PEARLSTEIN'S PRIZE....Atrios has declared Washington Post business columnist Steven Pearlstein "Wanker of the Day" for his performance during a bailout Q&A on Wednesday. As Glenn Greenwald documents, Pearlstein was indeed a bit of a dick, reminding everyone about his Pulitzer Prize and dismissing opposition to the bailout as little more than ignorance and mindless partisanship from demented bloggers. "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," Glenn snarks.
Unfortunately, I'd say Pearlstein deserves the abuse. He must have been having a rough week or something. At the same time, it turns out he did address the questions Glenn highlights. Here, for example, he acknowledges that lots of academic economists oppose the Paulson plan and then explains why he thinks they're wrong:
Academic economists very widely believe that if the government would simply recapitalize the banks somehow, it will solve the problem by giving banks the room to borrow more and lend more, and by bringing in additional private capital. In a well functioning market, that would happen. But it ignores the reality that this is not a well functioning market, which is the basic problem we are trying to solve with this legislation. First, a dollar of new capital would not allow the banks to leverage it 10 times and lend out $11 because the market is not willing to lend at decent rates even to well-capitalized banks. Second, even if they had the money, banks are hoarding and unwilling to make loans because they are gripped by the same fear and panic as everyone else, particularly because they have assets on their books that have gone down in value every quarter for a year now and are likely to decline in the quarters to come. So the simple recapitalize the banks solution isn't going to cut it. That needs to be part of the solution, and but it is not sufficient at the moment.
And he also addresses the issue of whether we should bail out homeowners instead of Wall Street bankers:
We have already passed legislation to "bail up," several months ago, using an idea that I was one of the first people to push (refinancing involving a reduction of principal in return for equity stake in the house). We might want to expand that program even further, but it is simply not true that we haven't done anything. We put $300 billion of refinancing into that, thanks to Congressman Frank, who you would villify.
....The obvious problem is that, if you say you'll do it prospectively, then everyone will make themselves delinquent if they think they can get a better deal, and we'll have a huge bill. My guess is that it will also be politically unacceptable when people see that their taxes are being used to help out the guy next door who took on too much debt.
Pearlstein's tone is unusually snotty in this Q&A, and he should watch himself. Bloggers aren't the only ones pissed off about the bailout, the issues are genuinely complex, and insulting critics as morons is hardly a way to build support for the Paulson plan. Still, he did generally answer the questions put to him. There's plenty of substance there to go along with the snark.