A Bunch of Very Rich People Get Hosed -- What's Not to Like?

I find as a regular reader of the NYTimes that, aside from sections like Science on Tuesday and Dining In/Out on Wednesday, in the paper one often has to read through a lot of qualified statements (this or that may happen) or analysis disguised as fact to get a piece of important factual information. So it is with the current sub-prime panic and credit crunch hysteria. Yesterday, in the next to last paragraph of a long article, the Times finally acutely summarized a situation over which it and a bunch of other papers have spilt gallons of hysterical ink, writing, "For all the turmoil in the markets this past week, the number of people involved appears to be relatively small. They are mostly engaged in hedge funds, banks and mortgage lending and they are usually wealthy. Hedge funds, for example, require investors to have a net worth of at least $5 million." In other words, some people comfortably within the top one percent of U.S. household incomes lost some money on bad investments. In a minute way, they contributed to narrowing the disparity between the super rich and the less well off in the U.S.; that's a good thing. And that's also how markets work, even for the super rich -- sometimes you make money and sometimes you lose money when you invest.

The trick of course is to prevent the hysteria over this minor phenomenon from becoming a credit crunch, something those same very rich want because if a credit crunch is deemed to be occurring, the Fed will lower interest rates, rescuing them from some of their losses. So far, to its credit, the Fed is having nothing of it. On Friday it reacted very nicely to that limited possibility of a credit crunch by injecting a bunch of billions into the markets. People who need loans will be able to get them; prudent banks will have the flexibility to make loans to good risks striving to buy their first house. And the super-rich, unless they and their hedge fund managers and improvident lenders can fan the markets into irrational panic, will get to lick their wounds. Sometimes there is justice after all.