Financiers have different concerns.  If the TARP seeks to buy assets too cheaply, banks will not take part. ~The Economist

This is the part of the argument where bailout supporters lose people, because this is where the apocalyptic rhetoric runs up against the possibility that financial institutions might turn down the offer that is supposedly the only thing between us and collapse.  When the vast majority of the public and a sizeable number of members of Congress balk at the bailout, they are told that there is no alternative and they simply must accept the deal, so how could it be that the financial institutions who stand to benefit from the bailout might reject it?  We are supposed to be on the verge of catastrophe, and presumably no one would be more aware of how close we are than these very institutions, but the government has to sweeten the pot enough to get the institutions to participate in the rescue?  Supporters of the bailout insist that we need to throw a lifeline to drowning banks, lest they pull all of us under with them, but we still have to give the banks enough of an incentive to grab on to the lifeline?  One might think that being offered rescue would be enough incentive.  If the consequences of rejecting the plan are as bad as the administration says, why would the plan’s primary beneficiaries not jump at the chance to have the government purchase these toxic assets?  If they wouldn’t jump at the chance, doesn’t that suggest that things may not be quite as bleak as we are being told?  Isn’t it then reasonable to ask why Congress and the public should be railroaded into accepting a deeply flawed plan?

Hard as it is to conceive on the Hill, Vladimir Putin represents a greater threat to global stability than either Dick Fuld or Chris Cox. ~Amity Shlaes

Well, I suppose that must mean that Fuld and Cox represent no threat at all and Putin represents a very, very, very small one, but it is actually pretty hard to conceive of this anywhere.  This should restore market confidence–our economic problems are so minor that even Putin is more dangerous to global stability.  It’s one thing to argue that the Russians are being foolish by sending naval vessels to Latin America to show that they can, but this is just silly.  If I follow Shlaes’ argument, financial insecurity will mean the Russo-Venezuelan domination of Latin America:

This time, of course, the political story isn’t about losing Europe. It is about losing Latin America — to Moscow-backed Chavez, the host of the naval exercise. With Russia behind him, Chavez is likely to fill the vacuum left when Fidel Castro passes. 

Oh, no, not that!  If he fills the vacuum left by Castro, he, too, can be equally impotent and without much regional influence.  The Brazilians, Colombians and Argentinians, among others, will probably have something to say about a Russian-backed Venezuelan takeover, but they won’t have to bother because there is nothing to this.  While Lula is laughing at the bankers who have been pushing neoliberalism on his continent, Brazil is emerging as the continent’s real political and economic power.  The so-called Bolivarian revolution of Chavez has shown itself to have no teeth beyond its borders and not much success within them.  Why do people fear this red-shirted buffoon?

Either the Colombian trade deal is in the economic interests of the U.S., or it isn’t.  If it is, let’s debate that, but can we please be spared the ludicrous claim that free trade with Colombia is necessary to halt the advance of what is little more than a ramshackle despotism?   Venezuela is dependent on Colombia for its food supply, and as the incident earlier this year between Colombia and Ecuador made clear Venezuela is in no positon to do anything directly to its neighbor.  Hosting some Russian sailors who are being sent on a propaganda cruise is not going to change that.  Political panic about the financial crisis is foolish, but panicking about Russo-Venezuelan domination of South America is simply absurd.

This classic from the great, old Indian film Pyaasa seems very appropriate this week.  Here is an English translation.

Greenwald has asked the obvious, necessary question about our oligarchs, who were praised by Brooks here:

But beyond that, I’d love to know who has been running economic policy up until now if it wasn’t these Wise Men from Wall Street? When listing our New Economic Overlords, Brooks identifies the very people from both parties who have been running economic policy for the last decades — people like Former Federal Reserve Chairman Paul Volcker, former Treasury Secretaries Nicholas Brady and Robert Rubin, current Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and Tim Geithner of the New York Fed. If that is the New Wise Establishment who will save us, who exactly has been dictating economic policy before now?

