It continues to impress me how much the Bush administration does to inspire emotions that do Americans proud.

For example, consider the swift and courageous action the Secretary of the Treasury proposes to take in the face of impending national financial doom. Does it extend a friendly help-up to those who encountered an offer they couldn’t refuse and moved into a house they couldn’t afford? No; that would involve us in what the faithful call a moral hazard. You might think that involved things like war profiteering, torture, and high-level corruption, but you’d be wrong.

Moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. For example, an individual with insurance against automobile theft may be less vigilant about locking his car, because the negative consequences of automobile theft are (partially) borne by the insurance company.

Or for another example, a Wall Street firm might bet fifteen or twenty times the value of the farm on black, knowing that if it comes up red, sympathetic taxpayers will supply the diff. Hey, no prob, you guys buy the first round next time.

Perhaps the government will decide to regulate the activities of the people who have stolen so much, making sure they can’t repeat their profitable scam?

Bush’s move, while a good start and potentially capable of getting bipartisan support, fits more closely with the pattern he has established since they took over Congress in 2006: a near freeze on new regulations unless and until the legislative or scientific ground gives way beneath him, at which point he launches savvy, preemptive moves to limit the scope of any new regulatory power.

As Everett Dirksen — a man I admire at least for his name, which I share, and his voice, which Stephen Colbert would be sampling if Dirksen were still on the Hill — may or not have said, a billion here, a billion there, and pretty soon you’re talking real money.

But if this whole thing sinks like a lead balloon, don’t blame the president! He is officially not putting his political capital behind this one.

White House press secretary Dana Perino made that clear yesterday.

Q. “Dana, is the President’s goal to get this passed and in place before he leaves office?”

Perino: “I think we’ll have to see. I think if there is — it’s a big attempt, but this President doesn’t shy away from big challenges — and also, if necessary, actions in order to address problems. And this is something, if you’ve looked at some of the coverage, that Secretary Paulson has been working on this package for about a year.”

By contrast, Bush continues to insist that a peace agreement between Israel and the Palestinians is possible before the end of his term. So file the Paulson plan as somewhat less likely to come to fruition than Middle East peace.

That’s comforting. At least we’ve got our best people on it.

Posted by Chuck Dupree at April 02, 2008 06:02 AM

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