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.
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"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 ..."
Your are telling it like it is. Obama has been a disappointment. I didn't expect better of McCain. What a losing slate from which to pick!
We must vote third party in state, local and national elections. We can take our country back from the multinational corporations and their media . Hit the internet.
In general, I some agree that economists are not represented in the media reporting. But, even within the economic landscape there are different ideologies to any economic problem. Further, as you state the governed do not really understand economics. So, the reporting could really get somewhat technical and "un-news-worthy". Either way, much of all of this is a political response to an economic problem and is further compounded by the election campaigns. In reality, if the government had developed an economic policy and rolled it out things could be different. In my opinion, we do not have an economic policy. We have political ideologies driving economic policy de jeur depending on a "I want to be the President" . In fairness, in as much as some economists suggesting that the financial mess can smooth out by the market itself with or without regulation (more, less or none) the media itself is merely in the market too. We couldn't very well have a market based finance system and a non-market based media system. In my opinion, passage of the bill versus what it actually achieves is what could work. After all, perception determines reality.
The Corporate Media don't have to sell their souls to Wall Street. They're CORPORATIONS, they ARE Wall Street's mouthpiece. Anybody who didn't figure this out years ago is simply hopless.
Geeze!
Thank you and Amen!
Josh,
Thanks for the great post and the link to the IMF report.Gre
I agree wholeheartedly!
My one caveat would be that I do think that Rachel Maddow is breaking the mold a bit with her new show. She unabashedly expresses her razor-sharp observations with keen intelligence and rapier wit. This in opposition to the "fluff" and pabulum you get from many/most talking heads. Her ratings are already soaring and we all know that the advertising dollars will follow....
I hope so. However during the Vietnam war, "The Smothers Brothers" was the most popular show and still got canned because their not so subtle anti war influence.
I don't see anybody talking or writing anywhere about potential market manipulation this week.
Wall Street is perfectly capable of staging its own drama in order to get this bailout bill passed.
There are much better plans out there: George Soros has one, Reps. Peter DeFazio (OR) and Marcy Kaptur (OH) have one, and many economists point to what FDR did to pull us out of the Great Depression.
It's criminal that Harry Reid and Pelosi and the corrupt chairs of the banking committees are pushing this rape of the taxpayer. What, Henry doesn't have enough millions already? He pulled $1.2 billion out of Goldman Sachs before he became Chief Thief of the Treasury.
If I hear "Main Street" one more time, I'm heading down to the voting supervisor's office and changing from Democrat to Independent.
I won't be voting for anyone who votes for this outrage. No one.
amen
The idea proposed by Soros and others is for the government to buy preferred equity in the banks, which is essentially nationalization. I think that idea will still be on the table is this one doesn't work, but we'd like to avoid nationalization of the banks if possible. Second, I don't understand how anyone could characterize this as a "rape of the taxpayer." That just blows my mind. The country will own assets that have inherent value even if the mortgage holder files for bankruptcy. A lot will depend on how much the government pays for the assets but it would be tremendously more helpful for the system to overpay for them and increase the possibility of some losses than to pay current market value and make money on the deal. Third, don't forget who the taxpayers are. The top 1% of wage earners in the country pay 40% of the federal income taxes. The top 5% pay 65%, the top 25% pay 86%. So if taxes go up to pay for this, the burden will be born 100% by the top 1% or top 5% at most. Nearly half of wage earners don't pay any federal income taxes at all because of the earned income tax credit and dependents, etc, so don't think the average Joe will be effected by this package.
The abysmal performance of the media, in terms of this bailout, and also concerning the Iraq war, and the criminal behavior of the Bush Administration over the past decade is nothing short of disgraceful.
We have been distracted for year after year, while environmental, economic, humanitarian and energy problems have festered.
Rather than reporting, or indeed over reporting issues critical to the people, the media has chosen to opt for profit as a guiding principle. They bombard the public with day after day of celebrity gossip, and only the most superficial coverage of real issues.
The major networks, talk radio and the right wing nutjob programs need to be put on trial in the court of public opinion. The Republicans and Democrats who have allowed the country to be raped and pillaged on their watch need to be held accountable to the people.
Add the fact that a ton of dems in Congress went along and you come to the realization that in a lot of matters, there aint a heck of a difference between dems and repubs.
