Bagging on the Bailout

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BAGGING ON THE BAILOUT….Atrios is annoyed:

If we remember way back to about 2-3 weeks ago, Hank Paulson was promising that there would be NO MORE BAILOUTS. Then, suddenly, we needed a giant BAILOUT RIGHT NOW. The media typically responded by using the Dow as a proxy for the economy/magnitude of the crisis in order to help hype the necessity of a massive bailout. And since the bailout passed, the Dow has tanked.

OK, point taken, but there’s a big dollop of unfairness here. It’s not as if Paulson and Bernanke just changed their minds for no reason, after all, or that a systemic bailout was a dumb response, or that the Dow is meaningless. Remember the sequence of events here.

Three weeks ago Paulson and Bernanke announced that they wouldn’t bail out Lehman Brothers. Maybe that was a risk worth taking, maybe it wasn’t, but in any case it didn’t pan out. In fact, it was a disaster. So unless they wanted to sit and watch the U.S. financial system melt down completely, P&B didn’t have any choice but to change their minds. Better that than to stubbornly cling to their free market principles no matter what the consequences, right? And while the Dow may not be a great proxy for the entire economy, the credit markets really are in big trouble and the Dow reflects that. What’s more, the S&P 500 reflects it even better, and it’s fallen even further than the Dow. Finally, today’s drop is almost certainly a reaction to European problems and the inability of the EU to offer a coordinated response, not a reaction to the Paulson plan.

Now, the Paulson plan may turn out to be bad policy. Plenty of economists think a pure recapitalization scheme would be a better bet. But the mere fact that P&B responded to events and offered up a systemic plan after a solid year of dike-plugging efforts and a final scary-as-hell week hardly counts against them.

And as long as we’re on the subject, here’s another question: is the problem with the credit markets fear or is it bank capitalization? If the problem really is capitalization, then it’s not fear that’s keeping banks from making loans. The problem is that they just don’t have the money. And yet plenty of economists who think capitalization is the fundamental problem also talk as though fear is really the driving force behind the panic. Which is it?

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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