I’m not sure if Holman Jenkins has been good all along, even in 2008, on the bailout and stimulus issue, but he sure is good now:
Members of the Obama administration have taken turns deploring the billions of dollars in year-end bonuses the finance industry is getting ready to hand out. Never mentioned is what they think firms should do with the money. Give it back to their customers? Spend it on office decorations?
Firms can’t just wish away revenue sitting on their books. That’s an accounting crime. More to the point, aren’t surging banker bonuses amid a general downturn the proximate and necessary outcome of Washington’s recovery Heimlich, which involves doling out free money to banks and artificially goosing asset prices?
Er, wasn’t this the plan?
After all, whatever sloppy incentives are introduced into the mix, Ken Feinberg is on hand to fix them by fine-tuning banker pay. Voilà , Washington has figured out how to stoke a credit bubble with one hand while making sure with the other that it feeds only good and sound “long-term” purposes….
The urgent problem is the giant riverboat gamble that Washington can save the economy by doing what comes naturally–spending money carelessly, creating massive new entitlements without funding them, dishing out cheap credit to politically favored sectors, telling business people where and how to invest.
Mr. Feinberg is an apt symbol indeed, for this gamble is built on the conceit that Washington can hector the recipients, whether auto companies, banks or homeowners, into behaving in ways that are “responsible.” So far, however, human nature is proving a disappointment: Take the outbreak of tax fraud related to the government’s emergency home-buyer’s credit.
Nor is the larger gamble looking so good either. Banks continue to fail at an alarming rate, the dollar is under assault, and Washington is looking at a future of trillion-dollar deficits. One might have guessed it would take a decade of Obamanomics to produce European welfare state levels of youth unemployment, but at 18.5% we’re there.
About the only positive sign is the price surge in normally uncorrelated assets–stocks, bonds, commodities, gold–as fund managers use cheap credit to play the carry-trade opportunity….
