Brain-Dead Economic Reporting: If Wall Street Approves of Obama’s Plan, It Must Be a Winner!
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 President Barack 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 their value.
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 statistics.
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 speculated that “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 Paul Krugmanblistered 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 latter.”
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 questions.
Because after all, the Dow is up today, so things must be going well, right?
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.
© 2009 Independent Media Institute. All rights reserved.
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