Interviews conducted with a dozen prominent
academic economists, Obama supporters as well as McCain supporters,
found little support for the bailout bill. Indeed, even the one
economist who supported the proposal passed by the Senate Wednesday
night had serious reservations.
The economists' list of objections to the
bailout proposals is long, but the most common was that the aid should
be targeted to those financially troubled enterprises and that the
Federal Reserve already has its traditional power to act as a lender of
last resort. As Fair notes, "a lot of things could be done that are
much smaller than what is being proposed."
Cochrane pointed out a major contradiction in the bailout bill. The legislation promises
the "minimization of long-term costs and maximization of benefits for
taxpayers," while it also promises that the Treasury Secretary "shall
implement a plan that seeks to maximize assistance for homeowners . . .
the Secretary may use loan guarantees and credit enhancements to
facilitate loan modifications to prevent avoidable foreclosures." As
Cochrane makes clear, "you can bail out homeowners or you can make
money on their mortgages, but you can't do both."
It's hard to be sure, but it's easy to believe that economists are more opposed to the bailout than the general public. I will say, however, that Daniel McFadden's views seem crazy enough to bring down the average of the rest of the profession:
I think that the U.S. is in the same position
as the Soviet Union in 1988. We are about a year behind them when they
collapsed. We are one year away from when our economy could not
function, that we could not keep order in the country.