Ellicott City, Md.: Where do you think we would be today if the bank bailout package hadn't passed in September? Was it worth the haste?
Paul Krugman: I think that without the bank bailout the whole system would have collapsed. In the first couple of weeks after Lehman went down, nothing was moving in the credit markets, and it looked as if a series of dominoes might fall. Even though things are terrible now, they would probably have been a lot worse without the bailout.
North Carolina: Why do you say that just one American automobile industry bankruptcy will bring down the entire American automobile industry?
Paul Krugman: The answer is that the Big 3 rely on a lot of the same suppliers. If, say, GM goes bust, that will doom a lot of the companies that produce parts for Ford and Chrysler; that will bring the whole traditional industry down.