Josh is exactly right. In today's environment if you are associated with "truth" or "truther" then you are branded as a terrorist. Truth is what we should be looking for and it is definitely not found in the mainstream media any more.
Citi will survice; Robert Rubin ran it for a while and Tim Geithner FRB NY president is Robert's protege' AIG will survive; Kevin Warsh is a Fed Governor, his father-in-law is Ron Lauder, the ex-CEO of Estee-Lauder is on the Board of AIG. And if any of the many felons on Wall Street are ever charged, they can do what Marc Rich and Pincus Green did - take the money, run, give millions, then get pardoned.
Probably part of the problem is that Pelosi and some of the others wanted to shove the original bill through as quickly as possible. Get the money in there, the market holds together long enough for Democrats to say "look how we fixed the country, now vote for us" and Obama can ride a wave of Democratic love into the Whitehouse. Unfortunately it didn't work out that way and some senators actually showed up to do their jobs. The bailout is going to happen and the media will never really get a full explanation out to the public. Most of us are not economists, but there has got to be a way for those brains in DC and the newsrooms to convey the necessary info to all of us mindless drones.
Excellent commentary Josh!
We have seen and heard nearly nothing from the media, except "the sky is falling" doomsday claims by Wall Street shills and quisling representatives. They have trotted out every mouthpiece for this grand theft, but we have heard virtually ZERO disenting views or heard from economists who have a differing analysis and plan to remedy the results of the years of theft, greed, and deregulation by both Republican and Democratic administrations. We heard little or nothing from Congress for the need to help the millions of Americans who lost their homes to the criminal mortgages they were sold/lured into. We have not seen the need to reign in the corporations who via offshore accounts pay ZERO in taxes but make billions in profits. WHERE was the Congressional haste to aid millions of Americans who are falling through the cracks while fat cats make billions? Where are they when it comes to REFORMING Wall Street abuses and greed?
Check this out
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"$700 billion handout this week to fat cat Wall Street financiers"
This statement shows your fundamental lack of understanding of the situation or the bill. The reason the public is "fundamentally against" this bill as the BLOGGERS and MEDIA has been saying is two fold:
1. MOST people don't understand the business worlds dependence on credit. They don't understand their own dependence on credit or how they get credit for the new TV with no payments until Dec '09
2. The media and the politicians have done a piss poor job of explaining the truth of the situation or the truth of what is being proposed to remedy the credit constipation. I noticed yesterday the drums starting beating in the media that 'Congress failed to sell the bill'. They did, but the multiple programs I watched & columns and blogs I read have mis-characterized the situation & inflamed the voters against the bill.
Look at the polls. The initial poll was over 3 to 1 against. The latest poll shows it at about 50/50.
The politicians are doing a much better job explaining what's going on. It's time the press grew up and realized their ROLE is public service, not incite through ignorance.
1. Who the fark in middle America is looking for credit right now? That is exactly why we are where we are right now. As far as small businesses, they will not need credit because people over the next year are not going to be buying. They will be laying off anyway and probably not even needing more credit.
2. Exactly, like how an estimated $63 tn in worthless derivatives is behind this pyramid scheme and $700 bn is not going to save anyone for very long.
MOST people that are for this lipstick on a pig do not understand this pyramid scheme is doomed to fail no matter what Congress does now.
"Who the fark in middle America is looking for credit right now?"
Anyone trying to buy a new energy-efficient car, furnace, window retro-fit or washer, dryer, freezer or 'fridge. Students who want to go to school. Businesses who do contract work and need credit for materials or labor. Retailers who depend on credit to floor inventory. State governments trying to sell bonds for infrastructure improvements, in some cases, just to pay state wages during a lull in tax revenue.
I'm not defending the system. I don't necessarily think it's a good system, but it IS the system. Nothing you or I say can change it. If the credit constipation continues, middle Americans will get laid off and our already recessed economy will grind further toward a depression.
"That is exactly why we are where we are right now"
No it is not. Business and consumer credit is NOT the reason for the credit constipation.
The current credit constipation is directly the fault of deregulation and lack of over-sight by Bush administration appointees which permitted the securities industry to bundle mortgages into something else the Wall Street gambling addicts could roll the dice on. Combine that with the end of usury laws and look out.
