The Bear Stearns Collapse: Triage and Opportunity

It wasn't really a bailout for them. It was good for all of us that the economy didn't collapse.

No one who owned Bear stock was protected. This was to protect the small guys who don't even realize they were at risk. To decry this deal means you just don't get how dire a mess we were almost in. It is all well and good to be rich or a theoretical purist and talk about how the Fed should let the system collapse so that we can have a "cathartic" pricing event. Or that the Fed should just leave well enough alone. But the pain to the little guy in the streets who did nothing wrong would simply be too much. The Fed and other regulatory authorities leaving well enough alone is part of the reason we are where we are. First, get the water out of the boat and fix the leaks, and then make sure we never get here again. (Emphasis mine)

When it's an issue of total economic collapse, we do not have the luxury of a moral judgment, to see that the people making the risky decision get what they deserved. The moral facts of another Depression are just too much worse.

And in a related note, from Salon's Andrew Leonard:

Liberalism is no longer a dirty word, [Krugman] thunders; it's high time for government to get back in the business of governing. He might be right. As we review the wreckage created by Wall Street's finest minds, it is tempting to entertain the possibility that the impulse to deregulate and privatize and "trust" markets to be their own best guardian -- that epochal reimagining of government launched by Ronald Reagan -- has finally run its course.

And this:

But whether or not the current ills afflicting the economy do bloom into something much worse, it's hard to argue with the thesis that the rhetoric of market fundamentalism hasn't looked this threadbare since Ronald Reagan won office in 1980. Deregulated markets were given their chance. They didn't work, or, at least, they now look to be in need of serious overhaul. The question is whether Americans will seize the opportunity to rethink and reshape how government manages the economy. But will a President Clinton or Obama or McCain seize the day?

Finally, for the first time since Reagan, we have a chance to alter the discourse significantly. This crisis has finally woken us up to the fact that Wild West, top-down economics doesn't work, and now it's up to our leaders to reshape the discourse to something much more responsible. Senator Obama understood this very well when he called Reagan an agent of change - he profoundly changed the very way we think about economic regualtion and taxes. We need a movement to change it again. I can only hope we get that.