You Can Lead a Horse’s Arse to Water, but…

You can’t make him think—or own to loan. Krugman notes:

[L]ast week Joe Nocera of The Times pointed out a key weakness in the U.S. Treasury’s bank rescue plan: it contains no safeguards against the possibility that banks will simply sit on the money. “Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead.” And sure enough, the banks seem to be hoarding the cash….

Events have forced Mr. Paulson into a partial nationalization of the financial system — but he refuses to use the power that comes with ownership. [link added]

So that $700 billion was the kleptocratic c.f. Main Street suspected it was, and which Wall Street has known at least since Ms. Smith Listened in on Washington.

And that just means it will be longer, and worse. But Jamie Dimon will be richer at the end, so all is well in Paulsonland.

UPDATE: Peter Dorman at Econospeak was all over the Nocera piece the day before I saw it. And his reading, naturally, is classier than mine:

You can lead a bank to liquidity but you can’t make it loan.

but the description is pretty much the same:

It makes it crystal clear that Paulson has a plan for his friends in the financial world, but there is no plan for the economy.

The United States can’t wait for noon on January 20, 2009.