I agree with Tim Fernholz and Paul Krugman that the various banking bailouts appear to have succeeding in staving off depression. But I also agree with Noam Scheiber and Kevin Drum that Hank Paulson’s hanky panky with Goldman Sachs looks pretty fishy.
I think it’s important for people to understand, however, that “bailouts saved the economy” and “bailouts were structured so as to be very favorable to politically influential financiers” are not exclusive options. The key point is simply that when you’re in an economic emergency there are a range of possible courses of action that will prevent total collapse. Consider this venn diagram:
After all, no scenario in which the economy falls apart and unemployment goes to 20 percent is any good for Goldman or J.P. Morgan or anyone else. The interests of the general public and of the scions of Wall Street are in some tension, but they’re not in complete opposition.
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