Has a Comedian Just Saved America?
Tuesday, March 17, 2009
As testimony to how Orwellian life has become under the outrages of Wall Street hubris, last week saw a comedian, who poses as an anchor on a fake news show, grab the reins of the Wall Street investigation from the actual investigators in Congress. Either Jon Stewart is the smartest man in America or he has incredible instincts. In a week's time, he has zeroed in, like a heat-seeking missile, on the core of Wall Street's malady. How insightful of Stewart, host of Comedy Central's "The Daily Show," to rationalize that the core of Wall Street's corruption might well be the same core that it has drawn the darkest curtain around: trading. Stewart is the son of an educational consultant mother (Marion Leibowitz), physicist father (Donald Leibowitz) and trading technology guru brother (Larry Leibowitz) an executive at the New York Stock Exchange. He's got a smart family and he's equally smart, advancing the national debate on a comedy channel.
After a week of explosive commentary and video clips of questionable reporting at the cable business network, CNBC, Stewart interviewed Jim Cramer on Thursday, March 12. Cramer hosts CNBC's "Mad Money" show which promotes itself as an advocate for the small investor while, at the same time, suggesting lots of buying and selling of specific stocks. Stewart used the highly anticipated interview to show a devastating clip revealing Cramer to be the embodiment of the market manipulators that he rails against on his show. Acknowledging on the clip that he would never say something like this on TV, Cramer states: "You know, a lot of times when I was short at my hedge fund and I was positioned short, meaning I needed it down, I would create a level of activity beforehand that could drive the futures. It doesn't take much money." -- Allow me to translate:
You know, a lot of times when I was making a large bet that prices would
decline in a specific stock or bond or derivative when I worked in the
largely unregulated world of private money called hedge funds, and I needed
to give that decline a little unseen assistance to make my bets profitable,
I would go into the futures market to trade. That's because I could put down
as little as 4 to 10 percent of the money I needed for the trade and borrow
the balance in what is called a margin account.
The academics and economists (none of whom ever worked a day on Wall Street)
have been telling us in OpEds and speeches and testimony before Congress
that the crumbling Wall Street structure results from bundled subprime
mortgages, collateralized debt obligations, credit default swaps, and asset
Trillions of dollars of taxpayers' funds have been spent on the premise that
these toxic assets are the problem. The fate of a nation has been staked on
that analysis: that if we get these assets off the balance sheets of the
major firms, the credit spigots will begin to flow once again, the banks
will once again trust each other and lend to each other, and investors will
resume buying stocks and bonds with their confidence in the system restored.
Stewart's weeklong commentary and clips helped to dramatically expose this
logic as bogus. None of the toxic instruments would have grown to a problem
capable of collapsing the country's financial system if their trading had
been regulated, transparent and fairly reported on by mainstream media. The
security instruments were never the problem; how they were traded was the
problem. For example, the mortgage and debt securities were, in reality,
junk bonds but they were tradedas triple A. They were not traded on an
exchange where price discovery would have shown them to be junk bonds, they
were traded in an opaque over the counter market. In the case of credit
default swaps, they were traded in a market created by the very firms who
needed to hide for as long as possible (while executives reaped windfall
compensation and bonuses) the dubious pricing of the securities and
gargantuan amounts being issued. (See CounterPunch column "How Wall Street
Blew Itself Up.")
Wall Street is supposed to have an early warning system that if something is
amiss it will self correct in time to avoid a collapse of the system. That
early warning system is known as price action. In other words, the trading
price of Citigroup, Merrill Lynch, Lehman Brothers, Bear Stearns, Freddie
Mac, Fannie Mae and AIG should have begun a downward trajectory years ago as
these firms loaded up on leveraged junk. There is only one possible
scenario, in my opinion, to explain why this did not happen: trading in the
market was rigged. Thanks to Jim Cramer, the public now knows how easy it is
to get stock prices to move up or down. (As one more example, see "Wall
Street Powerhouses Invested Alongside Madoff.")
