Written by Julia A. Seymour
The financial system has been the damsel in distress of the U.S. economy for weeks, and according to the media only one hero could save her: the government and its $700 billion "rescue package."
Called a "rescue" 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 "rebellious" 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 couldn't understand how it happened.
Katie Couric was clearly shocked. That night on "Evening News," she harshly questioned House Minority Leader Rep. John Boehner, R-Ohio.
"Congressman Boehner, Warren Buffett warned if Congress doesn't act, quote, ‘there would be the biggest financial meltdown in American history.' What in the world are you people doing?" Couric asked without pointing out that Boehner supported the bill against the majority of his party.
The failure of the "rescue" was stunning, according to the media. ABC's Jake Tapper called it "an historic legislative disaster" after Martin Bashir asked him how the day "which began with such high hopes" 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, CBS's Anthony Mason, ABC's Betsy Stark, Bianna Golodryga and Jake Tapper, NBC's Tom Brokaw and CNBC's 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 "Nightline."
Cramer supported a government bailout so strongly that he attacked economists who sent a letter of opposition to Congress. He said the economists - who found "three fatal pitfalls" in the plan including unfairness, ambiguity and long-term effects -- "don't know what they're talking about" during NBC's "Today" Oct. 1.
"Did any of those guys ever make a nickel on the market?" Cramer asked. "Have any of them ever traded? I've traded mortgage-backs most of my life. I've traded these obscure things. These guys simply don't know what they're talking about. We're on the precipice of Great Depression II; they all have tenure. They're not worried."
The Baltimore Sun's media critic, David Zurawik, issued a call to cable networks to "get serious" about the economy by reining in Jim Cramer on CNBC and Ali Velshi on CNN.
The public's lack of support for a bailout confused CNN's Carol Costello, who said on "American Morning Oct. 1 that "I talked to our own polling experts and they are perplexed by the numbers." 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.
After the failure of the first bailout bill, Gallup found 57 percent of people in favor of starting over and coming up with a new plan.
According to four major networks - ABC, CBS, CNN and NBC - the economic situation would be worse without a bailout. ABC and NBC argued the bailout could result in a profit and NBC's political director said those who opposed it were being "political" - though many Americans and nearly 200 economists spoke out against it.
Despite the media's "optimism" 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 "real help" 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 "the stage is set for almost any number of socialist type measures."
"We may not have a private sector as we once knew it," Kling warned.
This too must pass
Despite public furor over the bill, the media theme was that it "must pass" or terrible things would happen. Reporters and interviewees called it "necessary," "essential," and "critically important."
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 public's attitude toward the legislation on Oct. 2, saying "America is pissed at this bailout."
Still, reporters and anchors promoted the bailout with "doomsday scenarios." ABC's Bianna Golodryga painted a dire picture for "Good Morning America" viewers on Sept. 28. Citing "experts," Golodryga warned "time is running out to save both [Wall Street and Main Street]." While she did quote opposition to the bailout, Golodryga undermined it with an immediate rebuttal: "But for traders who are in the thick of things, the bailout is essential."
Why was the bailout "essential?" According to ABC's Betsy Stark, experts said "something had to be done to keep Wall Street and Main Street from falling into the economic abyss."
CNN also tried to scare up support for the legislation. Christine Romans offered a "doomsday" 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 "like anticipating nuclear war. We don't know what the chances are, but we should do everything we can to avoid it."
Romans' Oct. 2 "Newsroom" segment didn't 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 "Evening News" Sept. 26. Tom Brokaw for NBC and Betsy Stark for ABC agreed on Sept. 28.
On "Today" Sept. 28, Jenna Wolfe asked former "Nightly News" anchor Brokaw "How important is it that this bill gets passed?"
"Oh, it's critically important," Brokaw said. "[E]veryone agrees that if we don't get it done, we're going to have a real credit crisis in this country, and that can quickly spiral down into a deep recession, if not a Depression."
CNBC's "Mad Money" 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 "spot the bears 2,000 Dow points in this plan fails."
According to Cramer, the failure of the bailout would usher in the "Stone Age" or "The Great Depression, Part 2."
"I think in the end - Stone Age coming, Stone Age coming," Cramer said earlier on Sept. 24 on the "Stop Trading" segment on CNBC's "Street Signs" with Erin Burnett. "I want to be on board against the Stone Age - against a financial Pearl Harbor. You know, after Pearl Harbor, everyone got on the case and vote against - voted to go to war."
Don Boudreaux, chair of the economics department at George Mason University and a Business & Media Institute adviser, disagreed with Cramer's fear.
"Letting prices adjust freely - without meddling or subsidies from government - would not have returned us to the Stone Age. That's simply absurd," Boudreaux said. "Asset prices would have moved closer to their true values and, after the appropriate adjustments, the economy would have resumed its course."
The bailout that was supposed to stop the bleeding on Wall Street didn't. 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 "could" profit ...
One selling point the media used to campaign on behalf of the bailout was that "taxpayers could make some money out of this."
That's what Brokaw told "Today" viewers on Sept. 28, and he wasn't alone. One pro-bailout story from ABC "World News with Charles Gibson" began with Gibson's assertion that people weren't talking about how the plan could make money.
"Not much discussed is the fact that the government will likely recover much, if not all of that money," Gibson said Sept. 26. Betsy Stark then cited two experts who both favored the bailout. Stark admitted that the taxpayers face "risks" with the plan, but Gibson concluded that the package wasn't really a bailout after all.
"It is basically spending money that - a loan, in effect, that we could get back as a taxpayer," Gibson said. Stark generously assessed the situation calling it "an investment."
The profit-making scenario was also one of Cramer's go-to comments. On Sept. 29, Cramer told "Today" viewers he was "almost convinced" 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 "Squawk on the Street" Sept. 29.
"What 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 - that on average they cost about 13 percent of GDP to the government, both in terms of direct recapitalization costs, but also lost revenue." Patelis said before concluding that odds weren't in favor of the Treasury profiting from the bailout because on average governments only recoup about 18 percent of the cost.
The network media's onslaught of pro-bailout rhetoric could have made it seem that no one opposed the bailout, but that simply wasn't the case.
Rasmussen reported on Sept. 25 that 63 percent of people were worried about too much federal intervention.
A CNN poll found that after the bailout bill passed, 53 percent of respondents still opposed it and 51 percent didn't think it would prevent a "deep and long recession," 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.
That's what "Nightly News" did as it attacked members of the House who voted down the first bailout bill on Sept. 29. NBC political director Chuck Todd said, "It 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."
Stories on CBS "Evening News," ABC "World News with Charles Gibson," "Good Morning America" ran pro-bailout stories without criticism instead of presenting a debate on the issue.
An actual debate on the issue of the bailout was rare - but CNN's "Your $$$$$" bucked the media trend by providing it for its viewers on Sept. 27 and Oct. 4.
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.
Schiff's argument on Sept. 27 was that, "We're going to die from the cure, not the disease." On Oct. 4, Schiff continued: "If you want the fire to go out, you need to let the free market work." Leeb held his ground, saying on Oct. 4 that government inaction would cause "mass starvation, not just in this country, all over the globe" and could lead to a dictatorship.