A Debit to New York Times columnist David Brooks for his confused piece Tuesday on who’s to blame for the mortgage mess.
Brooks indicts everybody for causing the crisis but thinks only some should be punished—or even, God forbid, regulated.
The mortgage brokers were out of control. Regulators were asleep. Home buyers thought they were entitled to Corian counters and a two-story great room. Everbody from Norwegian town elders to financial geniuses decided that house prices would always go up. This was an episode of mass idiocy.
Easy for Brooks to say, a year and a half after the air started leaking out of the bubble.
Who should get nailed? The “true greedheads the speculators, the flippers, the people who bought second homes they couldn’t afford.” What about Wall Street and the banks who actually caused the crisis? Surely we could find a greedhead or two lurking about in the financial industry. But Brooks says lay off the greedheads. Heavy, man:
On the other hand, as Douglas Elmendorf of the Brookings Institution points out, it would be self-defeating to crack down on the so-called irresponsible lenders so harshly that you skew their incentives to lend in the future.
“So-called” irresponsible? Brooks points a long finger of shame at you if you bought Corian counters, but the lenders who gave you the money to buy those counters you supposedly can’t afford aren’t even straight-up irresponsible. Nice.
In normal times, the free market works well. But in a crisis like this one, few are willing to let the market find its own equilibrium.
Did he really say that? A free market “works well” in normal times? Does that include the time leading up to the current crisis, when regulation fell by the wayside and unscrupulous financial institutions and bobo homebuyers alike became greedheads? Are markets only “normal” when they’re going up, up, up?
This is what happens to columnists who use their political ideologies to guide them on topics about which they have no clue.
Wall Street-colored glasses
Another Debit to the NYT for its page-one article Monday on the Bear Stearns fire sale/government bailout.
Up high, reporter/editor Andrew Ross Sorkin says Bear Stearns “was driven to the brink of bankruptcy by what amounted to a run on the bank.” And then:
The deal for Bear, done at the behest of the Fed and the Treasury Department, punctuates the stunning downfall of one of Wall Street’s biggest and most storied firms. Bear had weathered the vagaries of the markets for 85 years, surviving the Depression and a dozen recessions only to meet its end in the rapidly unfolding credit crisis now afflicting the American economy.
We’re told nowhere here that Bear is one of those financial institutions that manufactured this credit crisis, which is to say it manufactured its own “stunning downfall.” It was brought down by a “run on the bank” caused by its own actions, not some irrational panic, as the Times implies.
Sorkin can’t help but let a certain admiration for the roguish Bear seep into his copy:
A throwback to a bygone era, Bear Stearns still operated as a cigar-chomping, suspender-wearing culture where taking risks was rewarded. It was a firm that was never considered truly white-shoe, an outsider that defied its mainstream rivals.
When the Federal Reserve helped plan a bailout in 1998 of Long Term Capital Management, the hedge fund, Bear Stearns proudly refused to join the effort.
We appreciate suspender-snappping cigar chompers as much as the next person. But that fun color isn’t balanced by telling us, as Sorkin’s colleague Gretchen Morgenson had a day earlier, that Bear Stearns has a long history on Wall Street as a shady operator.
A serious take on Bear Stearns
We’re not Times-bashing this week; it gets a Credit for a column in the same section on the same day as its A1 Bear story.
Columnist Paul Krugman has a good take on Bear and the coming Big Bailout, making clear he’d read his own paper on Sunday. Friday’s Times metro section also got it right with a nice piece on why New Yorkers should be particularly angry with the institution.