To be a fair marketplace, the trading price of stocks and bonds must
represent the composite wisdom of all market participants who have the same
opportunity to ferret out information from public sources. When trading is
internalized at the big Wall Street firms (meaning they are allowed to match
customer stock orders in-house), when they are able to create and
clandestinely operate their own trading venues off the radar screens of the
regulators, when they are able to create offshore vehicles like Structured
Investment Vehicles to hide bets gone bad, there is no longer any composite
wisdom. There is only dumbed down information which the public possesses
from CNBC and the superior information available to those operating inside
the clandestine system. (See Maria Bartiromo and the Co-Branding of CNBC and
The big Wall Street firms that taxpayers are bailing out even gobbled up
some of the largest specialist firms. Those are the folks who are required
to maintain fair and orderly markets on the regulated stock exchanges. But
here's what the specialists are really doing, according to charges disclosed
on March 4, 2009 by the Securities and Exchange Commission (SEC):
".from 1999 through 2005, the firms violated their basic obligation as
specialists to serve public customer orders over their own proprietary
interests. As specialist member firms on one or more of the regional and
options exchanges, the firms had a duty to match executable public customer
or 'agency' buy and sell orders and not to fill customer orders through
trades from the firm's own accounts when those customer orders could be
matched with other customer orders. However, the firms violated this
obligation by filling orders through proprietary trades rather than through
other customer orders, thereby causing millions of dollars of customer
The $70 million in disgorgement and penalties the SEC charged 14 specialist
firms (some of which are owned by Wall Street powerhouses like Goldman Sachs
and Citigroup) is now effectively coming out of the taxpayers' pocket since
these are two firms enrolled in the taxpayer cash for toxic asset trash
bailout bonanza. In other words, the public investor is now paying back the
money that was stolen from the public investor in the continuing Wall Street
saga of heads I win, tails you lose. Is it any wonder it takes a comedian to
deal with this stuff.
The speed at which Congress begins daily sessions investigating trading of
both toxic and non toxic securities will determine the speed at which this
country begins to rebuild from the ashes.
After the 1929 crash and as the nation entered the Great Depression in the
early 1930s, the Senate convened hearings by the Committee on Banking and
Currency that peeled back month after month from 1932 to 1934 previously
impenetrable layers of trading fraud. Each layer of fraud opened a window
into the next layer. The hearings did not focus on assets, toxic or
otherwise, it focused on the trading of assets: how Wall Street created dark
pool operators (today's hedge funds) to trade on inside information and
manipulate prices; how some of the most respected men on Wall Street had
participated in trading frauds; how some of the largest firms were secretly
manipulating stock prices; how respected business columnists were taking
bribes from Wall Street players to move trading prices.
I've often pondered just how it was that every large brokerage firm had the
same idea at almost the same time in the early 1990s: to put a TV set airing
CNBC in every stockbroker's office. The managers came around and offered the
broker a deal they couldn't refuse: a deeply discounted price on the TV and
the firm would install it hanging from the edge of the ceiling so it
wouldn't take up precious desk space. Out of 55 brokers in my office at the time,
only myself and one other broker declined. Can you think of any other
industry that wants its workers sitting around watching TV instead of
working? Unless, of course, what CNBC is telling brokers to buy and sell is
actually considered part of the work day by the Wall Street masters.
Television satirist Jon Stewart takes on Wall Street's media mouthpieces
By David Walsh
17 March 2009
Jon Stewart, host of US cable channel Comedy Central's "The Daily
Show," has to be given credit for his recent exposure of CNBC
the financial news channel owned by conglomerate General Electric,
as little more than a mouthpiece for Wall Street and its various corrupt and criminal or
After a period of stagnation, in which his satirical powers seemed
blunted, Stewart has rightfully attacked the unconscionable role
played by financial "reporters" who covered up for
the powerful banking and corporate interests that
looted the national economy and are now receiving trillions in public
Stewart's recent confrontation with CNBC began after that channel's
correspondent Rick Santelli erupted on the floor of
the Chicago Board of Trade February 19. Santelli angrily denounced
President Barack Obama's meager mortgage
reform plan, proclaiming: "We really [don't] want to subsidize the
losers' mortgages ... and reward people that should
carry the water instead of drink the water."
