Media Endorse $700 Billion Economic 'Rescue'
The financial system has been the damsel in distress of the
Called a ârescueâ by many journalists and a bailout by the angry public, the Economic Stabilization Act of 2008 was signed into law on Oct. 3. A previous attempt failed after 228 representatives, including 132 ârebelliousâ conservatives and 94 Democrats, voted it down.
The media cheered on government regulation, portraying a bailout as the only solution. When the first try failed Sept. 29, some journalists just couldnât understand how it happened.
Katie Couric was clearly shocked. That night on âEvening News,â she harshly questioned House Minority Leader Rep. John Boehner, R-Ohio.
âCongressman Boehner, Warren Buffett warned if Congress doesnât act, quote, âthere would be the biggest financial meltdown in American history.â What in the world are you people doing?â Couric asked without pointing out that Boehner supported the bill against the majority of his party.
The failure of the ârescueâ was stunning, according to the media. ABCâs Jake Tapper called it âan historic legislative disasterâ after Martin Bashir asked him how the day âwhich began with such high hopesâ could end the way it did.
Many in the news media championed the first bailout that failed and ultimately the bill that passed on Oct. 3, CBSâs Anthony Mason, ABCâs Betsy Stark, Bianna Golodryga and Jake Tapper, NBCâs Tom Brokaw and CNBCâs Jim Cramer all called for the government to be the knight in shining armor with taxpayer dollars. Cramer was interviewed repeatedly on NBC and CNBC and even appeared on rival network ABC during âNightline.â
Cramer supported a government bailout so strongly that he attacked economists who sent a letter of opposition to Congress. He said the economists â who found âthree fatal pitfallsâ in the plan including unfairness, ambiguity and long-term effects -- âdonât know what theyâre talking aboutâ during NBCâs âTodayâ Oct. 1.
âDid any of those guys ever make a nickel on the market?â Cramer asked. âHave any of them ever traded? Iâve traded mortgage-backs most of my life. Iâve traded these obscure things. These guys simply donât know what theyâre talking about. Weâre on the precipice of Great Depression II; they all have tenure. Theyâre not worried.â
The publicâs lack of support for a bailout confused CNNâs Carol Costello, who said on âAmerican Morning Oct. 1 that âI talked to our own polling experts and they are perplexed by the numbers.â Costello cited a Washington Post, ABC News poll that found 45 percent of voters in support of a bailout, but 47 percent against one.
Other surveys found more people opposed to the plan. A Sept. 25 poll from Rasmussen found that only 30 percent of voters agreed with the federal government stepping in to rescue financial markets. That poll also found that 63 percent of people were worried the government would do too much.
According to four major networks â ABC, CBS, CNN and NBC â the economic situation would be worse without a bailout. ABC and NBC argued the bailout could result in a profit and NBCâs political director said those who opposed it were being âpoliticalâ â though many Americans and nearly 200 economists spoke out against it.
Despite the mediaâs âoptimismâ about the bailout, 171 members of the House including Rep. Mike Pence, R-Ind., and Jeb Hensarling, R-Texas, opposed the bailout bill the second time around. Sixty-three Democrats also opposed the bill in its final vote, including Tim Walz, D-Minn., who wrote in a commentary that it lacked taxpayer protection and offered no âreal helpâ for homeowners.
Arnold Kling, former senior economist at Freddie Mac and the Board of Governors at the Federal Reserve, also had serious concerns about the bailout package and its potential impact on the free market. In a Cato Daily Podcast for Oct. 3, Kling said âthe stage is set for almost any number of socialist type measures.â
âWe may not have a private sector as we once knew it,â Kling warned.
This too must pass
Despite public furor over the bill, the media theme was that it âmust passâ or terrible things would happen. Reporters and interviewees called it ânecessary,â âessential,â and âcritically important.â
Time.com reported on Sept. 29 that phone calls to congressional offices were running 100 to 1 against the bailout. Glenn Beck indelicately described the publicâs attitude toward the legislation on Oct. 2, saying â
Still, reporters and anchors promoted the bailout with âdoomsday scenarios.â ABCâs Bianna Golodryga painted a dire picture for âGood Morning Americaâ viewers on Sept. 28. Citing âexperts,â Golodryga warned âtime is running out to save both [Wall Street and
Why was the bailout âessential?â According to ABCâs Betsy Stark, experts said âsomething had to be done to keep Wall Street and
CNN also tried to scare up support for the legislation. Christine Romans offered a âdoomsdayâ assessment of the economy without a bailout. She cited a former vice chairman of the Fed who said anticipating what the world would look like without a bailout is âlike anticipating nuclear war. We donât know what the chances are, but we should do everything we can to avoid it.â
Romansâ Oct. 2 âNewsroomâ segment didnât include voices of opposition to the government plan.
