The “Wall Street versus Main Street” cliché has infiltrated the mindset of reporters covering the economy. And government action has become the standard push for economic sectors in trouble.
Take CBS correspondent Maggie Rodriguez. On the March 18 “Early Show,” Rodriguez confronted Treasury Secretary Henry Paulson, suggesting a “cram session” to bail out some homeowners.
“Yesterday you mentioned the importance of things that can be done quickly to ease the housing crisis, but you didn’t give a deadline,” Rodriguez said. “Wouldn’t it be worth it, given the gravity of the situation, to sit down with the agencies involved and have a cram session, like you did this weekend to bail out Bear Stearns? Isn’t it just as important to bail out homeowners in trouble as it is to bail out an investment giant in trouble?”
Paulson said he thought the government had acted proactively in the wake of the housing crisis.
“Maggie, it’s very important, and the initiatives we’ve had that haven’t required congressional action – getting the industry together to help homeowners that are in trouble – has been – has made a difference so far,” Paulson said. “Our ‘Hope Now Alliances’ helped a million homeowners with working it out since we started it up, and we’re working hard with Congress to get legislation.”
As Paulson pointed out on NBC’s March 18 “Today,” the action by the Federal Reserve to facilitate a takeover by J.P. Morgan (NYSE:JPM) of Bear Stearns (NYSE:BSC) was hardly a bailout – due to the shareholder losses and also lost jobs.
“[F]irst of all, let me say that the Bear Stearns situation has been very painful for the Bear Stearns shareholders,” Paulson said. “So I don’t think that they think that they’ve been bailed out here.”
Criticism of government action, however, hasn’t been limited to the notion of bailing out homeowners, but the also the move by Fed to rescue Bear Stearns. The Wall Street Journal criticized the move by in a March 17 editorial, claiming any government intervention raises the issue of moral hazard:
“But with its Sunday move, the Fed is going all in. This raises genuine issues of moral hazard. Commercial banks traditionally have access to the discount window – that is, to public money – because they are regulated and have certain reporting and capital obligations.
Will investment banks and securities dealers now have to meet similar obligations if they tap the window? If they don't, then it's unfair to the banks that do, not to mention the taxpayers who are lending them the money.”