We received and gladly publish this analysis, from a reader whose identity, for obvious reason, we will keep anonymous.

To avoid overpaying the toxic assets the plan should ask the bank managers to contribute, alongside the FDIC and the Fed, to the debt financing of private investors.

To reduce the risks for the public the plan should ask the banks to put their earnings as collateral of the loans.

The new plan to rescue banks, as described by the New York Times, looks a lot like all the older plans. The basic idea seems to be always the same: overpay the toxic assets using taxpayers' money.

It has been widely claimed that one of the main reasons of the current troubles in the banking sector is the inability to properly price some assets, in particular Mortgage Backed Assets. The managers of the banks claim that the assets are worth more than the price at which they can currently be sold. The claim implies that managers have better information about these assets than the general public, a plausible assumption. The only way to solve the problem is to eliminate the asymmetry of information. Bank managers should be forced to invest part of their wealth and their compensation in the assets that they claim to be worth more than the market is willing to pay.

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Why is former Fed Chairman Alan Greenspan as wrong as it gets in his analysis of the causes of the recent US asset (not just real estate, asset(s)) bubble?

Yup, that's Paul Krugman.

It must be a mistake, I know, but Paul Krugman seems to have understood what his long-time friend and "multiplier co-supporter" Bradford De Long could not understand last Wednesday night. Which is also what his friends in the Administration keep denying, much to our chagrin and our dismay.

The GW Bush is the last (next to last?) version of the oldest trick in politics: exploit random events to scare people into accepting some extreme version of your agenda they would have never accepted otherwise.

A few things I learned.

Of traps and mice.

We need a larger fiscal stimulus.

[This is part III of a seven-part (!) discussion. Part I, II and IV ...]

Let's look at the second myth. The one that lead BB&Co to cut the Fed Fund Rate to zero last month. Even Bob Lucas, I am told, approved of it. I do not: it is either useless or, most likely, damaging because of the expectations formation process it motivates.

I find the ongoing public debate on the "crisis" and its "solutions" misguided. It is a "100-times larger" replica of the one that took place in 2001-2003 (and gave us the policies the effects of which we are all currently enjoying) and of the never-ending 1990s lamentation over the "Japanese Depression" (in which all the policies now being advocated were adopted, with the known results).

Well aware of being part of a minuscule minority of dissenters, I dare to dissent.

Here's is why, all the other criticisms notwithstanding and no matter how slick and refined the auctions will be, the Paulson plan cannot solve the liquidity and financial crisis anytime soon.

This is the third part of 1000 Alitalia in one shot ... I have a "new" coauthor and we have managed to find some data that leave us rather puzzled about the whole thing. In fact, we are still working on the more controversial (really controversial) data and their implications, so stay tuned as it may be more "fun" than we would like it to be. Because everyone is busy making urgent proposals (while Bush, Paulson, Bernanke and Congress are busy ignoring them and playing politics or serving vested interests) we also throw in our two cents on the topic "urgent measures". The only one we really advocate being "stay calm, think, do not panic, do not rush ... talk softly but carry a big stick ...". Apparently no one is staying calm, so disaster may really fall upon us.

Questa sarebbe la terza parte di 1000 Alitalia in one shot... Ho un coautore di lusso e, visto l'evolversi degli eventi, abbiamoprovato a fare due conti a mano. I dati più interessanti, ma anche più controversi, continuiamo a guardarli e riguardarli per essere sicuri di quanto andremo dicendo. Non c'è fretta, arriverà anche quell'articolo e temo che qualcuno concluderà che siamo diventati decisamente e per sempre "pazzi" ... amen, ci abbiamo fatto il callo. Poiché tutti si affannano a dire la loro sul da farsi immediato (mentre Bush, Paulson, Bernanke ed il Congresso li ignorano olimpicamente) diciamo anche noi la nostra, per quel che vale, sulle "misure urgenti". Come con l'articolo precedente, non ho trovato il tempo per tradurlo in italiano. Mi scuso.

I apologize for being so verbose, but while writing I am trying to also clear my mind of its many confusions. Because nFA is a blog read by many people, I am also trying to make the argument at least partially understandable to readers not trained in formal economic theory. A machine translation into the Italian language is available (click the flag), which I hope to turn into readable, instead of laughable, Italian tomorrow.