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I didn’t really want to write anything about the economy today, but it’s hard to ignore a graph like this:

The Dow Jones rose nearly 7% today after Timothy Geithner explained how the Treasury Department plans to rescue America’s banks with a “public-private partnership to buy $500 billion to $1 trillion of troubled assets from major banks.”

We should all feel somewhat relieved after stock market gains over the past eleven trading days raised the Dow 18% from its low of 6,595 on March 6th to its close of 7,776 today, right?

Not so fast… Nobel Laureate Economist Paul Krugman is not at all pleased with Geithner’s announcement.  In today’s column, Krugman writes:

This is more than disappointing. In fact, it fills me with a sense of despair.

After all, we’ve just been through the firestorm over the A.I.G. bonuses, during which administration officials claimed that they knew nothing, couldn’t do anything, and anyway it was someone else’s fault. Meanwhile, the administration has failed to quell the public’s doubts about what banks are doing with taxpayer money.

And now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

…

But the Obama administration, like the Bush administration, apparently wants an easier way out. The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.

If Paul Krugman is worried, then I am usually worried too. 

So what is the Obama Administration saying of the criticism?

“I think Paul’s just wrong on this one,” Christina Romer, head of the White House Council of Economic Advisers, said on ABC’s “Good Morning America” show just ahead of the plan’s release.

“This is really tails both the government and the private sector win, heads both the government and the private sector lose. We both are going to have, as the saying goes, skin in the game.”

I hope Obama’s team is right and Krugman is wrong, but I wouldn’t bet on it.  Krugman’s almost always right about these things…

Update:  Listen to today’s NPR interview with Paul Krugman here.

Make no mistake about it:  Jon Stewart is a national treasure.  Unlike the clowns that pass for reporters or analysts on the 24-hour cable news channels, Jon is actually funny and he really does know what he’s talking about.  He also has great respect for good journalists, but he loathes those who do not live up to their calling.

The New York Times reports:

It wasn’t a “Brawl Street,” or a thrilla in vanilla. It wasn’t a “Daily Show” friendly feud or even much of a discussion. Mostly, the much-hyped Thursday night showdown between Jon Stewart and Jim Cramer, the mercurial host of “Mad Money” on CNBC, felt like a Senate subcommittee hearing.

Mr. Stewart treated his guest like a C.E.O. subpoenaed to testify before Congress — his point was not to hear Mr. Cramer out, but to act out a cathartic ritual of indignation and castigation.
“Listen, you knew what the banks were doing, yet were touting it for months and months, the entire network was,” the Democratic Senator from Comedy Central said. “For now to pretend that this was some sort of crazy, once-in-a-lifetime tsunami that nobody could have seen coming is disingenuous at best and criminal at worst.”

…

Mr. Stewart made his feelings clear. “I understand you want to make finance entertaining,” he told Mr. Cramer. “But it’s not a game,” he said, using an additional adjective that was bleeped out. “When I watch that I can’t tell you how angry that makes me.”

…

And the “Daily Show” host pointedly questioned the hyped-up theatricality and dubious claims of CNBC shows like “Mad Money” and “Fast Money.” When Mr. Cramer explained, “There is market for it and you give it to them,” Mr. Stewart stared at him in disbelief, exclaiming. “There’s a market for cocaine and hookers!”

Watch the whole interview here – unedited and uncensored:

…and if you haven’t seen all the segments that led up to this showdown, watch them all beginning with the one that got it all started.

And after you’ve watched the whole series, you’ll probably agree that Jon Stewart is the [expletive deleted] King of America!