Brain-Dead Economic Reporting: If Wall Street
Approves of Obama's Plan, It Must Be a Winner! No?
Our press corps has discovered an important
scoop: Rich people approve of using
taxpayer money to help rich people.
Immediately after the Obama administration unveiled its cunning
plan to help the titans of
Wall Street avoid the hit that should result from their bad decisions, members of our
national press corps fanned out across the land to ask investment bankers, hedge-fund
managers and stock traders whether Obama's plan went far enough in lining their pockets
with taxpayer cash.
Setting the tone for the rest of our media, CNBC dutifully dubbed
Obama's plan a potential "game-changer" because it got a big thumbs-up from people like
Quincy Krosby, the chief investment strategist at the Hartford Financial Services Group.
Krosby said that the investment community's response to the plan will likely be "positive,"
although she cautioned that the government would have to provide "written guarantees"
that it wouldn't do anything silly -- such as, say, heavily taxing the undeserved bonuses of
executives living on corporate welfare.
Politico's Eamon Javers similarly declared that Geithner had
"cleared the bar" with his new
bailout scheme because it had received an "important endorsement from the Financial
Services Roundtable," which deemed the government's plan to help Big Finance artificially
inflate toxic assets above their market value a home run. Who would have thought?
Similarly, Javers discovered that the CEO of a hedge-fund trade group -- whose members
stand to make a killing by using government cash to subsidize and insure their purchase of
the assets -- also thought the plan was a swell idea.
There was some trouble in paradise, however, as Javers also reported
that a few members
of the investment community opposed the plan because it didn't do enough to benefit the
banks. Patriarch Partners CEO Lynn Tilton told Javers that while she was pleased to see
the government willing to pay the banks cash for their worthless assets, she was worried
that banks would not "share in the upside" if their worthless assets ever somehow regained
Elsewhere in Media World: Fox Business reported that Geithner's
plan to bribe investors
to purchase trash had "removed a huge cloud of uncertainty hanging over Wall Street" by
offering "clarity over how the government will help banks get rid of up to $1 trillion of their
toxic assets." Reuters, meanwhile, boasted an "exclusive" interview with Bill Gross, the
founder and co-chief investment officer of the PIMCO bond fund, who called the Geithner
plan "perhaps the first win-win-win policy to be put on the table" and said that his
company was "intrigued by the potential double-digit returns as well as the opportunity to
share them with not only clients but the American taxpayer." And CNBC analyst Marc
Chandler said that there was "a sense of relief" that private assets managers who bought
toxic assets "will not face the compensation limits of other Fed programs."
In case you haven't noticed, there's a common thread throughout
all of this coverage,
which is that Geithner's plan cannot be successful unless it wins the enthusiastic
endorsement of the very rich people who drove the broader economy into the ground in
the first place. Our press corps' primary gauge of measuring rich peoples' happiness is the
Dow Jones Industrial Average, which it uses as a general substitute for actual economic
When the Dow was crashing a few weeks back, the crackerjack staff
at Politico was
asking pundits if the Dow was spooked by Obama's socialist plans to raise taxes on rich
people to help poor people pay for health care.
But after the Dow rose by more than 500 points yesterday, Politico
"Barack Obama's aides must have been breathing a sigh of relief to see the real-time Dow
ticker headed upward after Geithner's big announcement."
Indeed, the Dow Jones' rise and fall is deemed so important by
many members of our
establishment press corps that it far outweighs expert opinion.
After New York Times columnist and Nobel Prize-winning economist
blistered Geithner's plan yesterday, CNBC's John Harwood smugly brushed off his
criticisms by stating, "if the White House had to choose between praise from Paul
Krugman or plus-300 points on the Dow, I suspect that they would happily take the
What's so galling about much of the media's response to this
plan is how focused they are
on the short-term political ramifications: i.e., if the Dow jumps, it must be good for Obama;
if the Dow falls it must be bad for Obama. By using metrics such as the Dow to discuss a
plan's economic merits, the press ignores vastly more important questions, such as whether
or not the assumptions made by the Treasury Department are at all correct.
Under the Geithner team's calculus, the toxic assets weighing
down banks' balance sheets
are being drastically undervalued by panicked investors. With just a wee little push from
the government -- or a bribe, as the more shrill and unbalanced of us would describe it --
they seem to think that the assets will recover at least some of their value, enough to make
subsidizing them a worthwhile endeavor for investors and taxpayers.
But what if these assumptions are wrong? What if the toxic assets
on the bank's balance
sheets really are just piles of trash consumed by underwater mortgages that will never be
worth anything approaching their original value?
How will the government react if it turns out that many banks
can't sell these assets, even
at artificially high prices, because doing so would render them insolvent? Alas, with a few
notable exceptions, you won't find a lot of our mainstream press corps asking such
Because after all, the Dow is up today, so things must be going
By Brad Reed, AlterNet
Posted on March 25, 2009, Printed on March 25, 2009
Brad Reed is a writer living in Boston. His work has previously appeared in the
American Prospect Online, and he blogs frequently at Sadly, No.
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