Moral Hazard For Thee, But Not For Me

By Kevin Drum

(Political Animal)  MORAL HAZARD FOR THEE, BUT NOT FOR ME....Over at CAP, David Abromowitz wonders why Treasury Secretary Henry Paulson is unwilling to consider serious help for ordinary homeowners caught in the subprime debacle, while at the same time he's apparently eager to rescue the Wall Street firms who created the mess in the first place:

"We know that speculation increased in recent years; a resulting increase in foreclosures is to be expected and does not warrant any relief," he said [on March 3]. "People who speculated and bought investment properties in hot markets should take their losses just like day traders who speculated and bought soaring tech stocks in 2000."....Asked about help for homeowners [on Sunday], the Treasury Secretary was clear: "I'm looking very carefully at any proposal. But all the ones I've seen, which call for much more government intervention, raise more problems and do more harm than they would do good."

....So it would be unthinkable, wouldn't it, for the Treasury Department to throw taxpayer dollars into the breach while riding to the rescue of one of the central players on Wall Street responsible for originating, promoting, and selling billions of dollars of speculative overvalued mortgages? And surely the disciplinarian-minded Bush administration would never agree to open the Treasury to benefit other Wall Street firms holding mortgage-backed securities on which they already made record profits? Think again.

....An awful lot of normal finger wagging about the hazards of bailing out those who make bad decisions from their consequences melted away in the face of Paulson's primary concern — the health of Wall Street investment banks amid the greatest credit crisis since the Great Depression.

....Or consider that big oil company tax breaks are too integral to our energy plan, but relief for millions of drivers squeezed by rising gasoline prices would be bad economic policy. Or that eliminating the estate tax is promoted as tax fairness, but vetoing the expansion of health care to millions of children through the State Children's Health Insurance Program as too expensive is prudent budgetary management. The list goes on and on.

I realize, of course, that this is no time for finger pointing. Or so I'm told over and over and over again. But I can't help but wonder: when will it be time?