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Don't look for both justice and success in the bank bailout plan

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Every once in awhile during a crisis or an event, you run across a quote or an observation that sort of summarizes events on the ground, in a nutshell.

New York Times (NYSE: NYT) business journalist Floyd Norris articulated one such observation during a roundtable discussion with other Times journalists on "The Charlie Rose Show" on PBS Monday night.

Regarding the bank bailout plan, Norris said, "This is a case where justice and success don't come together."


And that observation summarizes the trade-offs and dilemma present in the current crisis. If the U.S. wants a banking fix success, with normalized credit that facilitates commerce, it will have to involve some of the current financial players who were at least partially responsible for the crisis in the first place.

Alternatively, if we want justice to be done, Norris says in so many words, "so be it," but understand that punitive measures against current players who played a role in the mess, runs the risk of having inexperienced players at the helm, entirely new processes that are not likely to be as efficient, and/or potential bureaucratic bungling. In other words, if the nation's goal is justice, a lot could go wrong, and a lot of macroeconomic harm could be done.

The justice/success trade-off also helps explain some of the public's frustration, Norris added. The public's performance expectation for the bank bailout is too high -- sort of like asking that a baseball player possess blinding speed and tremendous power. Every once in a while, a Mickey Mantle comes along who possesses both, but it's not the norm or likely.

Fiscal Policy / Economic Analysis: For investors, the view from here argues that the bank bailout has to focus on success, not a 'party purge' of existing players. Some of those players are intrinsic to getting the financial system functioning again, and if the nation does not fix the financial system, nothing else -- not the stimulus package, not health care reform, not energy policy -- will matter.

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Financial Editor Joseph Lazzaro is writing a book on the U.S. Presidency and the U.S. economy.

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Last updated: November 25, 2009: 12:29 AM

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