So either 57% support the mega-bailout, er, I mean “investing billions to try and keep financial institutions and markets secure” or 28% support the bailout when it is described as such.  How you word those questions really does change things, doesn’t it?  The Rasmussen result is interesting, since 62% of their respondents are investors.  While more investors are in favor of the bailout than non-investors (36% vs. 15%), the plan is not that popular even among investors, as just as many (36%) oppose it and another 28% are unsure.  Republicans are somewhat more likely to support the plan (35%) than Democrats (25%) and independents (23%), but there is very limited support for the plan in every group.  When a proposed plan can barely win the support of one-quarter of the public, a member of Congress would have to be out of his mind to vote for it. 

When framed as making institutions and markets secure, as Pew does, support jumps dramatically, but the Pew wording has to be distorting things.  First, it describes this colossal waste of money as an investment, which it really isn’t, and loads the question with that magical word “secure,” which seems guaranteed to elicit a favorable response.  If you asked instead, “Do you think it is right or wrong for the federal government to waste hundreds of billions of taxpayer dollars on worthless securities that no one knows how to value to benefit financial institutions that have made colossal errors in judgement?” then I think the result would look a bit different.

Update: Bloomberg reports that the bailout is opposed 55-31 according to the latest Bloomberg/L.A. Times poll.  Once again, the phrasing seems to have been a major factor:

The Bloomberg/Los Angeles Times poll asked whether “the government should use taxpayers’ dollars to rescue ailing private financial firms whose collapse could have adverse effects on the economy and market, or is it not the government’s responsibility to bail out private companies with taxpayers’ dollars?”

The seclusion of Palin from media scrutiny has gone from annoying to simply comical:

Ms. Palin, the Republican vice-presidential nominee, is scheduled to meet Tuesday in New York with President Hamid Karzai of Afghanistan, President Alvaro Uribe of Colombia, and former Secretary of State Henry A. Kissinger.

But the McCain-Palin campaign’s sharp limitations on coverage of the meetings have sparked a mini-revolt – and a threatened boycott — among the press corps.

The campaign plans to bar print reporters from the meetings, and to limit coverage to brief photo-ops for a still photographer and a television camera. The television stations, though, are objecting, noting that they have a policy of not sending cameras to cover events without a producer, who provided editorial guidance.

A stand-off has ensued, with the networks threatening not to send cameras. The newspapers are trying to get back into the act as well.

I don’t quite understand what the McCain campaign thinks it is doing.  Every day that they keep her away from the press is another day that confirms not only that Palin is not ready for the VP spot but that the presidential nominee himself regards his running mate as little more than window dressing.  At least, that is how she is being treated.  Aside from boilerplate stump speeches, her purpose in the campaign seems to be to have nicely-staged photo-ops.  Even though this is part of McCain’s broader war with the media (break-ups can get ugly, can’t they?), it makes no sense. 

Yes, Palin might make some awesome, election-ending blunder if she has to answer a question about, say, Pakistani sponsorship of anti-Indian terrorism off the cuff.  However, as she is going to be under intense scrutiny on October 2 during the debate anyway, doesn’t it make more sense to give her some other opportunities to talk to journalists and become more comfortable facing adversarial questioning?  Why make the debate that much more consequential by making it one of the few times that she actually responds to questions from journalists?  More important, if the McCain campaign is at war with the media and has limited access to Palin, do you think most journalists and pundits are going to react to her debate performance favorably?  If the debate becomes all-important for her as a candidate and journalists are annoyed with the lack of access, won’t any flub that she makes then be magnified even more than it would have been? 

P.S.  After meeting with Karzai, Uribe and Kissinger today, she meets with Saakashvili, Yushchenko, Talabani, Zardari and Indian PM Singh tomorrow.  They’re really not going to drop this Georgia & Ukraine obsession, are they?

What people mean by the now dreaded phrase “too big to fail” is that large firms hold the people hostage and demand public support when they are in distress using the rhetoric of bombers whose explosives have dead man’s switches: if we go down, we take the hostages with us.  What the government is doing right now is colluding in blackmailing the public for the benefit of the most egregious, failed risk-takers.  With or without an equity share in the institutions whose debts the government takes on, this is really not much more than serving the interests of a relative few at the expense of the many.