ABC, CBS, CNN and NBC all predicted worse outcomes without a bailout. Anthony Mason made that claim on âEvening Newsâ Sept. 26. Tom Brokaw for NBC and Betsy Stark for ABC agreed on Sept. 28.
On âTodayâ Sept. 28, Jenna Wolfe asked former âNightly Newsâ anchor Brokaw âHow important is it that this bill gets passed?â
âOh, itâs critically important,â Brokaw said. â[E]veryone agrees that if we donât get it done, weâre going to have a real credit crisis in this country, and that can quickly spiral down into a deep recession, if not a Depression.â
CNBCâs âMad Moneyâ host Cramer called for bailout after bailout in interviews, and promoted a similarly pessimistic prediction of a second Great Depression. On Sept. 24, Cramer said he would âspot the bears 2,000 Dow points in this plan fails.â
According to Cramer, the failure of the bailout would usher in the âStone Ageâ or âThe Great Depression, Part 2.â
âI think in the end â Stone Age coming, Stone Age coming,â Cramer said earlier on Sept. 24 on the âStop Tradingâ segment on CNBCâs âStreet Signsâ with Erin Burnett. âI want to be on board against the Stone Age â against a financial
Don Boudreaux, chair of the economics department at
âLetting prices adjust freely â without meddling or subsidies from government â would not have returned us to the Stone Age. Thatâs simply absurd,â Boudreaux said. âAsset prices would have moved closer to their true values and, after the appropriate adjustments, the economy would have resumed its course.â
The bailout that was supposed to stop the bleeding on Wall Street didnât. Since the bailout passed on Oct. 3, the Dow Jones Industrial Average continued its slide, closing around 9447 points on Oct. 7 (nearly 900 points lower than the Oct. 3 close).
But it âcouldâ profit âŚ
One selling point the media used to campaign on behalf of the bailout was that âtaxpayers could make some money out of this.â
Thatâs what Brokaw told âTodayâ viewers on Sept. 28, and he wasnât alone. One pro-bailout story from ABC âWorld News with Charles Gibsonâ began with Gibsonâs assertion that people werenât talking about how the plan could make money.
âNot much discussed is the fact that the government will likely recover much, if not all of that money,â Gibson said Sept. 26. Betsy Stark then cited two experts who both favored the bailout. Stark admitted that the taxpayers face ârisksâ with the plan, but Gibson concluded that the package wasnât really a bailout after all.
âIt is basically spending money that â a loan, in effect, that we could get back as a taxpayer,â Gibson said. Stark generously assessed the situation calling it âan investment.â
The profit-making scenario was also one of Cramerâs go-to comments. On Sept. 29, Cramer told âTodayâ viewers he was âalmost convincedâ that the plan would make money.
Despite those optimistic claims, a September 2008 report from the International Monetary Fund (IMF) made that seem unlikely. Alex Patelis, head of international economists at Merrill Lynch, explained the IMF report on âSquawk on the Streetâ Sept. 29.
âWhat you find in the IMF report is of course that banking crises happen all the time. If you look at the history of banking crises â that on average they cost about 13 percent of GDP to the government, both in terms of direct recapitalization costs, but also lost revenue.â Patelis said before concluding that odds werenât in favor of the Treasury profiting from the bailout because on average governments only recoup about 18 percent of the cost.
The network mediaâs onslaught of pro-bailout rhetoric could have made it seem that no one opposed the bailout, but that simply wasnât the case.
A CNN poll found that after the bailout bill passed, 53 percent of respondents still opposed it and 51 percent didnât think it would prevent a âdeep and long recession,â according to The Boston Globe Web site Oct. 6.
What about the 166 economists who disagreed with the bailout? Many network reports failed to mention their opposition. Rare stories that acknowledged the opposition of politicians or the public undermined it.
Thatâs what âNightly Newsâ did as it attacked members of the House who voted down the first bailout bill on Sept. 29. NBC political director Chuck Todd said, âIt was clearly a political vote for these guys. They know the election is coming in four weeks and they are very, very nervous about being for this thing.â
Stories on CBS âEvening News,â ABC âWorld News with Charles Gibson,â âGood Morning Americaâ ran pro-bailout stories without criticism instead of presenting a debate on the issue.
While CNN reporters argued from a pro-bailout stance, the network at least brought on financial experts with opposite viewpoints. Peter Schiff, president of Euro Pacific Capital, staunchly opposed the bailout and warned that it could make things worse. Stephen Leeb, president of Leeb Capital Management, faced-off with Schiff both weeks defending the bailout.
Schiffâs argument on Sept. 27 was that, âWeâre going to die from the cure, not the disease.â On Oct. 4, Schiff continued: âIf you want the fire to go out, you need to let the free market work.â Leeb held his ground, saying on Oct. 4 that government inaction would cause âmass starvation, not just in this country, all over the globeâ and could lead to a dictatorship.