Financial Journalists Fail Upward

"Listen, you knew what the banks were doing and yet were touting it for months and months," said Daily Show host Jon Stewart to CNBC superstar Jim Cramer in their much-discussed confrontation last week. "The entire network was, and so now to pretend that this was some sort of crazy, once-in-a-lifetime tsunami that nobody could have seen coming is disingenuous at best and criminal at worst."

The applause Mr. Stewart has received for his j'accuse is the sound of the old order cracking. We have turned on the financial CEOs, inducting them one by one into the Predator Hall of Fame. We have gone deaf to the seductive rhythms of the culture wars. We have tossed out the politicians whose antigovernment rhetoric seemed invincible for so long.

And now comes the turn of the bubble-blowers of pop culture, the army of fake populists who have prospered for years by depicting the stock market as an expression of the general will, as the trustworthy friend of the little guy buffeted by a globalizing economy.

We know -- or we think we know -- about the roles played by other culprits in the debacle. The government regulators, for example: How could they have ignored the coming disaster? Well, they were incapacitated by decades of deregulation. What about the market's own watchdogs? Well, from appraisers to ratings agencies the whole tough-minded system was apparently undermined by conflicts of interest.

But what about the syndicated columnists and the beloved stock pickers and the authors of personal finance best-sellers, the industry for which CNBC is the perfect symbol? How did they manage to miss the volcano under their feet?

Mr. Cramer, for his part, had the forthrightness to confess his errors and admit his limitations. "I'm not Eric Sevareid. I'm not Edward R. Murrow," he pleaded. "I'm a guy trying to do an entertainment show about business for people to watch."

But the larger problem won't go away. And it's not just a matter of people missing the biggest economic story of the last 20 years. It's a matter of those who minimized it and those who blew it off because it didn't fit their worldview continuing in their plum positions of authority. Mr. Stewart wasn't rude enough to ask it, but over all his inquiries there hung the obvious question: Why do you still have a job, Mr. Cramer?

If the world of financial infotainment can itself be described as a "market," it is a market where accountability does not seem to exist, where the heaviest of incentives seems to carry no weight, and where consumers, to judge by what they get, seem constantly to choose the lousy over the good. The old order discredits itself, but the old order persists nevertheless.

This needs to be repeated every time someone pleads, "Who could have known?" Plenty of people did see the disaster coming. Most of them were marginalized, however, laboring at out-of-the-way econ departments, blogs and B-list think tanks. They were excluded and even ridiculed because their larger understanding of the economy was not one that fit well with the sort of Wall Street worship preached by the likes of CNBC.

Nor is this a particularly liberal line of inquiry, despite Jon Stewart's well-known fondness for tormenting Republicans. It was a question that interested Milton Friedman, among others, who could be seen musing on the subject in a 1994 TV interview that C-Span chose to rebroadcast on Sunday.

The occasion was the 50th anniversary of the publication of Friedrich Hayek's The Road to Serfdom. As he looked around him, Friedman marveled at the world's perverse refusal to learn certain lessons, even when history itself drove them home. Everyone had by then learned that government was too large, he said, but countries kept on growing government anyway.

Friedman may have misread the direction in which the world was moving in 1994, but the question he raised is still a good one. Bad ideas and clueless pundits often do get on top, and they stay there -- sometimes hailing incentives and accountability, even -- despite all manner of rebukes handed down by history itself.

The reasons the financial-entertainment biz failed us are many and complex, but they ultimately come down to this: In the marketplace to describe the marketplace itself, there is precious little competition. There is a single, standard product that comes in packaging that is alternately sultry, energetic or fun -- bitter, brainy or Cramer "crazy" -- but which rarely strays beyond certain ideological boundaries. Adversarial voices are few. Criticism is sacrificed for access. Advice sometimes shades over into simple propaganda. Even the worst prognosticators sometimes go on to jobs with presidential campaigns or prominent think tanks.

And the small investors whom the personal-financial industry claims so much to adore remain bystanders in a drama they neither understand nor control.

