No playbook for the bailout

There’s broad consensus among economists is that there is no real playbook for the kind of financial crisis America is currently experiencing, and ‘making it up as you go along’ might just be the best strategy.

Amity Shlaes, the author of "The Forgotten Man, A New History of the Great Depression," joins "The Takeaway to talk about the predicament of Treasury Secretary Henry Paulson, who has to convey that the strategy for the bailout plan is fluid and how he is changing the rules as he goes along:

"All along many observers had thought that it might be better for him to infuse capital into these companies [rather] than buy their troubled assets, because that basically lets them off free, and also takes control of them — when you buy someone’s assets. There was a sense that Washington was being forced to take over New York, and New York was being forced to move to Washington … but there is no clarity here — why is it that Detroit doesn’t get and Wall Street does …"

What Shlaes is currently watching on the bailout front: "Will they make room for the private sector to move in here … I look at Detroit and say ‘what are they doing for them,’ and there are two kinds of things you can do for Michigan. One is, you can just give them money out of the big package — that’s what we’re hearing in Washington. But another is, you can do a set of things to help Michigan people to find new jobs because their industry is a dinosaur … give them enormous packages to finish their lives in a positive way — to go back to school, to have good pensions. It’ possible to buy those people a good future without perpetuating the subsidy machine to the auto makers."

Shales thinks we will lose two of the Big Three car makers because, "they are just not competitive."

"The Takeaway" is PRI’s new national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what’s ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.

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