A classic case of projection at The St. Petersburg Times (Updated)

Headline on a brand-new editorial in The St. Petersburg Times:

Why millions are angry

If I had to guess, I'd say that Robyn "Blumñata" Blumner wrote this one on behalf of the editorial board. It's a classic case of projection and follows the Blumner pattern of focusing on corporate villainy.

On with the screed:

Here's why many Americans are having a tough time digesting spending $700-billion in tax money to prevent an economic disaster triggered by bad mortgages and greed.

For the sake of space I'll give away the three-paragraph punchline. Washington Mutual was once a profitable bank. Recently they hired a new CEO, but after only a few weeks on the job WaMu was possessed by the feds and sold. The CEO stands to gain millions from a signing bonus and more millions from a severance package.

Personally, I don't see why anyone would be angry over that situation unless the new guy was responsible for piloting WaMu into failure. Was three weeks enough time to accomplish that task? I doubt it.

But there's more to the tale. The proposed Bush administration plan will provide credit lines that both enable banks to keep from folding and continue to pay high executive salaries. That strikes many of us as unfair even if we don't exactly get angry about it. Supposedly the bailout plan is set to be modified to limit the weight of golden parachutes. I've got mixed feelings about that. After all, it isn't really the CEO's responsibility that their banks are failing. It's a failure of government regulation dating back to the Carter administration. Allow me to re-post a YouTube video from my previous post:



If you don't have time to view the whole thing, here's the takeaway: The government started penalizing banks if they didn't start lending money to high-risk borrowers. The government created the market for sub-prime loans. The banks, to avoid penalties, had to create financial products for those high-risk customers. Such products feature the potential for greater profits if the payments are made, since high-risk borrowers get charged for the risk involved. Those are now called "predatory loan practices" around the editorial table at The St. Petersburg Times.

Did lenders mislead borrowers regarding the terms of their loans? Probably, at least in some cases. Were banks implicitly pressured into selling the loans by the threat of penalities? I don't know for sure about that. But I suspect it is the case. As the video demonstrates, the stimulation to the housing market created by the easy money appears largely responsible for the housing bubble. And the deflation of that bubble led to the defaulted loans that ended us in the current pickle.

So, this Times editorialist apparently has no clue about economics (one indicator of Blumñatification) and some misdirected anger at the innocent, albeit overpaid, temporary CEO of Washington Mutual.

It's hard for most Americans to grasp the size and importance of the Bush administration's proposed bailout, even if urgent action is necessary to free up credit and protect the mortgages, businesses and retirement accounts for everyone who has managed their own affairs responsibly. But everyone gets this math: less than three weeks of work at a failing savings and loan for more than $19-million.

That is outrageous — and it explains why so many are so mad

It explains why the editorialist is mad, if we forgive the fact that the anger is focused on a guy who apparently had nothing to do with causing the conditions that created the need for the bailout. I don't think Americans are mad about the bailout. They're concerned that CEOs don't make off with taxpayer money under the proposed bailout plan. I don't think Americans are mad about Alan H. Fishman's signing bonus or potential severance package. Jealous, yes. Mad, no. I think the editorialist is mad, and projects that feeling onto people who don't really understand the financial crisis but who do not want taxpayers to foot the bill for CEOs whose companies failed--particularly if their leadership was to blame.

The blame, in this case, falls largely on the government. And that's you and me, once we get past the dingbat representatives who bollixed up the mortgage industry.


Update:

Democrats (such as Robyn Blumner?) who were upset at the amount of money received by Alan H. Fishman can console themselves with the apparent reality that Fishman is a Democrat who tends to give generously to the Democratic Party.

Aside from one donation to Mitt Romney ($2,300 and the only donation to a presidential candidate this cycle), Fishman has given consistently toward the Democratic side of the aisle. That includes a $2,000 donation to Barack Obama's campaign in 2004.

Charles Schumer (D, NY) has received the largest share of Fishman's donations.