Lenders Hoard Their Cash--Ask for Yours
Away from Wall Street, Economists Question Basis of Paulson's Plan
By Neil Irwin and Cecilia Kang Washington Post Staff Writers Friday, September 26, 2008; A01
The Bush administration's pitch for a sweeping bailout of the financial system has centered on two simple premises: that the economy could suffer a crippling downturn if action is not taken very quickly and that this action should consist of the government buying troubled mortgage securities from banks and other institutions.
But many of the nation's top economists disagree with one or both of those ideas, even as many top political leaders have swung behind them.
. . . almost 200 academic economists -- who aren't paid by the institutions that could directly benefit from the plan but who also may not have recent practical experience in the markets -- have signed a petition organized by a University of Chicago professor objecting to the plan on the grounds that it could create perverse incentives, that it is too vague and that i…