Are We All Lemons Now?

'Lemon socialism' - it's the oldest political game in town: You privatize benefits and socialize costs.

In his post 'Bad' of January 29, Paul Krugman tells a joke about a very serious matter, which rings all too true:

As the Obama administration apparently prepares to launch Hankie Pankie II — buying troubled assets from banks at prices higher than they will fetch on the open market — it occurred to me that an updated version of an old Communist-era joke may be appropriate: under Bush, financial policy consisted of Wall Street types cutting sweet deals, at taxpayer expense, for Wall Street types. Under Obama, it’s precisely the reverse.

Update: Maybe I was too cryptic. The original joke was, “Capitalism is the exploitation of man by man. Socialism is the reverse.”

His initial impression seems to be confirmed. In his latest column, 'Bailouts for Bunglers,' he now gives what might be the best short description of Obama's approach to the second half of the bailout:

Question: what happens if you lose vast amounts of other people’s money? Answer: you get a big gift from the federal government — but the president says some very harsh things about you before forking over the cash.

More than a week ago, Robert Reich made the same argument in his post, 'How America Embraced Lemon Socialism.'

So if, by many accounts, Obama has shown some smart progressive leadership on the stimulus & recovery package - though the full extent of which still remains to be seen - why this centrist caving on the second half of th bailout? Is there a larger political strategy behind this?

In any case, since we are now in the midst of lemon socialism, might as well do the real thing, and do it right, because that might be the only adequate response: The nationalisation of quite a number of banks. But of course the question again will be an quintessentially political one: Who gets what, when and how?