Time to play offense

The fact that the economic fallout from this Wall Street meltdown hasn’t been worse, says David Leonhardt in The New York Times, “should be considered a victory for Ben Bernanke and Henry Paulson, the point men on the crisis.” But while they’ve reacted aggressively to keep things from crashing down, neither man has done much to address the problems underpinning this crisis. Bailouts hinder long-term solutions (think Chrysler), and besides, the causes of this crisis—people with stagnant incomes taking “wishful-thinking loans” from “lightly regulated banks”—can’t be solved with a bailout. Playing defense has kept us from sinking, but “when will someone start playing offense?”

Wall Street’s dead; long live Wall Street

“Wall Street as we know it is kaput,” says Robert Samuelson in The Washington Post. And it’s not just the fall of Lehman Brothers, Merrill Lynch, and AIG. Rather, “Wall Street’s business model has collapsed.” Three changes since 1980—a move by financial firms from advising and acting as intermediary to placing their own market bets; skewing compensation toward exorbitant bonuses that reward short-term gain; and a heavy reliance on crazy amounts of leverage—turned Wall Street into “a manic machine for gambling.” It is unclear how Wall Street will restructure itself, and the changes will probably be beneficial, eventually and for a little while, but Wall Street’s miscalculations will hurt the rest of the economy in the meantime.