March 24 (Bloomberg) -- Nobel laureate economist Paul Krugman said the U.S. will eventually have to “seize” big banks as the economic and financial crisis deepens.

“In the end, we’ll come to it,” Krugman said in an interview with Bloomberg Television today, referring to nationalizing banks. “You guarantee the liabilities of everybody but seize the big ones.”

He also said the U.S. economy won’t stabilize until “late in the year.”

The economy shrank 6.2 percent last quarter, the most since 1982. Economists surveyed by Bloomberg News this month forecast gross domestic product will contract at a 5.2 percent pace from January through March.

U.S. companies cut 651,000 workers from payrolls last month, bringing job losses to 4.4 million since the recession began in December 2007. The unemployment rate in February jumped to 8.1 percent, the highest in more than a quarter-century, according to Labor Department figures.

The U.S. Treasury this week announced a public-private partnership plan aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets from banks. The proposal is “a very diffused, ill-defined instrument,” Krugman said.

“It’s very unlikely to produce enough gain in the prices of these assets to make the banks viable again,” said Krugman, a professor at Princeton University. “It’s a pretty bad deal for the taxpayer.”

To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net; Kathleen Hays in New York at khays4@bloomberg.net

Last Updated: March 24, 2009 16:01 EDT