(updated below - Update II)
Washington Post business columnist Steven Pearlstein has spent the week insisting that only gross ignorance could account for opposition to the Paulson bailout. After the House rejected the bailout plan on Monday, he wrote a column -- entitled "They Just Don't Get It" -- arguing that bailout opponents simply "don't understand the seriousness of the situation." He scoffed at the idea that any well-informed person could question -- let alone oppose -- the specific Paulson bailout plan Steve Pearlstein favors.
Today, in a chat Pearlstein had with readers, one reader voiced extremely reasonable and well-informed objections to this specific bailout plan:
You are correct in your piece yesterday that 'we don't get it'. I don't get the fact that millions of admittedly reckless homeowners are losing their homes but we only worry about bailing out big banks. . . . Well, I don't have confidence in the people who authored this 'bailout' and give them absolutely zero credit for the job they have done so far. I ask again what I asked you last week: Why not buy out the bad mortgages of the 'subprime' borrowers? The lenders will get their money and the government might get its money back in the future. Why not bail up instead of bail down?
Pearlstein responded by boasting that he had won the Pulitzer Prize:
Nobody has been more critical of the practices of banks and Wall Street and brokers than I have, probably long before you were even focused on this issue, so I certainly don't owe you any apology on that one. If you want to check, you'll see I won a certain prize for that.
Another reader then objected: "No, Mr. Pearlstein, it's you who doesn't get it. . . .Bail out the people who need -- and deserve -- our help keeping up the payments on their homes. If we do that, Wall Street's bad mortgage debt will take care of itself." That prompted this outburst from Pearlstein:
The left wing bloggers are out in force on this one -- they see this as a seminal issue, like the Iraq war vote and the vote on warrantless searches. But other than not really understanding the problem and not really having studied the proposal, you guys are doing just great! Thank God there is a mainstream media out there that actually does reporting and has people who understand thing [sic], because if the flow of information and news to the American people were left solely to bloggers, we'd be in a big mess.
Where to begin? Oh how we long for the Glory Days when the Steve Pearlsteins had their Supreme Wisdom honored and never had to hear anyone talking back:
First, an enormous number of Actual Economists -- as opposed to newspaper columnists -- vigorously oppose the bailout. Professor Nouriel Roubini called it a "disgrace" and has repeatedly argued it will not alleviate the crisis: "the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown."
Second, all sorts of other Actual Experts -- not just Pearlstein's idiot-readers and moron-left-wing-bloggers who have the audacity to object -- have argued that this plan won't work, is deeply unjust, and that far better and more equitable alternatives exist.
Just today, in Pearlstein's own paper, Jonathan G.S. Koppell and William N. Goetzmann of the Yale School of Management argued that a far preferable solution is to have the government pay off all delinquent mortgages -- which would transform the toxic waste into solid instruments and would prevent people from having their homes foreclosed -- the very plan Pearlstein's reader advocated which provoked such snotty scorn. Many other ignorant, ill-informed morons have had the temerity to argue that other proposals were superior to the bailout, including George Soros (recapitalize the banking system) and Actual Economist Brad DeLong (nationalize under-capitalized institutions). One of the leading blogger-opponents of the bailout has been Duncan Black, an Actual Economist with a Ph.D. in Economics from Brown. And Actual Economist Dean Baker wrote earlier this week:
How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That's what Warren Buffet did with Goldman Sachs.)
Pearlstein -- and so many other bailout cheerleaders -- scorns those same concerns as grounded in stupidity and ignorance when they come from the ugly, loudmouth, teeming, insubordinate masses who refuse to obediently bear the massive debt being tossed on their backs.
Third, just today I interviewed former New York Times reporter David Cay Johnston -- who, unlike Pearlstein, didn't beat his chest and boast that he "won a certain prize" for his journalism, though he did -- and Johnston condemned what he called the "atrocious" journalism on the financial crisis, and said "there's an enormous amount of just wrong reporting going on." In particular, Johnston documented the fear-mongering taking place among TV journalists that has plainly put the public into the state of submissive panic that Pearlstein wants them to be in, whereby -- exactly as was true for Iraq, eavesdropping, the Patriot Act and a whole host of other measures -- they come to be convinced that they better unquestioningly and immediately submit to the dictates of the political and media establishment, they better relinquish any belief that they should question what they're being told, lest they suffer imminent, inevitable, catastrophic doom.
Fourth, nothing is easier and cheaper -- or more worthless -- than making sweeping, categorical criticisms of large groups without bothering to identify a single specific. Who specifically are the "left-wing bloggers" spouting ill-informed and misleading statements in opposition to the bailout? Specifically, what have they said that isn't true, and which "mainstream media" reporters have "actually do[ne] reporting" and "understand things" and thus saved the country from being misled by the blogging-morons who dare to oppose the bailout?
