[originally published on CJR.org, the Web site of the Columbia Journalism Review]
“It began,” Czar Hank Paulson told George Stephanopoulos, “with excesses in the system, irresponsible behavior and practices in financial institutions.” On Meet the Press, Paulson again alluded to “excesses”—“excesses building up for sometime in this country”—and elaborated a bit: “bad lending practices, irresponsible borrowing, irresponsible lending…. We have overcomplexity. Mortgages are now securitized, sliced and diced, put into tranches, sold all over the world.” “What has gone on here,” he told Tom Brokaw, “is terrible, it's unexcusable [sic].” Mistakes were made. And that was all that Czar Paulson had to say about the origins of the grandest, most devastating financial crisis in three-quarters of a century.
At least that was all Paulson declared in so many words. What he did not declare was that America has been led to believe, by him and his friends, for several decades now, that markets are essentially self-regulating; and that what we have learned this week, as if we needed to learn it, is that this proposition is sheer nonsense.
Indirectly, however, Paulson said a good deal more, or so I read in one of his later remarks. About the Federal Reserve’s decision to bail out the American International Group last week, he added this: “This is a situation where there are fifty different insurance regulators, very little oversight at the holding company, a hedge fund on top of insurance companies.”
If I understand this remark properly, Paulson was acknowledging that AIG, a private insurance company, functioning with “very little oversight” at the federal level, had grown into an indispensable lubricant of the world financial system. “I can't explain how we got there,” Paulson said, meaning either that the situation is inexplicable, or that it is inexplicable to him, or that it is nothing he can explain in TV-sized sound bites. If it is inexplicable absolutely, or inexplicable to him, isn’t this an intellectual earthquake at the high end of the Richter scale? Don’t the week’s events discredit the decades-old lecture about the self-regulating splendors of markets?
To George Stephanopoulos, Paulson did declare that he might well have (1) an explanation and (2) a remedy up his sleeve: “I've spent a lot of time, well before this problem, developing a regulatory blueprint, looking at our outdated, outmoded regulatory system that doesn't fit the modern financial world, looking at how policies and practices need to be changed.” He said the same to Tom Brokaw, adding: “we very much need new regulations, new policies.”
In that case, why not ask Paulson why he kept his regulatory blueprint to himself? Did he tell the president of the United States, or did he anticipate the need to update “our outdated, outmoded regulatory system” only to find that the president wasn’t interested? For many months, economists have warned about the dire consequences of the housing bubble. How can any official be kept accountable when journalists don't inquire into the sources of their errors?
To be clear: I’m not proposing an escalation of gotchas. I’m proposing an escalation of intellectual curiosity in the interest of accountability. I’m talking about the fifth W -- Who, What, Where, When, Why. As in, why didn’t you act earlier? Why did your government minimize the significance of the housing bubble?
Secretary Paulson is busy these days. Yet one might have hoped the Sunday morning interlocutors would ask him about alternatives to the trust-me receivership into which he proposes to cram the global financial system. Paulson kept framing the problem in chocolate-vanilla terms: Either implement his plan or do nothing. One might have hoped to find an economically-literate critic or two around the network news round tables: Paul Krugman, say, an actual economics professor who has been blogging to beat the band all day at his NYT site; or Robert Reich, who has published a most specific list of conditions for bailout; or, from a different angle, Washington Post columnist Sebastian Mallaby.
On ABC’s round table, there were harsh words for what is laughably known as our political and financial leadership. Cokie Roberts, if I heard her correctly, said she’d like to see the financial chiefs marched down Wall Street in “sackcloth and ashes.” (Maybe she meant tar and feathers?) She approved of Obama’s comforting advisers, the likes or Robert Rubin, Warren Buffett, and Paul Volcker. George Will agreed that Obama sounded calm, at least, while McCain “showed his personality in this last week and made some of us fearful.” McCain, he added, “substituted vehemence for coherence,” having “discovered his inner William Jennings Bryan.” Cokie Roberts, channeling her inner David Stockman, wondered if there was some malevolent purpose to a budget-busting measure that would leave the next president without options. Sam Donaldson unhelpfully declared that we’ve got to “do something quickly, do something now.”
All entertaining, especially the spectacle of Cokie Roberts finding her inner Mme. Defarge. Especially entertaining if you think such bagatelles are what America’s broadcasters owe the people who grant them television licenses for zero dollars a year.