Anatomy of a Crisis

Greed begets greed and the bubble grows,White House economist Larry Summers said.Then greed gives way to fear,and this fear begets fear.This is the paradox at the heart of fifnacial crises.What is the task of policy in this environment? We need a program that breaks and reverses the vicious cycles.The President's plan moves on jobs,credit and housing,attacking the vicious cycles.The Recovery and Expansion Act is the largest such plan in American history.Already its impacts are being felt,retaining teachers and cops,increasing take-home pay and extending health insurance.Contracts are underway for infrastructure projects.Consumer spending appears to have stabilized,and the financial plan addresses credit contraction.There are two pillars in the President's plan:first,one trillion or more for financing mortgages,student and small business loans through the TALF program,and a public-private partnership enabling banks to divest toxic assets;second,assuring that our banking system is well-capitalized and able to lend on a substantial scale,which starts with the stress test of major banks,Larry Summers noted.