The business press has done its usual thorough job of explaining the whos, whats and wherefores of this historic weekend, but I’m not sure anyone’s been able to convey the disgrace, the scandal in all its fullness, of the fact that U.S. taxpayers—innocent bystanders, by any account—must pay for bailing out Wall Street.

The most outraged, embarrassed voice seems to be that of Henry Paulson on the talk shows:

And, again, it pains me, it pains me tremendously to, to, to have the American taxpayer be put in this position…

He said that on his way to saying that there’s no alternative, but at least it’s something.

Also out there:

Evidence that the business press has work to do can be found in this walk-and-talk in this morning’s Washington Post, which found respondents understandably vague about what’s happening, with most seeming to believe this is about bailing out irresponsible borrowers:

“I’m not overextended,” Merkle said. “I didn’t buy a large home that I can’t afford. I’m not behind on any of my payments. I’m not sure I want the government to take my tax dollars and buy someone else’s house for them.”

The Wall Street Journal does well, however, at conveying the enormity of the import that the last two independent Wall Street firms will convert to bank holding companies:

The headline

Goldman, Morgan Scrap Wall Street Model,
Become Banks in Bid to Ride Out Crisis

And the story:

With the move, Wall Street as it has long been known — a coterie of independent brokerage firms that buy and sell securities, advise clients and are less regulated than old-fashioned banks — will cease to exist.

It’s worth pondering that for a minute.

The New York Times does less well in its account:

It also is a turning point for the high-rolling culture of Wall Street, with its seven-figure bonuses and lavish perks for even midlevel executives. It effectively returns Wall Street to the way it was structured before Congress passed a law during the Great Depression separating investment banking from commercial banking, known as the Glass-Steagall Act.

The last historical comparison may be true, but it’s meaning is not explained. More please.

The Journal’s editorial page, meanwhile, is starting to resemble some mad Shakespearean character, blaming everything, including—get this—the Community Reinvestment Act of 1977, instead of the deregulatory philosophy it has been promoting for lo these many years..

Nice try. Much more on this as we go

Krugman provides an actual suggestion: give the taxpayers a stake in the upside:

And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

And this also strikes me as valuable:

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem.

Evidence that government should get a stake for being force to lend on and buy securities of utterly unknown quality is found in this Journal account of how American International Group shareholders are desperate to avoid having the once-hugely profitable insurers taken over the United States for $85 billion.

Shareholders who are dissatisfied with the deal are exploring ways to quickly pay off the loan, which gave the federal government the right to take 80% of the insurer. Under this scenario, AIG would not only sell assets, but also raise capital in other ways, potentially leaving shareholders better off. AIG had no choice but to accept the federal help last week, when large sums of private money weren’t available.

Private money wasn’t available for good reason. This is the mother of all subprime loans.

Robert Samuelson reminds us of a stunning fact:

As is well known, the crisis began with losses in the $1.3 trillion market for “subprime” mortgages, many of which were “securitized” — bundled into bonds and sold to investors.

He is actually minimizing the figure to make some other point, but the idea that so much money was lent into what was once, quite properly, a marginal business is, for me, all you need to know about level of regulatory breakdown that brought us to this.

Also recommended:

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.