Wednesday, October 8, 2008

Double your money

Greg Mankiw has a plan for fixing the financial system: The government matches the funds raised by banks from private capital, taking non-voting equity stakes in the institutions. This can be done, he thinks, based on the already passed rescue/bailout legislation, using a portion of the $700 billion. It seems to me that the ideas needed to get past this crisis will use government to bolster rather than replace free markets, and this idea seems to fit that bill.

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