In the US, Decidedly Warped Standards for “Mission Accomplished“

Matt Yglesias and Kevin Drum say the right thing about revelations that big banks got very easy terms during the 2008 financial crisis: the real scandal isn’t so much that those banks got rescued as that the rest of the population didn’t.

Recently, in an article for Slate titled “How the Fed’s Generosity Made $13 Billion for America’s Biggest Banks,” Mr. Yglesias writes: “It was always clear that massive emergency lending of some kind was going on and also that some people would regard this lending as a dastardly ‘bailout’ that kept banks in business. But what’s really coming into view now is that this lending was not at a penalty rate. It was ultra-cheap money that allowed banks to earn profits designed to help resolve fundamental solvency problems.”

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Mr. Drum, a commentator at Mother Jones, wrote on Nov. 28 that he agrees with Mr. Yglesia’s observations and that “massive financial crashes always produce some inherent unfairness. For some reason, though, we were willing to overlook that unfairness when it was Wall Street that came begging but became obsessed with it when all the rest of us came begging.”

(Image: CartoonArts International / The New York Times Syndicate)

For sure, the Federal Reserve and United States Treasury should have driven harder bargains. I think the political landscape would look different and better right now if the Obama administration had in fact taken at least one big bank into receivership. But in the crisis, money had to flow freely, and the truth is that the gifts bankers received are more a source of annoyance than a source of current problems.

What’s unforgivable is the way policy makers, both at the Fed and elsewhere, basically declared Mission Accomplished as soon as the panic in financial markets subsided and stocks were up again. When spring rolls around, we’ll reach the third anniversary of a declaration from Ben Bernanke, chairman of the Fed, that “green shoots” were making an appearance — and there will still be 4 million Americans who have been out of work for more than a year. Yet there has been no sense of urgency about dealing with unemployment; indeed, most of the elites’ conversation has been about stuff like cutting Social Security payments a decade or two from now.

As Mr. Drum says, that’s the true radicalizing experience.

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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008.

Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including “The Return of Depression Economics” (2008) and “The Conscience of a Liberal” (2007).

Copyright 2011 The New York Times.