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Behind the Lines: What does Bagley have against Wall Street?

By Pat Bagley And Val Lambson The Salt Lake Tribune

Published October 3, 2011 9:23 am
This is an archived article that was published on sltrib.com in 2011, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
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Today The Salt Lake Tribune launches a new online feature called Behind the Lines with Tribune cartoonist Pat Bagley and BYU economist Val Lambson.

Behind the Lines is an unusual addition to news commentary. Once a week Bagley or Lambson will pick one of Bagley's cartoons from the previous week and engage in some give and take on the issues it raises. There will also be a comment section for readers. Think of it as politically enhanced art criticism.

Here's the link to the blog: http://www.sltrib.com/cat/BTL

Bagley, the 30-plus-year Tribune veteran, you already know. Lambson, however, is a newcomer to political commentary, having spent his 30-year career as an economist teaching at various universities and publishing scholarly articles. He was a member of the initial Board of Scholars of the Utah-based Sutherland Institute, originally a platform for raising the profile of libertarian ideas.

Rather than a left-right, winner-take-all slugfest popular in some media, Behind the Lines will be a friendly conversation between two people who have achieved distinction in their respective fields. In fact, Bagley and Lambson are friends from way back. They both grew up Mormon in Oceanside, Calif., became Eagle Scouts together, graduated the same year from the same high school, and went on to serve LDS missions and graduate from Brigham Young University.

Both ended up in Utah, geographically separated by just 60 miles, but worlds apart politically.

Here is the first feature in the series.

Lambson: I am anxious to hear how your negative view of one man in government changed your world view in favor of more government. First, however, your Wednesday cartoon, a view from Wall Street, cries out for comment. What is it that you have against Wall Street professionals? Collectively they create an efficient market for capital, allowing people to build factories, buy homes and generally live better. They don't do this to be charitable, but why does that matter to us?

Bagley: Here I get to openly declare my socialist credentials! The problem is, I am not a socialist. I think that capitalism is a fine system when everyone plays by the rules, otherwise known as informed laws and regulations. But when the system is gamed so a class of people can't lose, despite making horrendously bad bets on a titanic scale, well, that destroys capital and factories and homes. Despite most Americans still trying to dig themselves out from the financial collapse of 2008, Wall Street in 2010 gave itself record compensation. You're right, they're not charitable. They're immoral.

Lambson: Do you seriously believe there is insufficient regulation? There are laws against fraud, and you will find me no defender of the fraudulent, but I do not see wealth as prima facie evidence of fraud.

Bagley: Regulation. Fraud. Wealth. There's a lot to unpack there. Which one do you want me to address? By the way, I'm glad there is someone in Utah Valley who is foursquare against fraud.

Lambson: If only more in Washington, D.C. were foursquare against fraud! My point is not that capitalism is perfect, simply that government intervention tends to make things worse. The gaming of the system that you decry is often made possible by government. For an example, look no further than the bailouts.

Bagley: Just to review, the TARP bailout program was signed into law in October 2008 by George W. Bush. It gave government a bag of money ($700 billion) to use to save our financial system from becoming a smoldering heap of blackened Hindenburg, as the demise of Lehman Brothers indicated could happen. I recall everyone freaking out at the possible consequences. OK, not everyone. There were some few who argued that the consequences might be severe, but it was just the kind of bracing shock that the system needed to clear out the old carburetor. Then we'd really see what this puppy can do! (the puppy, in this case, being a car, which is a metaphor for the American econ . . . I'm sure you get my drift but I could use a sketch pad about now). Personally I go with the Hindenburg and Mitt Romney on this: "I believe that it (TARP) was necessary to prevent a cascade of bank collapses. For free markets to work, there has to be a currency and a functioning financial system."

America also still has an auto industry, thanks to TARP, and most of the money has been paid back. It was a messy fix in an emergency, but I'm happy now not to be selling caricatures to other people selling apples on a street corner.

Lambson: Covering losses in an ad hoc manner just rewards bad behavior and promotes the kind of gaming of the system that you condemn. And metaphors, particularly mixed ones, are a poor substitute for economic analysis.

Bagley: Metaphors are what I do. Can you point me to an analysis of how we would be better off if government hadn't intervened?

Lambson: Sure. There are several. A good place to start is John Cochrane's article in the Winter 2009-2010 issue of Regulation http://faculty.chicagobooth.edu/john.cochrane/research/papers/cochrane_lessons_regulation.pdf. That will give you something to read over conference weekend. Enjoy!

Bagley: See you at the conference tailgate party.



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