I’ve been looking around, trying to see what the great and the good — or at least those who play such on TV — are starting to say about what should be done. And I was particularly eager to read this piece, by a top guy from Pimco. Pimco is a smart outfit, with a deserved reputation for talking frankly about stuff. So what would Mr. El-Erian say?

I read it; and read it again; and again. It took me the third reading before I got it.

Why is it so incomprehensible? Because what he’s basically saying is, bail out the investors, do nothing for the homeowners:

Policymakers now face the unpleasant reality of having to cross at least one of two lines in the sand: altering contracts so that stressed mortgage holders can avoid default and foreclosures; and/or explicitly using the government’s balance sheet to support the housing market. … Crossing the first line critically undermines the sanctity of contracts and, at the very minimum, leads to a persistent increase in the risk premiums that lenders impose on all borrowers. In addition, there may be unintended consequences that erode the integrity of the market system. The other line, which involves the authorities’ balance sheet, amplifies inflationary pressures and weakens public finances. Yet these costs are less persistent and, as such, lower than those associated with the alternatives. Indeed, the real cost of the second regime shift is more nuanced.

The incomprehensibility is not, I think, because El-Erian is a bad writer. It’s because he understands, perhaps unconsciously, that saying this clearly would outrage people.

But it’s not going to work. The financial industry is not going to get away with a covert bailout, snuck past voters with obscure wording.