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Pawlenty’s Bailout Blarney

Once again we find that Tim Pawlenty has changed course on an issue that is something of a litmus test for Republican candidates. In this case, it’s government bailouts.

On Jan. 16, he condemned all such bailouts, saying: "I don’t think the government should bail out Wall Street or the mortgage industry or for that matter any other industry." But back in 2008, when the sub-prime lending crisis was gathering force, Pawlenty said that some entities were "too big, the consequences are too severe for innocent bystanders to allow them to fail."

Here’s what the former Minnesota governor and potential 2012 GOP presidential candidate said at a National Press Club luncheon two-and-a-half years ago:

Moderator, Aug. 6, 2008: Another questioner asks, "How can you be such an advocate of marketplace economics when airlines, banks, and trillion-dollar mortgage insurers like Fannie Mae and Freddie Mac are in need of rescue by the American taxpayer?"

Pawlenty: Well, there has been market failure, some of it by business practices, some of it by bad judgment, some of it, perhaps, by other behavior. …

[I]n an ideal marketplace, you’d allow those entities to fail. But if you allow those entities to fail, the consequences are so severe for innocent bystanders, namely average Americans who rely on the markets, rely on those mortgages, you know, the consequences are too severe.

So from a pure marketplace principle, you would not bail them out. But we also have to measure that against the consequences to the rest of the country. And, you know … they are too big, the consequences are too severe for innocent bystanders to allow them to fail. So it’s an imperfect solution, but you also have to be pragmatic about getting the mess cleaned up.

Salon.com described this as a statement of "reluctant support" for bailouts on practical grounds. We agree.

And it’s hard to reconcile with his blanket rejection of bailouts on "Fox News Sunday" this month. There, he made excuses for some of his earlier equivocation on the subject, saying that he had been appearing on certain occasions as a surrogate for John McCain, the 2008 Republican presidential nominee:

Host Chris Wallace, Jan. 16: OK, I want to ask you about — and you’ll probably contest this — some apparent flip-flops in your positions. In your book "Courage to Stand," you opposed the TARP bailout.

Here’s what you write, "When the rain started to fall on America’s picnic, Washington hung up a big old plastic TARP to protect us from the deluge. Ever wonder why they call some of these things ‘TARP funds’? Good intentions, maybe, but a bad decision." But, Governor, in 2008, on this program, you defended John McCain’s plan during the campaign for a huge bailout, as long as some of the billions of dollars would go to Main Street as well as Wall Street. Let’s take a look at what you said back then.

Video clip of Pawlenty, 2008: And if we don’t do something to get at the root of this cause, which is declining home values, he believes that the problem is going to continue to spiral downward. So he’s trying to get at the root cause, which is home values and bad mortgages. (End of video clip)

Wallace: Governor, isn’t that a flip on — on bailouts?

Pawlenty: Well no, it’s not, Chris. I was in the role of speaking for Senator McCain and his views in 2008. …

Wallace: You — you didn’t believe what you were saying back then?

Pawlenty: Well, you — we’ll play the tape, it says "he believes," and I was speaking as a spokesperson for Senator McCain. But I don’t — didn’t support and don’t support bailing out places like Wall Street, General Motors and the like with respect to federal and government —

Wallace: I don’t want to belabor it, but — when you were defending that back in 2008, you didn’t believe it?

Pawlenty: I don’t think the government should bail out Wall Street or the mortgage industry or for that matter any other industry.

Pawlenty is right that he was speaking on McCain’s behalf in the video clip that Wallace played.

But Wallace didn’t quiz him on the National Press Club appearance that same year, where Pawlenty was representing only himself. 

Last week, we found that Pawlenty’s position on cap and trade had changed markedly in the last few years. Now, on bailouts, too, we find that he’s taken a new direction. Pawlenty may be against all government bailouts in 2011, as he indicated on Fox, but in 2008, he saw a place for them.