There is an argument that even if the Paulson plan is terrible (and it is!) there simply has to be some kind of bailout.  This argument relies heavily on dire warnings of complete financial collapse and comparisons to the Depression.  When you get down to it, this is economic apocalypticism, and it is not necessarily any more well-founded than any other kind of alarmism, whether it concerns terrorism (“existential threat”!), climate change (the world is ending!) or foreign threats (the new Hitler!).  Economic 1929-ism today is no more persuasive than foreign policy 1938-ism.  The federal response after the 1929 crash was consistently, awesomely wrong in the direction of reducing the money supply and intervening more in the economy.  You cannot have the sort of prolonged economic contraction that took place in the 1930s without repeating all of the mistakes of Hoover and FDR.  

Resistance to alarmism always provokes the same response.  Skeptics and critics of alarmism are dismissed as trivial and silly people, unserious and unfit to participate with the great and the good in promoting their disastrous “solutions” to the problems they have hyped.  We have seen this time and again from both sides of the spectrum.  If you opposed the PATRIOT Act, you did not care if terrorists killed small children in their cribs; if you questioned the wisdom of the Kyoto Treaty’s provisions, you hated science and wanted the planet to be destroyed; if you doubted that a third-rate dictatorship on the other side of the world posed a threat to the United States, you loved despotism and genocide; above all, you were not one of the serious people who bought into the alarmism and thereby automatically disqualified any arguments you might make.  The new story seems to be that if you do not think the government should save certain banks from their own mistakes, you are the political equivalent of Tyler Durden dreaming about obliterating the economic life of this country.  I don’t know whether alarmists are simply overwhelmed by fear and blinded by assumptions that may well be badly mistaken, or if they earnestly, truly believe in their warnings, but we have already lost too much to political panics in the last decade.  I am not inclined to believe the latest batch of alarmists who once again clamor for us to give them vast powers and ask as few questions as possible.

During the months before the invasion of Iraq, I often heard or read the claim that we had to defer to the government, because they “knew more” than the rest of us, which meant that if they claimed a dire threat was on the horizon there really was a dire threat on the horizon.  As it turned out, they knew scarcely more than the average well-informed citizen, and much of what they thought they knew was wrong.  There was a broad, international consensus of supposed experts that did not doubt the severity of what turned out to be a non-existent threat, and this consensus held despite an acknowledged lack of reliable information.  Indeed, the consensus thrived on the impossibility of proving a negative.  Except for a relative handful of dissenters, who were either ignored or dismissed as cranks, the people in the relevant policy community acquiesced or kept quiet, and the average citizen looked at the near-unanimity of supposed experts acknowledging the severity of the threat and took it far more seriously than he would have ever done otherwise.  Instead of asking who benefited from building up the threat, people were cowed into taking the threat for granted and accepting more or less unquestioningly government proposals for addressing it.  To be part of the mainstream conversation, one had to admit first of all that the threat was real and serious, at which point the debate was really already over.  

This strangely misplaced confidence in government expertise seems to have returned.  This time people seem to be inclined to defer to government claims because the situation really is quite serious and the problem at hand is fairly complex, which makes it much easier to confess a lack of expertise, yield to expert opinion and say, “Well, we have to trust the government–the alternative is unthinkable!”  If the last few years have shown anything, I would have thought they would have taught us to recognize this sort of browbeating as a means to shut down critical thought and skepticism.  The people who sold a war of choice as a war of necessity are now telling us that yet another emergency measure is absolutely necessary, which makes me think that it is distinctly possible that it is not.  The language of necessity in turn feeds the public’s fear that things must be so bad that they should not question the principle behind the emergency measure.  They can, as half-hearted critics of the invasion did, quibble about means and process, and at this point that is all we are seeing from most members of Congress, but they are not supposed to doubt the necessity of acting and acting now. 