Thomas Frank's column, The Tilting Yard, appears every Wednesday at OpinionJournal.com

Also in Opinion Journal:
Richard S. LeFrak and A. Gary Shilling: Immigrants Can Help Fix the Housing Bubble

Shelby Steele: Why the GOP Can't Win With Minorities

Comments

[Barni]

If immigrants are going to help buy up the current excess housing and start to restore the market they have to have a reason to migrate to the USA - like a job for instance. As the (right agenda ideologues) RAI are busy 'outsourcing' middle class jobs thereby destroying the worlds champion consumers, destroying property and asset values in America and greatly reducing the world's economic pie; the potential immigrants should stay where they are and the job will soon come to them.
Expecting immigrants to shore up the housing market is just rediculous. Truth is that illegal central American immigrants are the only ones with real incentive to migrate to the USA and they won't be in the housing market for a long time if ever.
The RAI have been focusing the media on 'financial system' recovery and ignoring the fact that the real underlying problem is outsourcing jobs. The RAI are aiming at a jobless recovery - which is of course a contradiction in terms and can never happen as Hoover has already proven. The fact is that the RAI are one trick ponies who can only concentrate wealth in fewer and fewer hands, which Galbraith in his study of the great depression identified as the major factor creating and sustaining the depression.
Until middle class manufacturing jobs are protected from offshoring any new technology created jobs will simply follow all of the rest of the manufacturing jobs and be offshored and the situation will continue to get

[LMPE]

I had never watched Jim Cramer's show. In fact, I think that I had only heard about it on "The Colbert Report". That's how it is with me: the stuff that they try to ram down our throats I hear about from secondary sources, usually as a spoof.

[ramblingjohnny]

The Peter Principle push to the absolute and absurd limit!

[WilliamProc]

Mr Frank, thanks for the post!

You should have said that all media news failed us. Its easy to see CNBC for what it is, a 24-hr infomercial for Wall Street, and Cramer's show represents the most visible chunk- a gaudy carnival with lights, horns, whistles and a obnoxious barker.

I can make the argument that the WSJ, CNN, CBS, FOX, and other print, video, and Internet outlets assisted in making the snowball bigger. During late 2007-the end of 2008, there were few voices of warning to be heard because they weren't getting the air time of more bombastic journalists. Recently the more liberal outlets have made note of the lack of economists being interviewed about the economy, but there's a glut of wannabe "economic analysts" giving opinions on whats happening. They never hit the mark, it seems. The farther off the prediction, the higher the ratings.

Its horrible that the Peter Principle has become the American financial business model.

[doober]

It seems to me that in trying to sell democracy to Arab countries we have taken on their style of government and way of doing business which has been for years built on bribery and corruption and is second nature to them..

Corporations which have been dealing with Iraq and paying bribes and overlooking corruption in order to do business have brought these methods back to the USA

In other words we have not sold our business methods and form of government to them.. On the contrary they have sold their corrupt business methods and form of government to us.

[DiogenesOfAlaska]

In the market places for ideas, news, assets (financial or otherwise), there is an overarching principle: the only thing worse than their absence is being forced to take a cheap imitation for the original.

[veritasor]

Right on! Hey why don't you join up with Jon Stewart and lead the charge to obliterate CNBC and alike. Give us, the American people a real alternative, that tells the truth, nothing but the truth. Interested?

[January]

I liked best the line "Why do you still have a job, Mr. Cramer?" But the answer is, "Because I still have an audience."

The market is about customers. Any one who can keep the customers coming, can keep his job...even if he is selling poison.

We saw that in a dramatic fashion with the election twice of Geo W Bush. The man was incompetent at everything except selling himself. With our uninformed electorate, and as The Daily Howler points it with our pseudo-liberals who bashed Gore and Kerry, Americans are suckers for a phony self-promoter.

Mass media are in a turmoil. Along with banks, newspapers are failing. Gossip and lies appeal to our baser selves and therefore will survive. Yet anyone who depends on what they hear from the mainstream media to make financial decisions has only themselves to blame. We need media critics who will critique. We've learned how to do that for movies. Why not elsewhere?

[DennyCrane]

Excellent point. Cramer is still on because people are still watching him. Why they continue to do so when it's become abundantly clear that he has no credibility is beyond me. Maybe instead of blaming people like Cramer or CNBC, we should blame the people who are so easily fooled.

[DrPaulProteus]

Bravo as usual, Mr. Frank, though you really should include the larger news media as a whole. An honest media would have warned us far ahead of time, and listened to marginalized economists who were trying to get the word out like Dean Baker, Michael Hudson, James Galbraith, and others.

"It is difficult to get a man to understand something when his salary depends on him not understanding it"
—Upton Sinclair