Scrooge90210

Krugman's Capital Injection Scheme: Nice Idea, Won't Fix Problem

The Treasury can loan out money to financial institutions that steered away from toxic assets like the ones causing the need for a bail out. In exchange for nominal interest and tax-exemption from profits associated with purchases from ailing institutions, competent financial institutions can reap profits and help out the US govt.

The govt can also bail out companies in exchange for an equity stake, but the govt can offer a rebate if returns on such holdings exceed the initial buyout plus nominal interest.

The government can do what Buffett did for Goldman Sachs, but without the need for high returns. A loan payback would suffice.

Some mix of different ideas would have to be on the table, because I don't think there is a magic bullet here.