When Pundits Don't Know

People often believe that pundits have no idea what they're talking about. Speaking personally, this is not true. I may be wrong but I'm usually pretty well informed and have an educated opinion. This financial mess however reduces me to informed agnosticism. I've read, listened, pondered and scribbled but I still am unsure of the best way out. I don't know whether to coddle Wall Street, throttle them, or both.

We are all, I think, in agreement that the mess is real and not staged for political gain--since no one seems to be winning. The administration's view is if you trust them with $700 billion bucks they do good things and save us. The populist view is: Are you nuts?! A blank check and trust you? Ha, I don't think so. The liberal position is: I hate this but we must, at all costs, avoid a total collapse. The conservative position is: Why would we reward failure?

Strangely, though this is being played in a poisonously partisan manner, the first congressional vote was pretty interesting. The Democrats did not deliver the majority of the Black Caucus and local liberals, Schiff, Sherman and the Sanchez sisters all voted against it. On the other hand some true blue rock ribbed conservatives voted for it--Dreier being one.

As special interest projects get added in order to attract votes, the once three-page proposal has grown like, well, the deficit and soon will be completely beyond the comprehension of mortals. This is sausage making at its very messiest. Shall we put the money in at the top and give it to the failed institutions that be our houses and lost? Shall we put the money in at the bottom and help the poor and middle class people who made a reasonable if wrong bet that their homes would continue to increase in value? Shall we hand it all to Sec Paulson who once led Goldman Sachs and wonder if his loyalty played a part in letting competitor Lehman Brothers sink while rescuing AIG that owed billions to Goldman Sachs?

Part of what make the fix so difficult is its scale, the shear enormity of it all. But part is also the intentional mystification of finances. Once upon a time the bank lent you money. You had a problem or issue, you could talk to your banker. Now the bank sells the paper. The person who made the loan makes money only when lending it. He or she is separated from the people who own the debt. The debt is, in fact, sold, sliced, diced, recombined and sold as a security. Well, a false security as it turns out.

As both people and institutions lose confidence in the ability to collect these debts, they stop lending money both to us and each other. The wheels of commerce grind to a halt without the lubricant of credit. We know we have to do something. We cannot be sure what. We have no real and reliable model. Not even the Great Depression. We spent our way out of that with money we didn't have and a world war. We have borrowed and spent our way into this with money we don't have and two smaller wars.

I long for clarity, for the times when I could say with some assurance (even false) this is what we must do. Instead I confess this is a mess that people smarter than I got us into and I don't trust anyone who claims to know how to get us out. I am willing to pay any price--but only for something that will work. Ay there's the rub when pundits are unsure and uncharacteristically modest.