Instead of thinking of the pending bailouts and financial regulation as a new era of government supervisions of markets, think of it as preserving the system in which a Harvard elite controls other people's money. In fact, very little is likely to change. Reading the news stories about how Secretary Paulson plans to implement the bailout, it seems as though the same people will be in charge of the money. Print some new business cards, change the logo on the front from "Goldman Sachs" to "U.S. Treasury," and everything else continues as it was.

Arnold Kling, who Joshua Sharf thinks is contrary to my view. He's not on this one. When I worked in Indonesia on figuring out whether the country could pay for the bailout they enacted in haste, I spent seven weeks in a hotel in Jakarta surrounded by former officials of FSLIC, the organization that had slept through the collapse of the U.S. savings and loan crisis, heretofore the largest bailout (by dollar volume) in history. It did seem odd to me that the officials who had cost the U.S. $200 billion in that bailout were now helping figure out what to do with Jakarta commercial real estate that had been flipped and re-flipped in almost identical fashion. (My role in that was as a fiscal, not a financial or banking expert.)

Labels: economics