Question: Tyler Cowen: Where would you find the institutional capability to run a nationalized banking system?

Paul Krugman: Well, that’s a good question. I mean, one of the things you need to do is find… and we do have a shortage. I mean, part of the problem is we’ve had a sort of long term devaluation of civil service in this country, so that I’ve been watching the contrast between US Treasury and Her Majesty’s Treasury in Britain, and US Treasury is desperately trying to recruit people from Wall Street, because it doesn’t have that type of competence, and the British Treasury doesn’t seem to be that short of competence, but, you know, you can get them, and, you know, particularly of a new administration coming in. I bet they can get a lot of smart people, a lot of people, probably a lot of people will have to be rotated in from Wall Street. There’s a lot of people at the Fed, at the various Feds, the New York Fed in particular, who knows stuff. So, it’s going to be tough, but, you know, it doesn’t have to be perfect. It just has to be something that is not too bad and gets the money flowing again.

Question: Tyler Cowen: Do you have a point estimate of the probability that an ethanol-friendly Congress spends the money for a stimulus plan in an efficacious way?

Paul Krugman: I guess the question is what’s the meaning of the word ‘effective’? Will they spend it in a way that is better than nothing? 100% probability. Will it be spent as well as ideally it should? Zero. How good will it be? That remains to be seen, but I think people do understand some of the principles, and there’s a pretty, there are at least a couple hundred billion dollars of pretty good projects out there to be started up quickly. So, a good chunk of it, I think, will be spent well. The rest, who knows?

Question: Do we need to create a new institution?

Paul  Krugman: Well, probably not on a… maybe on a temporary basis, but, you know, we don’t want, I don’t want to seize the economy’s commanding heights and hold them, right? I want to just have money pumped in long enough to get the thing functioning and then reprivatized. You want to do what Sweden did. We want to do what we did with the [SNLs], when we had, you know, we had a temporarily created institution that took over a lot of their assets and then disposed of them. So, no. We probably do need… Yeah. I mean, the tarp is kind of a new institution, right? Very haphazardly created, but take that thing and make it run right, and get, you know, get some people, get more people recruited and preferably a few people were not from Goldman-Sachs.