Fifth, Pearlstein snidely dismisses concerns that the Treasury Secretary about to be vested with vast discretion can't be trusted with such power ("in the list of villains, [Paulson]'s pretty low on the list," and "I think you may want to think again before questioning his motives or his competence"). Pearlstein specifically mocked the idea that Paulson is motivated by allegiance to his until-very-recently Wall St. friends and Goldman colleagues ("He let Lehman fail, and that nearly brought Goldman down with it, which doesn't sound like a guy who was out primarily to protect his Wall Street friends").
But it's Pearlstein who appears quite ignorant here. As Johnston pointed out, letting Lehman fail eliminated a Goldman competitor, while Paulson's decision to save AIG -- in debt to Goldman for $20 billion -- likely saved Goldman. The fact that Paulson's decision to save AIG was made in consultation with Goldman's CEO, Lloyd Blankfein, raises obvious, pressing questions for anyone who is not a blindly gullible establishment-worshiper. As Actual Economist Dean Baker said about that episode:
Did Goldman's influence with their ex-CEO make a difference in Paulson's decision? I have no idea, but this thing stinks. Can you imagine if clerical workers losing their homes got to sit around with bankruptcy judges deciding the fate of their mortgages? It doesn't work that way where the rest of us live.
It is impossible to exaggerate the corruption of this Wall Street crowd.
And then there is the fact that Paulson was leading Goldman when it was a leader in the very reckless derivatives wreaking such havoc, and it was Paulson who continuously insisted for the last two years that there was no housing crisis and that the market was correcting itself. The deep public distrust of our Government and the establishment which Pearlstein serves is profoundly rational and well-informed. It is the blind trust Pearlstein is eager to vest that is ignorant.
Contrary to Pearlstein's simplistic bullying, opposition to the bailout isn't tantamount to denial that there is a financial crisis. It's perfectly possible simultaneously to recognize that we have a serious crisis in the credit market and still oppose the bailout. It's also possible to acknowledge a crisis in the credit market while questioning whether a rejection of this specific plan would spawn a global meltdown and catapult us into the Second Great Depression.
From the beginning, Congress considered only one framework -- the Paulson framework -- and systematically ignored all others. Professor Roubini called that decision "pathetic" precisely because it resulted in consideration of one plainly inferior plan. Professor Roubini is right, and it's equally pathetic to watch people like Pearlstein try to shove this bailout down the public's throat based on patronizing claims that these matters are much too complex for regular people to have an opinion (even if the opinion is based on familiarity with what actual experts have been arguing) and that, instead, the only rational thing to do is cede one's critical faculties to those with regular columns at The Washington Post (ones who have won "certain prizes" for that). That sort of blind following of our Nation's Wise Men is what the country has been doing for the last eight years. The only thing that's "ignorant" would be continuing to do it.
UPDATE: Former Bush Treasury Secretary and long-time Alcoa CEO Paul O'Neill has obviously been reading way too many stupid left-wing blogs and not nearly enough intrepid Washington Post columnists (h/t karrsic):
Paul O'Neill, who served as President Bush's first treasury secretary, today called the bailout bill headed for Senate passage "crazy," with "unbelievably bad" consequences.
"Doesn't this seem like lunacy to you?," said O'Neill, who was President Bush's first Treasury chief, from 2001 to 2002, in a telephone interview today. "The consequences of it are unbelievably bad in terms of public intrusion into the private sector."
"Is anybody thinking there?" asked O'Neill, who also served as deputy budget director in the Ford administration. "It's too late, it's not going to make any difference and it's aggravating as hell when there's a better idea and you can't even get it in play," he said, recognizing little success so far in pitching his own proposal.
Did Steve Pearlstein mention that he won the Pulitzer Prize?
UPDATE II: Another drooling know-nothing being misled by left-wing bloggers is John Allison -- CEO of BB&T, one of America's largest commercial banks (h/t nick):
BB&T chief exec slams bailout plan
A significant and immediate tax credit for financial institutions to purchase homes would be a more effective solution for the financial crisis than the proposed $700 billion federal bailout, says BB&T Chief Executive John Allison. . . .
He adds the primary beneficiaries of the proposed rescue are The Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE: MS). The U.S. Treasury, he says, is "totally dominated by Wall Street investment bankers," and "cannot be relied on to objectively assess all the implications of government policy on all financial intermediaries."
Allison also said it is "inappropriate that the debate is largely being shaped by the financial institutions who made very poor decisions."
Allison -- drowning in populist rhetoric, class-war resentment, and paranoid questioning of the motives of government officials -- obviously "doesn't get" just how serious of a financial crisis we face.