In this blog post, I summarize two amazingly quick turnabouts in Larry Kudlow’s views on the bailout. Specifically, back in mid-September he was explaining why we needed to stop bailing out firms, because of the problem of moral hazard. Then, after the bailout was rejected by the House and the leaders were putting in “sweeteners,” Kudlow said he couldn’t support any plan that contained limits on executive pay.
Well, two days after that article, he came out saying how great the bailout would be for taxpayers. The fact that the plan still contained limits on executive pay apparently didn’t bother him anymore. Then, just a few days ago, Kudlow explained that Paulson needed to “recapitalize” the banks without punishing shareholders. I.e., last month’s talk about moral hazard was out the window.