At this point you might say, “But this is different, Larison.  The danger in this crisis is very real and serious–something must be done, the government is proposing to do something, so we may as well do that.”  It seems to me that this sort of response shows how similar the two cases are.  There is an assumption that if something must be done, this translates into calling for the government to use its coercive apparatus to intervene.  The logic is the same: unless you favor some kind of state action that will mainly benefit the state (in terms of power) and those connected to it (in terms of wealth), you want to stand by and do nothing at all.  More to the point, there is a presumption that action, even foolish, excessive action, is preferable to inaction.  In reality, however, taking precipitous action is almost always worse and yields all manner of unintended consequences that can be readily foreseen at the time.  There is also a fundamental problem that this administration cannot be trusted with the power it already has, much less new emergency powers that it wants to acquire, but this is not simply a question of whether this administration can be trusted.  In a few months, a new administration will begin, but I can already say with confidence that it should not be trusted with this kind of power, either, because concentrated and ultimately unaccountable power on this scale should never be granted to anyone in government. 

P.S. A useful thing to remember in the days to come: whenever someone yells about an impending catastrophe, he is probably either trying to sell you something or trying to steal something from you.  The mega-bailout is actually a case of trying to sell you on the idea that you should allow yourself to be robbed, so we should be even more wary.

Update: Donald Luskin makes a related point:

Yet there is ample room for doubt. The officials advocating this — Henry Paulson and Ben Bernanke — are the same ones who, in similar haste, engineered interventions this year in the collapses of Bear Stearns, Fannie Mae, Freddie Mac, and American International Group. With each intervention the banking crisis has gotten progressively more severe. Experts differ on this, but it is my professional judgment that these interventions actually made matters worse, because of the unintended consequences that were nearly impossible to forecast at the moment of decision. We simply cannot know what unintended consequences might be unleashed in the process of a massive acquisition of mortgage assets by the federal government. 

I would like to know what Larison thinks these writers should have done to prepare the Obama-is-a-Muslim section of the public. What more can the man do, other than, I dunno, profess at every opportunity that he’s Christian? ~Aaron at Pseudo-Body Politic

Aaron is not alone in objecting to my claim that the people who stressed Obama’s international ties and supposed ability to build a bridge to Muslims are responsible for encouraging the false belief that Obama is a Muslim.  First of all, Aaron incorrectly assumes that I am pinning the blame for this entirely on progressives.  As I saidmany times over the last year, I thought that Andrew Sullivan’s arguments about Obama’s alleged appeal among Muslims were doing the candidate real and perhaps irretrievable harm.  I also thought that the notion that he has such appeal was exaggerated, but that’s a different question.  One need only see how the “endorsement” from Hamas was spun to Obama’s political disadvantage and how it continues to be used against him in a country that is already thoroughly anti-Palestinian.  Simply by raising these topics and bringing them into mainstream discussion, Obama’s admirers legitimized the discussion of his heritage and religion to a degree that was simply not possible before they unburdened themselves of their enthusiastic cheers.  I have no illusions that there would not have been some significant percentage that believed that Obama was a Muslim, but instead of glorifying Obama’s differences they might have made more of an effort to dwell on his established American roots.  This is really where I fault them, as Obama has a very normal, recognizable family history in this country to which most voters could relate and this side of his ancestry has been ignored by his champions. 

What do I think Kristof, Sullivan, Cohen and other unhelpful Obama admirers should have done?  I think they might have avoided mentioning how beautiful Obama finds the Islamic call to prayer, I think they might have eschewed ever referring to his middle name, and I think they could have worked much more strenuously to stress how embarrassingly “pro-Israel” Obama’s positions on Palestine, Lebanon, Iran and the like have been.  I take it for granted that his admirers and supporters want him to win, and I assume they are savvy enough to understand that imputing sympathy with Muslims is exactly what Obama’s opponents want people to believe about him, so I have never understood why they have been so keen to talk about those aspects of his life and family history that separate him from most Americans’ experience.  As they may discover by the end, they have been doing Mark Penn and Steve Schmidt’s work for them.