David Henderson Takes on Reich and Kuttner
This mp3 features the Hoover Institution’s David Henderson who debates the bailout etc. with first Robert Reich, who then tags Robert Kuttner. It is shocking to hear Reich’s take on this; he really is a Keynesian who thinks it is necessary and sufficient for consumers to spend money, in order for a strong economy. But a great moment later on is when Kuttner says, “I resent that comment, because I wrote the Community Reinvestment Act and it had nothing to do with this crisis.” You don’t hear that kind of thing very often when the talking heads go at it.
Another good one is that Kuttner–after saying the CRA had nothing to do with the present crisis–then says that credit default swaps are the “type of instrument that should never have been permitted” and says it is a classic case of moral hazard, because the CDS buyer then has no incentive to worry about the bonds he holds. By itself, this would also “prove” that fire insurance on your house is an instrument that shouldn’t be permitted.
Henderson makes great points, especially about the fact that the so-called “credit freeze” is really more of a return to rationality, where you have to prove you are a good risk before getting huge lines of credit. His only flaw is thinking the CPI overstates price inflation (!!).
