Like anyone who wants to know where our economy is going, I’ve been scouring the economics news more than usual of late. It’s confusing stuff. Market pros typically say the Fed under its newish chairman Ben Bernanke isn’t doing enough to lower interest rates. People who don’t make their living in the markets tend to point out that it’s not Bernanke’s job to bail out investors who made stupid investments. A third layer of complexity is what, if anything, the administrative and legislative branches should be doing to help in the form of stimulus measures (spending more money, lowering taxes, or both).

The single best article I’ve read recently to make sense of it all is Sunday’s cover story in the New York Times Magazine: “The Education of Ben Bernanke,” by the great Roger Lowenstein. Perhaps with the exception of my colleague Allan Sloan, there isn’t anyone in America who writes as clearly about the complexity of economics as Lowenstein. Over Christmas I read (I’m ashamed to say, for the first time) his “When Genius Failed,” an absolute must read to understand what the mortgage crisis of 2007 does and doesn’t have in common with the collapse of Long-Term Capital Management in 1998.

Taking advantage of his three, count them, three interviews with Bernanke, Lowenstein does an outstanding job of explaining the history of the Federal Reserve, how Bernanke is different from his predeccesor, Alan Greenspan, and how the current crisis unfolded. I’ve been baffled that Bernanke failed to see the problem of the mortgage meltdown sooner, and in the article I found a clue. In his teachings at Princeton, Bernanke became if not a fan, then at least a consumer of econometrics, the study of the economy as it is reflected in the economics data published by the government and others. Greenspan, in comparison, is far more anecdotal and driven by hunches. Had Bernanke paid more attention to anecdotes about how out of the control the mortgage situation was he might have caught on more quickly.

Finally, a small-C criticism of Lowenstein’s article, and not just that it twice misspells Treasury Secretary Henry Paulson’s surname. Fine as it is by way of explanation, Lowenstein, at least to my read, never offers up a suggestion as to what Bernanke, the president and Congress ought to be doing. Immediately after finishing the article, I caught up with a Saturday editorial in the Wall Street Journal I found far more helpful in this regard. It’s called “The Panic Stage,” and here’s the kicker:

So what to do? Pass a tax cut that is immediate, marginal and permanent. In the “stimulus” grab bag that President Bush is contemplating, the only growth driver is bonus depreciation. Congress will be worse. As for the Fed, continue with the regulatory triage, but ease as little as it can get away with and slowly restore the monetary credibility that was so painfully earned in the 1980s.

This recipe may or may not prevent a recession, though we’d note that so far the underlying economic indicators suggest slower growth rather than a contraction. What these policies would do is prevent today’s panic from becoming something much worse.

This short and punchy editorial, together with Lowenstein’s leisurely and masterly narrative, will bring you up to speed on the economy. For now.

Treasury Secretary Henry Paulson was everywhere Monday, including on the Fox Business Network in a sharp interview with FBN’s Adam Shapiro, who pressed Paulson repeatedly on how effective his voluntary loan modification plan would be. Paulson stressed, and FBN — where I jawboned on air as soon as Paulson was done — streamed on screen, that his plan would affect 1.2 million homeowners.

I doubt that.

Joe Nocera, in his Saturday column in the New York Times, cited an altogether smaller number: 300,000. He cited numerous sources. Let me tell you something about Joe: If his sources think this plan will affect a fourth of the number Paulson thinks, I’m siding with Joe.

This number is important. The last time I saw an objective guesstimate was when the Wall Street Journal reported that of the 1.8 million homeowners with sub-prime re-sets, a third can’t be helped, a third won’t be helped because they can afford the re-set and the last third, or 600,000, would be eligible.

If the 300,000 number is correct, it feels totally irrelevant, which may be a good thing. This is problem that largely needs to work its way through the system, and if the Paulson plan provides a Band Aid, or a psychological balm, so be it.

My buddy Joe praises the plan for its compassion. And while of course I feel for anyone staring at a foreclosure, there’ve got to be other ways to help them. Many have compared the non-bailout bailout with aiding victims of Hurricane Katrina. But let’s be real. The people who took out loans they couldn’t afford aren’t victims. By and large, they acted stupidly. Their plight just isn’t analagous to living in the Lower Ninth Ward of New Orleans. Then again, if the plan won’t help that many, then perhaps it’s no big deal in either direction.

Lots of things have been gnawing at me about this plan, as I wrote here a couple weeks ago. Here’s one more: For those who will be the beneficiaries of a modification, say someone who gets a five-year extension of a teaser-rate ARM, is there any price being paid at all or are they just being a given a gift because they fit the criteria of the plan? If not, then those of us who took more conservative loans and paid a higher rate are the chumps. These people actually are getting away with something — they took a risk on a lower rate than if they hadn’t gone with a teaser and they’re going to get to keep it — which doesn’t make them feel like victims to me. (Katrina victims are getting a handout AFTER losing their homes.) If the lenders (and/or investors in the securitized mortgages) exacted a price, such as taking away some of their equity, or, if there is none, requiring that additional money be paid back, that would seem more fair. That would allow people to stay in their homes and reward the investor/lender for their willingness to modify beyond the reward of the not killing the economy with foreclosures. Likelihood of that happening? Not great.

When Katie Benner and I were reporting an article this summer on the role of the big credit rating agencies in the mortgage-finance crisis I had a weird education on how these firms work. To boil it down, companies that want to sell debt in the public credit markets first present their information to ratings agencies, which then issue ratings and research to investors. The agencies — Moody’s (MCO), S&P and Fitch are the biggest — collect fees from the issuers. In other words, the institutions charged with giving advice to investors make their money primarily from companies issuing debt. It’s a classic conflict of interest, a case of the fox guarding the henhouse. Their fee, by the way, is contingent on the sale, meaning that the agencies are motivated, financially at least, to move the goods, not give good advice.

What interested me over the summer was that whenever I pointed out this conflict to anyone in the debt dodge, they told me this was the way it always worked. Case closed.

Things may be changing.

Hank Paulson, the treasury secretary, addressed the issue in a speech Tuesday, saying: “It is clear that we must examine the role of credit rating agencies, including transparency and potential conflicts of interest. We must also assess if regulations and supervisory policies are encouraging an over-reliance on ratings by financial institutions and investors.”

Well, identifying the problem is a start, but Paulson hardly is offering solutions. You’d think debt investors would be willing to pay for impartial advice, right?