Santelli continued, turning to traders on the floor, "This is America!
How many of you people want to pay for your
neighbor's mortgage that has an extra bathroom and can't pay their
bills?" The traders cheered on the CNBC
correspondent, shouting abuse at those facing foreclosure. This
staged, right-wing episode was treated by the media as
average Americans "speaking out."
Stewart invited Santelli onto his program March 4. The latter first
accepted, then cancelled the appearance. On the show
that evening Stewart proceeded to rake Santelli and CNBC over the
The "Daily Show" host noted that Santelli had done "some critical
reporting on the hundreds of billions of dollars of
bailout money going to failed banks and failed automakers ... and
insurers of failed banks and automakers." But, he
continued, when it appeared that Obama "wanted a small percentage of
that money to go to actual homeowners: Oh-ho!
David Banner [the television alter-ego of the super-strong Incredible
Hulk] became the Incredible Santelli."
Stewart ran a video of Santelli's reactionary rant and then commented:
"Yeah, man! Wall Street is mad as hell! And
they're not gonna take it any more! Unless by "it' you mean $2
trillion in bailout money. That they will take."
Thereupon viewers were treated to an extended sequence devoted to
CNBC's coverage of the financial industry and
markets. The segment included Jim Cramer of "Mad Money" defending Bear
Stearns less than a week before the
investment banking firm went under. "Bear Stearns is not in trouble,"
Cramer tells his viewers.
We also see CNBC's Maria Bartiromo interviewing John Thain of Merrill
Lynch, who comments, "I think that the view is
that, yes, the US is going to slow down, but there's still a lot of
optimism around the world." Bartiromo obsequiously
remarks: "It's amazing we've had a lot of executives on who say the
same thing, that, in fact, their businesses are doing
okay." Merrill Lynch had to be acquired by Bank of America in the face
of possible bankruptcy last September.
Stewart followed the Bartiromo clip with: "That is amazing. I mean
these CEOs saying their own businesses are doing
okay! I mean, it makes sense to take the CEO's word for it. For
instance, I know O.J. Simpson. He told me that he
didn't kill anybody, and he should know—he was there!"
(Bartiromo, it should be noted, was exposed in 2007 for her repeated
appearances at events sponsored by CNBC
advertisers, including Citigroup, with whom she was particularly cozy.
In response to the revelation that Bartiromo hadaddressed a group
of Citigroup clients in Asia in 2006 and flown home
on the bank's company jet, the New York Times
commented, "It is unusual for a financial journalist to make a public
appearance on behalf of a major advertiser.")
The "Daily Show" segment continued with a CNBC interview of now
disgraced Ponzi scheme operator "Sir" Allen
Stanford, in which correspondent Carl Quintanilla asks Stanford:
"Before we let you go, is it fun being a billionaire?"
Stanford replies: "Well, uh, yes. Yes, yes, I have to say it is fun
being a billionaire."
The comedy program's next confrontation came with Cramer of "Mad
Money," a former hedge fund manager whose
antics on his CNBC program include a good deal of screaming, throwing
books, chairs and other objects, setting off
sound effects and other stupidities. One of Cramer's rants against
Federal Reserve policy in August 2007 prompted
Financial Times correspondent Martin Wolf to term the cable channel
host's view "not just offensive," but
Stewart had Cramer on the "Daily Show" March 12. The contest was not
an even one. The host told his somewhat
cowed guest early in the extended segment, "It's not just you. It's
larger forces at work. It is this idea that the financial
news networks are not just guilty of a sin of omission but a sin of
commission. That they are in bed with them [the Wall
He showed a video of Cramer explaining how to manipulate stock prices
and observed, "I gotta tell you. I understand
that you want to make finance entertaining, but it's not a f---ing
game. When I watch that I get, I can't tell you how angry
it makes me because it says to me, ‘You all know.' You all know
what's going on. You can draw a straight line from
those shenanigans to the stuff that was being pulled at Bear and at
AIG and all this derivative market stuff that is this
weird Wall Street side bet. ...
