No Silver Bullet for Crises Like These: Pearlstein

With various factions blaming a single factor—and pushing a single solution—for the financial crisis, Steven Pearlstein of the Washington Post cautions that there won’t be a silver bullet. Reducing foreclosures, removing toxic assets, and nationalizing banks will all come into play; meantime, we must “resist the fetching idea that there is a simple, quick and relatively painless way to put a complex financial system back together again.”

First, banks must resume lending, perhaps facilitated by government guarantees. Reducing foreclosures is doable if lenders are willing to restructure loans instead. As for “toxic” assets, their value will return over time. The best thing the Treasury can do is help banks recapitalize. And all this, Pearlstein concludes, “will involve several more rounds of trial and error.” (More Steven Pearlstein stories.)