MemeWatch: Superconduit as Treasury Bail-Out

Bloomberg's Brendan Murray and Simon Kennedy have an article up today headlined "Paulson Credit Push Earns Jeers From Free-Marketers". It kicks off like this:

U.S. Treasury Secretary Henry Paulson's plan to shore up asset-backed commercial paper is drawing criticism from free-market advocates, who say it risks shielding banks from the consequences of poor decisions.

It's not just "free-market advocates", either: it's also the likes of Dean Baker, who describes the proposed superconduit as "a bailout by the nanny state for the big boys who lack the ability to get by on their own in a free market".

I'm not convinced that this is really a Treasury bailout, if only because anybody capable of bringing senior bankers together could, in theory, have achieved exactly the same thing. (Maybe the IIF might have been able to orchestrate something along these lines, in an alternate universe where it was, you know, actually relevant.)

Nouriel Roubini, who knows from bail-outs, has a long blog entry up today which keeps on hinting that there's a Treasury bailout going on but never quite comes out and says it. Instead, Roubini concentrates his attention not on Treasury and the superconduit, but rather on the Fed and something called Section 23A of the Federal Reserve Act (Reg W). When the Fed waived that section, says Roubini, that was the real bailout.

So maybe if the "free-marketeers" want to start pointing moral-hazard fingers, they should swivel a little and aim at Bernanke, rather than Paulson.