March 24 (Bloomberg) -- Treasury Secretary Timothy Geithner has a good chance of succeeding with his plan to cleanse banks of toxic assets, says A. Michael Spence, co-winner of the 2001 Nobel Prize in economics. Paul Krugman, the newest laureate, is so sure Geithner will fail that he’s full of “despair.”

Even winners of the highest awards in economics can’t always be right. Which prediction proves correct depends in part on whether private investors can be enticed to bid on as much as $1 trillion of illiquid loans and securities that banks are now stuck with.

“This program is crucially dependent on the private sector as participants and price setters,” said Spence, 65, who shared the Nobel Prize with George Akerlof and Joseph Stiglitz for a theory that found some government intervention can make markets more efficient. “It could work,” Spence said in a telephone interview yesterday.