Academic economists sit alone in their ivory towers, insulated from the world around them and oblivious to reality – at least according to CNBC “Mad Money” host Jim Cramer.
“One-hundred-and-sixty-six academic economists signed a letter opposing the government bailout. In a commentary, one of those economists said the talk of Armageddon was scaremongering,” NBC “Today” host Matt Lauer said Oct. 1. Cramer said the experts didn’t know what they were talking about.
“Did any of those guys ever make a nickel on the market?” Cramer asked. “Have any of them ever traded? I’ve traded mortgage-backs most of my life. I’ve traded these obscure things. These guys simply don’t know what they’re talking about. We’re on the precipice of Great Depression II; they all have tenure. They’re not worried.”
“Today” host Matt Lauer had cited a commentary authored by Jeffrey Miron, the director of undergraduate studies for the Harvard University Department of Economics. “‘The current credit freeze is likely due to Wall Street’s hope of a bailout; bankers will – don’t laugh yet – bankers will not sell their lousy assets for 20 cents on the dollar when the government might step in and pay 30, 50 or 80 cents on the dollar,’” Lauer said, quoting Miron.
The letter – which earned signatures from economists at Massachusetts Institute of Technology, the University of Chicago, the University of Pennsylvania and many other schools – warned that a hastily designed bailout plan would risk being unfair to taxpayers, being unclear in its scope, and setting up long-term negative effects that could weaken “innovative private markets.”
Miron further wrote in his commentary for CNN.com that bankruptcy, not a bailout, was the right answer for solving problems in the financial sector. “Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses (sic) that remain profitable.”
Miron blamed the government, not deregulation or free markets, for the crisis. “The current mess would never have occurred in the absence of ill-conceived federal policies,” Miron said, citing the creation and sponsorship of Fannie Mae and Freddie Mac.
It’s not the first time Cramer has accused bailout opponents of ignorance. “The American public don’t know jack,” he said on CNBC’s “Squawk on the Street” March 24, criticizing public discontent with the government’s $29 billion contribution to the bailout of investment bank Bear Stearns.