Why does Obama do what the banks tell him to do?

Leading Noble Prize winning economists like Paul Krugman and Joseph Stiglitz say banks should be nationalised. But when Obama has an economic summit to decide what to do, people like Krugman and Stiglitz are nowhere to be seen. Why not? Noam Chomsky explains why:

Obama’s plan is the same the Bush plan - it's based on the principle that the financial institutions should remian intact, no matter how much it costs taxpayers. They have to remain intact, and must remain under the control of the same people who destroyed the economy. Why?

“Obama’s constituency is basically the financial institutions. Just take a look at the funding for his campaign. I mean, the final figures haven't come out, but we have preliminary figures, and it seems to be mostly financial institutions. I mean, the financial institutions preferred him to McCain. They are the main funders for both—you know, I mean, core funders for both parties, but considerably more to Obama than McCain ... That's the way the system works: you make risky loans, you make a lot of money, and if you get into trouble, we're here to bail you out, namely the taxpayer … What does ‘too big to fail’ mean? ‘Too big to fail’ is an insurance policy. It's a government insurance policy. Government means the public pays, which says, ‘You can take huge risks and make plenty of profit, and if anything goes wrong, we'll bail you out.’ That's ‘too big to fail.’ Well, that's extreme protectionism … We lectured the third world that they must accept free trade, though we accept protectionism.”

“The modern information revolution—computers, the internet, fancy software and so on—most of that comes straight out of the Pentagon. My own university, MIT, was one of the places where all of this was developed under Pentagon contracts in the 1950s and the 1960s. In fact, that's another critical part of the way the economy works. The public pays the costs and takes the risk of economic development, and if anything works, maybe decades later, it's handed over to private enterprise to make the profits. And that's a core element of the economy. Of course, we don't permit the third world to do that. That's considered a violation of free trade when they do it. But it's the way our economy works. And it's kind of complementary to the ‘too big to fail’ doctrine of protectionism for financial institutions. But in general—we do not have a capitalist economy. We have kind of a state capitalist economy in which the public has a role: pay the costs, take the risks, bail out if they get into trouble. And the private sector has a role: make profit, and then turn to the public if you get into trouble”.