It might have been so bad had honesty prevailed, but greed and an Enron manipulation mentality took over. Low interest teaser mortgages were sold then, just like credit cards, the interests went up just because they could. Throw in a down turn in the economy and ~10% of the mortgages defaulted. Another ~10% are shaky.
BECAUSE the mortgages are bundled in groups of thousands, no one KNOWS what the percentage of bad and shaky mortgages is in any given bundle.
CNN bought a bundle and hired some nerds to deconstruct it for valuation. It took weeks. There are millions of these bundles that no one can value quickly and potential purchasers are leery.
THAT is why we are in this situation.
"As far as small businesses, they will not need credit because people over the next year are not going to be buying. They will be laying off anyway and probably not even needing more credit."
That simply shows your lack of understanding and over-simplification of the situation. While it is possible credit demands will go down and buying will reduce and some people will be laid off, it is NOT TRUE that no one will need credit.
While what you say MAY happen, it ALL will happen TEN-FOLD worse if these assets are not turned in loanable cash in short order..
"Exactly, like how an estimated $63 tn in worthless derivatives is behind this pyramid scheme and $700 bn is not going to save anyone for very long."
$63 trillion? no, $13 trillion in total. $700 billion will work as a laxative. It will buy some time for some of these mortgage-security holders to accurately value the assets, clean em up, and get them re-certified for sale.
No one lender needs to sell all their assets. They just need to sell enough that they can get some flow going again. A part of the problem I forgot to mention earlier is part of the deregulation was how much in assets needed to be held against outstanding loans. The asset amount was reduced. Also, these securities, once thought to be bullet proof, were allow to be part of the assets. In theory they were considered liquid, (readily converted to cash, the MOST liquid asset), but since this goof-ball scheme had never been done before, in reality the mortgage securities were found to NOT be bullet proof.
The idiots looked at them as if they were single mortgages totaled up. They aren't. They are thousands of mortgages in a single security with no straight forward means of assessing their liquid-illiquid status. The Wall Street geniuses blew-it, plain and simple.
The reason public opinion has shifted to 50/50 wouldn't have anything to do with hiring lobbyists to pose as the public writing letters, emails and making phone calls combined with the filtering of responses to the Congressional websites would it?
Naaaaaaah! Couldn't be!
Or how about the nonstop desperate screaming of CNN?
Naaaaaah!
The calls going into the Senate and House are more like 200:1. There is no way that the public is 50:50. I do not know a single person (and I have spoken to many!) that supports this bill.
"This statement shows your fundamental lack of understanding of the situation or the bill. "
No, it shows a very keen understanding of where the previous 700 Billion went. That money went into exorbitant bonuses and salaries. Time to get that money back!
A bill that doesn't address the problem will not fix the problem. Obama, say good bye to your agenda.
Well written. Thank you.
the bill would pass if it was only a bailout bill.word keeps surfacing that other legislation keeps getting thrown into it.Offshor
Hmm, why do I suspect that the bailout doesn't pass tonight and the stock market takes a bit of a beating Thursday. Why?
Because the public isn’t begging for the bail out. We are starting to stir against the bailout and have taken down the congressional servers with e-mail. Now that is power.
I'm just guessing of course, but this is how these things get sold to an unsuspecting public. The smart people are lobbying against this, but to pass, this needs to have more support from the uninformed, so we are going to make sure that they are clamoring for this bailout. The uninformed are the masses who get their news from the media and don’t have time to study the proposal. That way congress can pass the bill, because it is the will of the people.
The world will not end and the stock market will not crash (it may go down) but it will not usher in the great depression if the bailout is not passed this week. But the drama we can get from a failure tonight is just the tonic to get George back on the tube telling you "I told you so". Who knows, he may enact some “swashbuckly” legislation to cram this down your throats and save us from “financial terrorists”. Ha! Be scared. Be very scared. Seen the movie before.
Keep the pressure on your elected official to make an intelligent vote and their hands out of your pocket.
I say, No Deal to Any Deal unless the public gets a vote. This surprise economic crisis is too close to the end of the robber barons exit, and the last opportunity to grab as much as possible. Third World here we come. Unless of course, we wake up in time and realize we really do have a say. Unfortunately, we are too scared to speak up in mass numbers. This is stealing.
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