"Listen, you knew what the banks were doing and yet were touting it
for months and months. The entire network
[CNBC] 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."
Cramer protested that executives like Richard Fuld of Lehman Brothers
had lied to him, although "I've known him for
twenty years." Stewart responded with mock amazement, to the
audience's delight, "The CEO of a company lied to
Cramer's miserable defense brings to mind the arguments of media
figures and Democratic Party leaders after the
launching of the Iraq war, that they had been "misled" by the Bush
administration. In this case as in that one, individuals
who claim they were lied to are either lying themselves or such fools
that they have no place in public life.
When Cramer argued that there was a market for shows that offered
get-rich-quick schemes, Stewart countered,
"There's a market for cocaine and hookers. What is the responsibility
of the people who cover Wall Street? Who are
you responsible to? The people with the 401(k)s and the pensions and
the general public or the Wall Street traders."
Toward the end of the extended segment, Cramer plaintively asserted,
"I'm not Eric Sevareid. I'm not Edward R.
Morrow [investigative television reporters from the 1950s and 1960s].
I'm a guy trying to do an entertainment show
about business for people to watch. But it's difficult to have a
reporter to say I just came from an interview with
[Treasury Secretary] Hank Paulson and he lied his darn fool head off.
It's difficult. I think it challenges the boundaries."
Stewart responded, "I'm under the assumption, and maybe this is purely
ridiculous, but I'm under the assumption that you
don't just take their word for it at face value. That you actually
then go around and try and figure it out."
To give him credit, Cramer for once had the decency to be more or less
speechless on Stewart's show. He seemed to
express a degree of genuine moral reservation about his own actions
and those of his colleagues.
For his part, Stewart had a good day. In this effort, growing public
outrage over the banks and the bailouts clearly
played a role. US public opinion is deeply hostile to Wall Street and
its shills at CNBC and elsewhere.
Of course, in right-wing publications and on "free market" web sites,
Stewart was the villain. The National Review's
Mark Hemingway labeled Stewart a "bully" who delivered "a predictable
sandbagging," with the host "hopped up on
faux-indignation." Hemingway argued that Stewart was attacking
Santelli and Cramer to divert attention from the failure
of Obama's economic policies. Stewart undoubtedly remains in the
Democratic Party orbit, but that takes nothing away
from his scathing attacks on Wall Street and CNBC.
Chiming in to defend Cramer, and this is perhaps nearly as inevitable,
was the New York Times and its television critic,
Alessandra Stanley. In a contemptible piece, Stanley accused Stewart
of treating his guest "like a CEO subpoenaed to
testify before Congress: his point was not to hear Mr. Cramer out, but
to act out a cathartic ritual of indignation and
castigation." Stewart, she wrote, had adopted a "prosecutorial tone."
A shyster like Cramer treated rudely, and on
American television, that is shocking! Stewart, a comic, is obliged to
intervene precisely because Congress, prosecutors
and the media will do nothing.
Stanley suggested that Stewart "has always had a messianic streak to
his political satire," i.e., that he takes his comedy somewhat more seriously
than most. Her main argument, entirely tangential to the issues at hand,
that Cramer "may yet have the last laugh," because the feud might help CNBC's ratings,
speaks to her own concerns (above all, career and income) and cynicism.
Stanley's reaction was a social response. Whatever Stewart's political
limitations and agenda, he is tapping into popular
anger and, for the moment, nourishing it. Hatred of the banks, hatred
of the politicians who are bailing out the banks with
public money ... where is this leading? Instinctively, this makes the
New York Times and the political establishment
nervous. And so it should.
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