Grim and Bear It

As a result of the deal, American taxpayers could be on the hook for billions of dollars in troubled mortgage assets so that Bear Stearns can avert bankruptcy. [...] It no longer matters what anybody or any business did to find themselves in their current predicament. All that matters is that they have a grievance big enough or pervasive enough to move the government to action. Eventually, something has got to give. -- Phil Klein

I like it -- when investors hurt, government's got to give. Over the weekend in NYC, publicly the Bear Stearns implosion seemed to be a blip. Then again, St. Patrick's Day was consuming all. Either way, private titters suggest an important idea that's obvious in retrospect: this plot point sits along the course of a much longer narrative which is well-known to those on the inside. It's easy to forget how true this is generally about everything; only to remember it again when doing pre-litigation discovery or chatting up insiders. In this case, the story is a familiar one -- the market must keep moving or it will die, and the urge for truth without the consequences impels us to offset gambling losses by inventing new games for high-stakes rebounds.

So the plot point marked 'Bear Stearns', simply in virtue of having transpired, points backward to an earlier slate of problems which are likely to crop up in the future, including the near future. This also means that Bear would not have been bailed out had the market punishment it faced for making poor investment decisions not been as broad as it actually still now is. It's not that Bear's grievance is big and pervasive enough to make government move. It's that the market's is. And we've gone all in on a system which guarantees eventual unpredictable failures. On balance, this may turn out to be the 'right answer', or the right answer given our preferences or our historical situation or any other number of things. What hurts is the sudden awareness of this fact, which tends to outrage the ignorant whom suffer for it. The ghost in the market machine drives both innovation and profit, as money and moneymakers seek to extend knowledge of the future by increments at the margin. Because somewhere out there in the future is flitting the Next Big Downturn.

Pervertedly enough, in its particulars it is only a possibility, but in the abstract it is a certainty. On the cosmological scale this is probably the worst thing about the market system as we know it today: it teaches you that particularity is either unreal or irrelevant, while abstraction is a matter of life or death. Only from the perspective of the most aggregate distance can you obtain reliable knowledge. But at increasing distances from real details, knowledge loses its human character. And the idea that we are actually the ones causing all this to happen becomes incidental to the question of what to do about it. Bear gets the bailout not because of questions of justice, fairness, or desert but because the information disruption caused by not bailing out Bear is more than the mere mortals chasing the ghost can handle. Letting Bear die a natural death means accelerating the future, empowering the ghost to outrun its trackers and seekers. And then all the innovation and profit motive in the world can't stop the abstract market from revenging itself in particulars: large numbers of real people whose daily lives have suddenly been plunged into dislocation and chaos.

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