11/01/2008 05:12 am ET | Updated May 25, 2011

How the Media Sold Their Souls to Wall Street

If you are like me, the pundits, and 99.9% of the American public, you really don't know much about economics. And despite Monday's refreshing moment of rebellion in the Congress, in all likelihood the House and Senate will pass a modified version of the $700 billion handout this week to fat cat Wall Street financiers.

The likely result, according to Nobel economist Joseph Stiglitz: "The unemployment rate will still increase, growth will remain anemic, house prices will continue to fall, the number of houses in foreclosure will continue to rise, credit will be harder to get, states and localities will remain in a fiscal crisis, and there will be cutbacks in basic public services. .... Our living standards in the future will be lower than they otherwise would have been. "

Here's the problem: None of us really know that the hell is going on, and what the largest financial bailout in the history of our nation would actually achieve. Based on McCain and Obama's hasty support of the bailout, it would seem they are both too far under the thumb of Wall Street to look at viable alternatives to an unprecedented handout to the same reckless bankers who got us into this mess.

And like they did in the run-up to war in Iraq and the passage of the Patriot Act, the media are compounding the problem rather than helping it. While TV devotes 24/7 coverage to pretending that mudslinging Democrats and Republicans represent the full range of debate, while right-wing radio hosts scream socialism, and while pundits like Thomas Friedman implore Congress "to give them the capital and the flexibility to put out this fire," the American people are getting virtually no hard economic analysis about what the bailout would achieve or what the range of options are.

Why aren't Luc Laeven and Fabian Valencia on television right now? They just submitted a comprehensive report to the International Monetary Fund after studying 42 banking crises over the past 37 years. Their conclusion: Bailouts often do not work, they often result in more bad practices, and they distort economies by transferring wealth from taxpayers to bankers and their customers.

Why hasn't economist Dean Baker been invited onto a single television program in the past week ? He is one of the guys who actually predicted the current crisis. He wrote this week: "There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. The worst case scenario is that we have an extremely scary day in which the markets freeze for a few hours. Then the Fed steps in and takes over the major banks. The system of payments continues to operate exactly as before, but the bank executives are out of their jobs and the bank shareholders have likely lost most of their money. In other words, the banks have a gun pointed to their heads and are threatening to pull the trigger unless we hand them $700 billion."

Why isn't New York University economist Nouriel Roubini all over the news right now? He says the claim that "spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit - at a huge expense for the U.S. taxpayer - the shareholders and even unsecured creditors of the banks. ....The pockets of reckless bankers and investors (will) have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession."

Roubini continues, "Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money. It is pathetic that Congress did not consult any of the many professional economists that have presented alternative plans that were more fair and efficient and less costly ways to resolve this crisis. ... and it is a scandal that even Congressional Democrats have fallen for this Treasury scam that does little to resolve the debt burden of millions of distressed home owners."

But turn on your television - the place where more than 60% of Americans get their primary news - turn on your radio, or open your local newspaper, and you're not going to see what these top economists are saying. It's a McCain quote, an Obama sound byte, and the same pundits who have proven their incompetence over and over. The result is an American public that is fundamentally uninformed about the issues that matter most - like economics, health care, and war - and over-informed about those that matter least: sports, celebrity, the latest campaign ad, and horserace analysis of elections.

The deregulation of our media and financial industries have occurred concurrently, and have resulted in equally disastrous outcomes. We now have a highly consolidated media system, where a few commercial conglomerates control most of the TV channels and newspapers - the place where vast majorities of Americans get their news. As these companies consolidate, four bad things happen:

1) Profit becomes paramount, so reporters are laid off, and cheap-to-produce programming prevails in the form of yakking pundits and reality shows;

2) Advertising reigns supreme, so politically controversial and unsavory reporting is replaced with noncontroversial fluff, while programming is designed to appeal to the middle and upper classes;

3) Government policies granting further consolidation, free airwaves, and monopoly control of markets become increasingly valuable, so media steers clear of investigating corrupt politicians or asking tough questions that could piss them off. They stick to more trivial stories that don't rock the boat in the halls of power;

4) The get-it-first, 24/7 news cycle, driven by an unquenchable thirst for higher ratings, compels reporters to cozy up to government officials in hopes that they will get the next big scoop. Reporters that ask tough questions are thrown off the bus and out of the press room.

Finally, in case you're wondering, the news anchors that dominate the airwaves are not part of a grand conspiracy. Rather, people like Wolf Blitzer, Brian Williams, Charles Gibson and Katie Couric are people whose world view and approach to reporting dovetail with the sensibilities and business interests of their employers. They are the reporters who are promoted, while those who challenge power are not. Just look at the firing of Phil Donahue from MSNBC when he criticized the war in Iraq, or the fact that Bill Moyers is not on commercial television.

With a few notable exceptions like Katie Couric's recent interviews where she is asking tough questions for the first time in twenty years, we have no reason to believe that the press -- and along with it, most politicians -- will ask the tough questions, expand the range of debate, and bring the facts to the American people. But until they do, our economy - and our democracy -- will continue its race to the bottom.