From Casey’s Daily Dispatch:

Friend and correspondent Mark V. sent along a PBS interview with David Stockman, President Reagan’s budget director.

In this interview, Stockman strongly objects to former Secretary of the Treasury Hank Paulson’s contention that he saved the economy by bailing out his alma mater Goldman Sachs and others of the Wall Street boys’ club.

Here’s an excerpt from the interview…

PAUL SOLMAN: So, if you had been in the administration after Lehman Brothers, you wouldn't have supported bailing out AIG?

DAVID STOCKMAN: No, absolutely not. It was the single most, you know, drastic error in policy in modern history, going back to the 1930s. This was exactly the wrong thing to do.

It's destroyed any basis for fiscal discipline in the United States. I was a member of Congress, and I know how they think. And they think by analogy. If you did it for John, you have got to do it for Bob. There is no way that any congressman is ever going to vote against farm subsidies or ethanol subsidies or housing subsidies or anything else, refrigerator subsidies, once we have made this tremendous bailout for Wall Street, and we stepped into AIG.

PAUL SOLMAN: Well, spoken like a true gunslinger, but you would have been taking an enormous risk.

DAVID STOCKMAN: It's part of the capitalist system. You know, if an investment bank gets in trouble, it ought to fail. If a hedge fund gets in trouble, it ought to fail.

The idea that our system is so fragile that the failure of Lehman Brothers or even Goldman Sachs, which could have happened, allegedly, in the next few days, would have brought the whole system down, I think, is baloney. I think it's an urban legend that was created by Wall Street.

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