Brother, Can You Spare $30 Billion?

It's been nearly two months since the Bear Stearns Paulson Prop-up, and something still bothers me.

It's not the action the Fed took. Unlike some people of my political persuasion, I'm pretty well convinced that it was the right thing to do. You can't talk about how humans are all inter-related as it applies to something like global warming without accepting that inter-relationships are strongest (and fastest) in global capital markets. Yes, it's true: Like a butterfly's wings causing a typhoon, if Bear Stearns goes down, somebody doesn't call me to do that website.

But for me, focusing the question on the Federal Reserve is a red herring. There's something bigger going on--something that allows me to pick on the never-ending hypocrisy of the talk-radio right, which is probably my favorite hobby.

Wingnuts hate panhandlers almost as much as feminists. The image of someone going through their daily life knowing that they can just expect a handout if they screw up gives them acid reflux. The guy selling roses in the bar. The illegal immigrant flocking to a nanny state. The welfare mom driving a Cadillac. These are all symbols of original liberal sins: no accountability, lack of personal responsibility, learned helplessness.

Yet, consider life from the perspective of Bear Stearns CEO James Cayne (or the CEO of a major airline, or any other business tightly woven into the global economic quilt). These guys know two things: They have to maximize shareholder value to stay alive, and if something goes terribly wrong, the government will step in and bail them out. In other words, their judgment of short- and long-term risk tolerance thresholds--the skill that is supposed to justify their salaries and stock option packages--is artificially inflated (one might say "subsidized") by the public sector. Me.

In other words, if I know that I’ll get bailed out to some degree, I have much less of an incentive to take on appropriate risk. That, in turn, encourages more risky behavior, like flirting with mortgage-backed securities that dip more than a pinky toe into the sub-prime market. Or smoking crack.

Government largesse enabling and encouraging risky behavior. Sound familiar? But ask a Dittohead if the two are related, and he’ll shrug his shoulders in passive forgiveness of his white-collar brother. The panhandler outside the bar on First Avenue in Minneapolis gets under his skin. The reckless CEO doesn’t. Yet the latter costs him hundreds of dollars in direct and indirect tax subsidies each year, while the former costs him 50 cents if he's feeling generous.

These guys both have their hands out. Why is one better than the other?