Thursday, October 2, 2008

Why the Popular Opposition to the Paulson Plan?

The simplest explanation is that, like the contrarians I quoted in the previous post ("Is the Credit Crisis Hurting the Real Economy?"), most Americans don't see how the crisis on Wall Street affects Main Street, and so they're not interesting in helping out Wall Street firms.

Another explanation, proposed by Salon's Walter Shapiro ("The Voters are Angry -- And Don't Know Why"), is that the folks on Main Street don't understand the issue. Shapiro notes that both presidential campaigns have avoided discussing the credit crisis in their ads and writes,

Both campaigns are basing their TV ads on non sequiturs, presumably because they believe that most voters cannot handle a serious discussion of the liquidity crisis on Wall Street.

Sadly, this cynicism may be justified. A Pew Research Center poll released Wednesday found that 43 percent of all voters admitted that they feel "confused" by the proposed plan to stabilize the financial markets. At the same time, voters grasp that something important is happening -- 54 percent say, in response to another question, that they are paying "a lot" of attention to the bailout debate in Washington. Pollster Andy Kohut, the director of the Pew Research Center, said that it was virtually "unparalleled" to have this simultaneous level of interest and confusion in a policy debate. "It's a tough one to get into the nitty-gritty of," said Kohut. "It is not like gay marriage that is easy to grasp no matter what your point of view is."


Daniel said...

Don't know if you go to their blogs but The Epicurean Dealmaker and Accrued Interest have both taken a shot (within the blogosphere) at explaining the credit crisis and what it means for Main Street.

DaveinHackensack said...

I saw the Accrued Interest post yesterday and found it unconvincing. I left a comment there on just one part of his post (the part where he claims college would become unaffordable) but I have other problems with what he wrote. For example, the collapse of the securitization market hasn't lead to an end to traditional mortgage lending by banks that hold their loans, and there's no reason to expect it will. You may need a 20% down payment going forward and you may need to have decent credit, so there would be less credit available, but that's an inevitable part of the deleveraging process anyway.

If you haven't seen it yet, check out my previous post about whether the credit crisis is hurting the real economy. There is a chance that it could, if left unchecked (and for that reason, I feel some sort of Congressional response is warranted), but as of now it doesn't appear to have impacted the real economy materially (beyond the unavailability of cheap mortgage loans for marginal borrowers or, perhaps the financing of new cars).

DaveinHackensack said...

Just read the Epicurean Dealmaker post. Much better, and he neatly summarizes my main issues with Accrued Interest's post.

Anonymous said...

A financial system that encouraged poor capital allocation is being given a $700 billion blank check.

These distressed assets should be purchased by investors who saw all this coming and had the intelligence to keep some cash on the sideline, not by the U.S. government's printing press.