Krugman was Right

When President Obama came to office in January 2009, the U.S. ecnonomy that he inherited from his Republican predecessor was headed into collapse. The jobs report and the stock market indices were shedding big numbers. As the president considered what to do he turned to this economic team of Larry Summers (the Treasury Secretary under Clinton who championed allowing banks to gamble with credit default swaps and went on to earn tens of millions at hedge fund DE Shaw) and Tim Geither (former NY Fed Reserve boss who signed off on allowing Goldman and JP Morgan to get away with billions in US tax payers money by paying them 100% on their insurance contracts with the failed insurance giant AIG).

The advise he got from Larry and Tim was not only bad for Americans out of work, it was also bad for the president's future.

What Larry and Tim advised the president to do was to go easy on the banks saying that if he did so they would start lending money, everyone would just forget about what the banks had done to cripple the economy and the who scary story could just go away.

Paul Krugman at the time wrote that this was folly. He said that the president needed to inject significantly more money directly into the real economy to create jobs not give it to the banks. Krugman also said that if the president didn't take this direct course of action that he would lose political support.

The election of Republican Brown to the seat held by the late Teddy Kennedy shows how prescient Mr. Krugman was.