect among leveraged financial institutions, and that is precisely what caused the recession of 1929 to become the Great Depression. There are some who say that the Paulson plan goes way too far. The scarier possibility is this: what if the problems are far greater than we even imagine today?

UPDATE — Professor Roubini apparently likes the Paulson plan, according to his quotes in the NYT.

This entry was posted on Saturday, September 20th, 2008 at 12:49 pm and is filed under Democrats, General, Republicans, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.