Greg Mankiw's Proposal

Greg Mankiw doesn't like the Swedish Plan, basically for the same reasons as Becker and Flynn:

"Other economists have suggested that the government inject capital itself. That raises several questions. First, which firms? The government does not want to put taxpayer money into “zombie” firms that are in fact deeply insolvent but have not yet recognized it. Second, at what price should the government buy in? Third, isn’t this, kind of, like socialism? That is, do we really want the government to start playing a large, continuing role running Wall Street and allocating capital resources? I certainly don't."

Who's talking about a continuing role? Nationalize, then privatize. It seems much cleaner.

Here's his plan:

"Here is an idea that might deal with these problems: The government can stand ready to be a silent partner to future Warren Buffetts.

It could work as follows. Whenever any financial institution attracts new private capital in an arms-length transaction, it can access an equal amount of public capital. The taxpayer would get the same terms as the private investor. The only difference is that government’s shares would be nonvoting until the government sold the shares at a later date."

I'm not sure we can wait around for new private capital. Isn't the problem that no one is lending?
Also, the government still needs to have people evaluate these private plans. If there's one thing we've learned recently, it's that there are a lot of dumb businessmen and investors. I would also worry about the problem of lobbying in this proposal, which is always a problem, but the Swedish Plan lessens the power of lobbying in my opinion.

Still, it's a good compromise plan, which I'd like better if I trusted these hybrid/compromise plans more.