Side Effects of the Populist Anti-Bonus Upsurge

Here is an example of Krugman's point about the side-effect of clumsy legislation by Congress. This is a blog entry by Dean Baker at The American Prospect showing how of other high flyers getting their wings clipped by the new bill aimed at AIG fat cats:

The Washington Post devoted a full page article to the plight of the small clique of highly paid executives and managers at Fannie Mae and Freddie Mac who could see their bonuses clipped as a result of the bill passed by Congress yesterday. At one point the article implies that the government's takeover of the mortgage giants destroyed the value of the stock held by these people: "Many employees lost small fortunes -- in some cases life savings -- when the government seized the firms and wiped out almost all their shares."

In fact, the shares were almost worthless at the point where the government stepped in. They had lost most of their value because the executives who ran Fannie and Freddie made really bad loans with the institutions money. The government stepped in to avert bankruptcy which would have wiped out the shareholders. So, it is not true that the government's action cost these people their life savings, bad management by Fannie and Freddie cost these people their life saving.

It is also worth remembering that the Washington Post is a newspaper that is outraged by the idea of autoworkers earning $57,000 a year.

Notice how Dean Baker points out that media like the Washington Post are so concerned about preserving the income of high flyers while at the same time it keeps up a constant drumbeat against the "outrageous" wages of autoworkers. With major media working overtime to advance the interest of the tiny elite, it is no wonder that politics are so badly skewed toward protecting Wall Street while letting the economy go to hell in a handbasket.

If you want a critique of American media from the left-of-centre perspective, read Dean Baker's "Beat the Press" blog.