Among his pearls of wisdom were this: "First, as I've said in the past, this isn't about fairness. There's nothing remotely fair about using taxpayer money to rescue a free-market financial system from the mistakes of the financiers. But the reality is that we can punish the bankers or we can save the banking system, but we can't do both at the same time."
Wrong. The financial industry is full of talented, yes, even ethical professionals, who had nothing to do with mismanaging their firms by their seniors. Yes, you can promote them to replace those who were responsible and in the process save the banking system. Mr Pearlstein's bio does not indicate he has ever worked for a financial firm, let alone a major one. He was out of his depth on this one.
Pearlstein: "Homeowners who have paid their bills and have been careful not to take on too much credit are now being asked to provide relief to homeowners who have not. Unfortunately, the price of righteous indignation is a wave of foreclosures, a further decline in home values...Given the financial and economic hits they have already taken, that's a price that most "innocent" homeowners and taxpayers would probably prefer not to pay. "
Really? Prices are going to go down whether government wants to support home prices or not. Pearlstein failed to understand government can only set "nominal" prices, market sets "real" prices.
Let's say government managed to fix a house at x, which is 40% lower than you paid for to avoid banks calling for further margins. At that price you can still manage to keep your house by digging into your diminishing savings.
But the "real" price will be set by the economy which would further decline to compensate for the articifically high prices propped by the government. Economic decline would mean you losing your job and not being to find work, perhaps any work. Everyone else is scrambling to become just a janitor.
One recent report had 700 applicants for one janitor job at a high school, yes, in the Mid West.
No job, no mortgage servicing even at lower interest rates,, even if the banks don't want more margin deposits. That's what economists mean when they say market sets the "real" prices versus "nominal" prices.
Pearlstein said the issue was never about "fairnes".
A society disintegrates if sufficient number of citizens feel unfairly treated by those whom they had elected as leaders, whether they are in the White House, in local communities, in churches or in banks.
Economic polices are rarely divorced from the issue of fairness even if efficiency is a primary concern. To dismiss the relevance of fairness is the work of a simple minded journalist, or perhaps a not-so-simple minded hack lobbyist for the financial sector.
Pearlstin had this punch line:
"A final point on outrage: We need to save some of it for ourselves. While it was Wall Street that got rich by peddling new ways for Americans to live beyond their means, the decision to do so was ours. It was we who ran up the credit card bills, we who drew down the equity in our homes and we who refused to tax ourselves for the government services we demanded. Wall Street bankers may have been the pushers, but it was we Americans who became addicted to the easy credit."
Was he not defending the "system" earlier in his piece? The system provided false incentives dished out by the same leaders who paid themselves billions who ought to have known better.
Is it fair to blame Joe the Electrician not to understand that "mortgage securitization" had intrinsic risks? Can we blame him for not knowing bond rating agencies also went along and gave misleading, if not criminal, passing grades on lousy companies? Should he tell his banker to take a hike if the banker is willling to give him a loan based on no money down and a baloon payment towards the end while telling him "It's ok, Joe. Don't worry about it"?
The ordinary Joe Blow's accept that there are those in society who enjoy high prestige and high financial rewards because they are supposed to be smarter. The JB's don't complain. They follow.
Mr. Pearlstein is now blaming the JB's for following wrong signals produced by the system he wants to preserve.
Many polls taken indicate journalists "enjoy" a prestige slightly higher than prostitutes. Unfortunately, Mr. Pearlstein is validating those polls.