Originally Posted by SteveD
You're missing his point. Creditors are supposed to assume risk, due to the possibility of default; but if government picks up the tab to ensure that banks are immune from this risk (via 'toxic asset' bailouts), then it is a redistribution of income from the general public to bankers, whereas homeowners don't get this benefit, because they don't have the influence over both parties that bankers do. Banks are "too powerful to fail," whereas middle class homeowners are not. That's his point.
If that's all Glenn were saying, I would agree. I don't think it is. It seems to me his thought experiment is one in which Washington says "we changed the rules to benefit the Banks once, now no one can complain when we change the rules again to hurt the Banks and help our new friends." Two wrongs, which on net leave some at zero, some ahead, and some behind. I posit that the potential for populism among those who fear being put behind in that scenario is just as great, if not greater than the potential for populism that Glenn is sketching.