The New York Sun published its last issue today. James Taranto has a nice piece marking its demise.
Bankruptcy, not bailout
From a Harvard economist:
This bailout was a terrible idea. Here’s why.The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.
Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.
This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.
Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.
The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.
Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.
In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This “moral hazard” generates enormous distortions in an economy’s allocation of its financial resources.
Makes sense to me.
Global Village
To protect his yard sign from being stolen, a Portland, Ore., man is streaming live video of it around the world.
Dozens of viewers now take shifts, based on their time zones, so as not to leave the sign unwatched at any time. Viewers in Europe take over for those turning in on the West Coast, who are in turn relieved by a dedicated crew of Australians. It’s attracted more than 40,000 viewers and ranks among the top 10 most-watched videos on Ustream.tv, the Web site that hosts the video, among videos of the two presidential candidates and comedian Dane Cook.
A little weird, but certainly evidence that the Internet is indeed creating a global village.
W’s legacy
Entertaining column from academic Stanley Fish, no fan of G.W. Bush. But, he notes that the president will probably enjoy lofty approval after he leaves office:
And the fact is that he’s likable. I don’t mean on the superficial level of being someone you’d want to have a beer with. It’s deeper than that. He comes across as a basically decent man who is at peace with himself. Despite the fun poked at his verbal maladroitness, he is actually quite skillful (certainly more skillful than either Al Gore or John Kerry) in conveying his positions succinctly and persuasively. (He didn’t win two national elections — well, maybe one — by accident.) He may not be an intellectual, but he isn’t dumb and he is shrewd enough to play his “aw shucks” personality for all it’s worth. And he has a really good sense of humor (something Barack Obama seems to lack) and a comedian’s ability to make capital out of his own malapropisms. Putting aside the agendas for which he will no longer be held responsible, what’s not to like?In addition, the road to rehabilitation will be shorter for him than it was for some of his predecessors. It took a while for Harry Truman’s feistiness to erase the memory of the 22 percent favorable rating he had at the end of his tenure. Richard Nixon had to make his way back from disgrace, and he did it being smarter than anyone else (he was, I think, the smartest president of the 20th century) and becoming an astute political commentator and historian. Jimmy Carter just continued being good and after a while it payed off in a Nobel Prize. Bush I’s basic, undemanding decency kept shining through after he left office. Bill Clinton and Ronald Reagan didn’t need rehabilitation; each would have won a third term easily and still could (even though Reagan is dead).
He even suggests a future career for the soon-to-be ex-president — baseball commissioner. Now, that’s an idea I can support.
Alas, the East Carolina Pirates have now fallen from the AP Top 25 poll. Perhaps, now they can go back to winning football games.
On Stereotypes
Here’s a great quote from Walter Lippmann, author of “Public Opinion.” When he talks about stereotypes, he’s not just talking about being racist — he means all of the subconscious assumptions we make about how the world works:
What matters is the character of the stereotypes, and the gullibility with which we employ them. And these in the end depend upon those inclusive patterns which constitute our philosophy of life. If in that philosophy we assume that the world is codified according to a code which we possess, we are likely to make our reports of what is going on describe a world run by our code. But if our philosophy tells us that each man is only a small part of the world, that his intelligence catches at best only phases and aspects in a coarse net of ideas, then, when we use our stereotypes, we tend to know that they are only stereotypes, to hold them lightly, to modify them gladly. We tend, also, to realize more and more clearly when our ideas started, where they started, how they came to us, why we accepted them. All useful history is antiseptic in this fashion. It enables us to know what fairy tale, what school book, what tradition, what novel, play, picture, phrase, planted one preconception in this mind, another in that mind.
Well said.
