Hard to tell what the econobloggers were more obsessed with over the weekend, the now de rigueur weekly pile-on flattening Ben Stein’s latest offering, or Treasury Secretary Hank Paulson’s plan to stabilize the mortgage market.
Ben Stein’s too easy — yes, it’s important to pay attention and be critical of whatever the New York Times is pumping out in its business coverage, but How the World Works decided months ago that there was a very simple way to avoid being aggravated by Stein. Stop reading him. If online page-view metrics are one of the ways in which Stein’s “success” is measured by the Times, then the Ben Stein bloggerfest that erupts every Sunday is only solidifying the man’s hold on his bullhorn.
So — onto the Paulson rescue plan, which the treasury secretary flogged again on Monday morning in a speech at the Office of Thrift Supervision’s National Housing Forum. The aspect of the plan that has attracted the most attention is the provision that will freeze interest rates for homeowners who have good credit standing and are able to meet their current payments, but are unlikely to be able to handle an upcoming rate reset.
There are obvious problems: How do you differentiate between homeowners who are in real trouble, and speculators who deserve to be burned? How do you avoid a tidal wave of lawsuits from the owners of the securities whose value is tied to the mortgages that would be resetting? How does all this square with established structures for handling bankruptcy?
All good questions. But at How the World Works, we were most interested in one sentence delivered by Paulson that profoundly undermines the political logic of laissez-faire capitalism in the 21st century. To put it mildly, this is not what we expected to hear from the former Goldman-Sachs CEO.
An appropriate role for government is to bring the private sector together when innovation has greatly increased the complexity of achieving beneficial solutions for all parties involved.
The clause “when innovation has greatly increased the complexity of achieving beneficial solutions” is admirable shorthand that captures the essence of humanity’s existential plight on this planet. And despite the longings of those who would prefer returning to some kind of quasi-mythical back-to-the-land simplicity, it’s only going to get worse. Billions of people all over the world, innovating their hearts out, enjoy access to ever more powerful technology and are linked together in ever greater networks. You think life on this planet is complex right now? Wait another second. Guess what? It just got more complicated.
Which, by Paulson’s logic, will mean that the future inevitably will offer increased opportunities for government to play its appropriate role in knocking heads, taking names and “achieving beneficial solutions for all parties involved.”