Greg Mankiw’s link today sums up my thoughts on the economic crisis and the controversy around the proposed bailout from Paulson and Bernanke. Everyone should listen to him … especially those folks on the Hill who have allowed their vision to be obstructed.
From Mankiw …
On the one hand, I share many of the concerns of the letter signers and other critics of the Treasury plan.
On the other hand, I know Ben Bernanke well. Ben is at least as smart as any of the economists who signed that letter or are complaining on blogs or editorial pages about the proposed policy. Moreover, Ben is far better informed than the critics. The Fed staff includes some of the best policy economists around. In his capacity as Fed chair, Ben understands the situation, as well as the pros, cons, and feasibility of the alternative policy options, better than any professor sitting alone in his office possibly could.
If I were a member of Congress, I would sit down with Ben, privately, to get his candid view. If he thinks this is the right thing to do, I would put my qualms aside and follow his advice.
I also want to point out that the professor who’s letter published on this post is also spot on in his analysis. This pretty much sums it up. On one hand, you have one of the most gifted economists in the world trying to use his authority granted by the President to rescue our financial system, thus making sure we can all continue to have confidence in our economy and markets.
On the other hand, you have many people Monday morning quarterbacking the decisions and recommendations by these leaders who have better information on the issue at hand. Many of these people criticising Bernanke have not spent so much as one day working within the financial markets or even sitting in an economics class. So many of these folks wouldn’t know systemic risk if it kicked them in the a**, and that includes the so-called policymakers on the Hill. So, what makes them experts on what to do when the strength of our financial system is on the brink of failure?
Yeah, something tells me it’s better to listen to Bernanke in this situation, and I recommend all of the blowhard politicians holding this rescue up do the same.
Oh, and let’s start thinking about how to get Greg Mankiw in as Treasury Secretary under the next administration!