Bloomberg’s Brendan Murray and Simon Kennedy have an article up today headlined
Credit Push Earns Jeers From Free-Marketers". It kicks off like this:
U.S. Treasury Secretary Henry Paulson’s plan to shore up asset-backed commercial
paper is drawing criticism from free-market advocates, who say it risks shielding
banks from the consequences of poor decisions.
It’s not just "free-market advocates", either: it’s also the likes
of Dean Baker, who describes
the proposed superconduit as "a bailout by the nanny state for the big
boys who lack the ability to get by on their own in a free market".
I’m not convinced that this is really a Treasury bailout, if only because anybody
capable of bringing senior bankers together could, in theory, have achieved
exactly the same thing. (Maybe the IIF might have
been able to orchestrate something along these lines, in an alternate universe
where it was, you know, actually relevant.)
Nouriel Roubini, who knows
from bail-outs, has a long
blog entry up today which keeps on hinting that there’s a Treasury bailout
going on but never quite comes out and says it. Instead, Roubini concentrates
his attention not on Treasury and the superconduit, but rather on the Fed and
something called Section 23A of the Federal Reserve Act (Reg W). When the Fed
waived that section, says Roubini, that was the real bailout.
So maybe if the "free-marketeers" want to start pointing moral-hazard
fingers, they should swivel a little and aim at Bernanke, rather than Paulson.