by Tanta on 7/11/2008 08:44:00 AM

The whole essay is worth reading, if only as a refreshing change from the overheated rhetoric of the last few days. Note that Pearlstein will be having an online chat today at 11:00 Eastern to discuss Fannie and Freddie.

A financial crisis like this one calls for policymakers and regulators who can keep a cool head and remain flexible and practical rather than insisting on strict adherence to economic orthodoxies. Not every instance of regulatory forbearance need be viewed as a step down a slippery slope toward Japanlike stagnation. Nor is it particularly constructive to characterize every instance of government involvement in the private sector -- whether it be refinancing a troubled home mortgage, opening the Fed lending window to cash-strapped investment banks or orchestrating a private-sector rescue of a failing hedge fund -- as a massive government bailout.

As for Fannie and Freddie, nobody would be particularly happy if it became necessary for the Treasury to inject some fresh capital into the mortgage giants, in exchange, say, for newly issued preferred stock that could be sold back at a profit when the mortgage market recovers. But even the editorialists at the Wall Street Journal acknowledged yesterday that this wee bit of socialism might be the most effective and least costly way to keep the mortgage market functioning and prevent a meltdown in global credit markets.

A financial crisis is not a morality play. What matters most isn't the precedents that are set, the amount of taxpayer money that's implicated or whether people are made to suffer fully for their financial misjudgments. In the end, what matters most is that we get through it as quickly as possible with an economy and a financial system intact.

If this blog's comment threads are any kind of representation of a slice of reality--I am often agnostic on that question, but still--there are more than a few people who are more interested in getting a front-row ticket to a morality play than working through a financial crisis with the least (further) damage to the banking system. Lord knows that a lot of bad policy can be floated along under the guise of "pragmatism," but I for one would rather try debating with a pragmatist than a purist or a moralist.