New York Times Crashed-and-Burned Watch (Ben Stein Edition)

I think that the decision to let Lehman Brothers fail was a mistake. But I don't think it was the only or even the major cause of our current financial distress.

Ben Stein does. The way he tells the story of the last two years, the economy was doing fine in spite of everything the shortsellers, the media, the greedy homeowners who took out excessive loans, Goldman Sachs, and the fee-collecting hedge funds could do to it--until one day the Fed and the Treasury forced Lehman Brothers to declare bankruptcy.

Economists ask me why the New York Times publishes Stein. I say that I have no insight into why:

Ben Stein, October 12, 2008: Everybody’s Business - Fear and Loathing in La Jolla - NYTimes.com: A FEW days ago, I spoke to a large gathering of investors in the San Diego suburb of La Jolla, and was startled by the audience’s furious anger at the powers that be. The Wall Street-Treasury-Federal Reserve axis is hated, loathed and feared by these people, who were, as far as I could tell, largely Republicans, almost all well to do — or formerly well to do. They are in a state of extreme agitation about how the current mismanagement of our financial system has played havoc with their own personal financial situation. In fact, they are among the angriest upper- and middle-class people I have ever seen. And the most frightened and worried.... And why not? With the experiment of allowing a major investment bank, Lehman Brothers, to simply vanish, leaving huge holes in the portfolios of many other financial entities, Henry M. Paulson Jr., the Treasury secretary, threw the financial system into chaos. Yes, some people at Lehman undoubtedly did some bad things, but those kinds of people are found everywhere. Letting Lehman fail was almost incomprehensible. It took the federal government many decades, after the banking collapse leading to the Great Depression, to restore confidence in the financial system. Then, in one horribly misguided moment, Mr. Paulson, with the apparent agreement of Ben S. Bernanke, chairman of the Fed, demolished that confidence...

Ben Stein, August 31, 2008: Everybody’s Business - Obama’s Questionable Stimulus Plan: [Obama's] knowledge of economics may not be as extensive as his legal background... he’s been campaigning with an idea of a second round of economic stimulus to combat the evident slowdown in the economy.... The first round hasn’t succeeded, and Senator Obama’s ideas aren’t very promising, either.... Of course, the final word on this stimulus package isn’t in. Some economists say that the package has helped avoid deeper short-term problems, and Treasury Secretary Henry M. Paulson Jr. says we need more time to assess the true impact of the rebate checks.... We already have a national savings rate that approximates zero; that means we spend almost all that we earn. And many of us spend even more than that. If the president’s economic stimulus plan had done what he wanted it to do, we would be borrowing to finance current spending, in effect taking out a national second mortgage to buy handbags and glad rags. Would that have been a great thing?..

Ben Stein, March 23, 2008: Making Sense of a Scared New World - New York Times: Just think of what the short sellers did to Bear Stearns. It’s true that Bear Stearns’s fabled risk management was not up to par in its portfolio. But it’s also true that without the hedge fund heavies of great wealth and great gossip beating them to the ground, Bear would surely have “shlepped it through,” as we say. How do I know this is happening? First, it’s the only explanation that fits the facts. Second, it’s human nature. Third, much of it has been reported. I am just putting it together and turning it into laws of finance...

Ben Stein, January 27, 2008: Can Their Wish Be the Market’s Command? - New York Times: the traders grabbed for their phones and started to put out any bad thoughts they could dream up.... [T]his is what traders do all day long — and especially what they’ve been doing since the subprime mess burst upon the scene. They have seized upon a fairly bad situation: a stunning number of defaults and foreclosures in the subprime arena, although just a small part of the total financial picture of the United States. They have then tried — with the collaboration of their advance guards in the press — to make it seem like a total catastrophe so they could make money on their short sales.... They are not figuring out which way the market will go. They are making the market go the direction they want...

Ben Stein, November 11, 2007: It’s Time to Act Like Grown-Ups - New York Times: If the buyers are now realizing that these instruments are worth tens of billions less than they paid, someone else must have booked a roughly corresponding gain. Now, it’s true that the seller might not have realized that he had the gain. He might have sold at what he thought was fair value at the time. It may be that only when the credit correction started was the asset in question marked down to problem levels. But even if there were no intent and even if the loss were not foreseeable at the time, someone is sitting pretty. There are gainers somewhere, and it sure looks as if some home borrowers are in that group...

Ben Stein, August 26, 2007: Avoid the Craziness and No One Gets Hurt - New York Times: Today’s news media will “catastrophize” anything they can. The subprime mess was always much smaller than the media let on. (See my column of two weeks ago.) In a nation of our size, in a world economy on fire with prosperity and liquidity, the losses were not large, but the media endlessly tried to scare us...

Why oh why can't we have a better press corps?

Comments

[NE1]

You might want to slightly edit the formatting on this post... :)

[macheath]

I still don't understand why Ferris Bueller's economics teacher is given a regular place in the New York Times. Anyone?...Anyone?....Bueller?

[capatalistpig]

My heart bleeds for these formerly well to do Republicans. I remember Ben Stein as a former third rate actor; how does he rate a column in the New York Times?

[Joe S.]

The jackasses at the NYT publish Ben Stein because he appears on teevee. Isn't that enough?

[jeff hoffman]

At La Jolla:
"They are in a state of extreme agitation about how the current mismanagement of our financial system has played havoc with their own personal financial situation." So what does it say about these toney victims that they've paid money to listen to Ben Stein pontificate about their money? What irony there.
" In fact, they are among the angriest upper- and middle-class people I have ever seen." Had to throw in the middle class, for authenticity. Put the middle class to good use there, nice touch.

[Funkhauser]

Ben Stein has faux economics credentials only insofar as he is related to economists. Same with Robert Samuelson, who must have part of the Nobel already because he shares a surname with Paul.

[baileyman]

Ben together with Paul makes "Fair and Balanced"?

[rea]

Stein, of course, famously sneered at Paul Krugman's limited background in economics. Stein should have explained that to those guys in Sweden . . .