One of the more interesting aspects of the economic crisis is that it has forced the mainstream media to confront a financial world that, frankly, it would really rather avoid. Credit default swaps, banks versus nonbanks, the mechanics of bailouts -- these are topics that seem better suited for the more staid and specialized (read: borrring) business press than for the mass media and its endless appetite for sound bites, villains and victims.
As National Public Radio's "Marketplace Report" recently confided to listeners, stories about how to fix the economy too often focus on "wonky talking heads, and that can be a bit of a bore." Its solution: Talk to "regular" people to get their ideas. You can imagine the results.
So it was against this backdrop that we watched the progress of one story as it migrated from the specialized press to the front page of a mainstream newspaper to fodder for cable shouters. We're talking about the revelation that Treasury's banking bailout scrapped a provision of the tax code that limited tax breaks financial institutions could take after buying loss-ridden banks.
One of the earliest full-blown stories on the move appeared in the Nov. 2 issue of Crain's Financial Week. Headlined "How IRS breaks could boost bank bailout tab," the piece pointed out the tax waiver in question "will eventually add billions of dollars to the cost of the $700 billion Wall Street bailout." But that wasn't the story's focus -- nor was it a source of anger or surprise. Instead, Financial Week walked through how the rule change encouraged PNC Financial Services Group Inc. to buy the ailing National City Corp. and Wells Fargo & Co. to take over a sputtering Wachovia Corp. And it told readers that some "tax attorneys argue that tax relief is indeed an essential element to making Treasury's plan to revive credit markets a success." In other words, go Hank!
Fast-forward to one week later. On Nov. 10, The Washington Post ran a front-page story headlined "A Quiet Windfall For U.S. Banks." The 2,000-plus-word piece put a price tag on the tax code change -- up to $140 billion -- and revealed that many lawmakers didn't even notice it was tucked into the bailout. What's more, the paper reported, a change to the tax code by Treasury may well be illegal.
Unlike Financial Week, WaPo bore in on the politics behind the move, explaining that conservative economists and some Republicans have long wanted to repeal the tax and that the bailout bill was a stealth way of doing so. While it found several tax lawyers, "all of whom represent banks," who said the change was perfectly legal, it also found "more than a dozen" who said it was not. And as for lawmakers, it reported that though many are furious, they're avoiding crying foul for fear of derailing important deals for Wachovia and Nat City.
By that night, the piece, which was comprehensive and balanced, was a hot topic, including on cable news. MSNBC's Rachel Maddow, for one, was incensed. "So Merry Christmas, banks. If you don't want to pay your taxes anymore, that's fine," she fumed. She then brought in "syndicated columnist and all-around smart guy" David Sirota to "talk her down" from her outrage.
Sirota proceeded to do the opposite; he talked her up. Soon, he was railing not just about the "tax gift to banks" but about Wall Street bonuses and banks paying dividends to shareholders. (Remember when the media loved shareholders?) He dismissed the notion that undoing the change would cause chaos as "the innocent bystander fable." And as for the (yet unproven) idea that a measure that encourages bank mergers could be good for the ailing industry, well, it never even came up for debate.
Sirota's venom had us wondering: Who is he and why he is qualified to speak about taxes, banking or the bailout? Turns out he's a former Democratic staffer who has worked on Capitol Hill, or, as The New York Times has called him, "a liberal political analyst and author." In other words, he's less a journalist than a political operative. OK, this is cable and you can't be shocked by that. But what is distressing is the deterioration of the discourse, no matter where you come out on this issue, as it broadens out. A wonkier talking head might have been nice -- if a bit of a bore.