Sometimes former CEOs have a reason to be downbeat when they make predictions.
Former Chairman and CEO of Citigroup Sanford Weill told CBS's "The Early Show" Oct. 28 that unemployment would hit 9 percent and that Wall Street CEOs "didn't deserve bonuses this year." It went something like this:
Well, I think we've set in motion a whole series of events that is going to make the economy really, really bad over the short term. I think we are going to see the biggest drop that we've seen in GDP. I think we are going to see unemployment go up to about 9 percent.
Weill said that a year from now things would be a lot better, but still was critical of the Federal Reserve for not acting sooner:
In 2004, economists at the University of California, Los Angeles (UCLA), studied the policies of President Franklin Roosevelt's New Deal and determined it actually prolonged the Depression by seven years.
Harold L. Cole and Lee E. Ohanian blamed anti-free market measures for the slow recovery in an article published in the August 2004 issue of the Journal of Political Economy.
Cole and Ohanian asserted that Roosevelt thought excessive business competition led to low prices and wages, adding to the severity of the Depression.
"[Roosevelt] came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies," Cole said in a press release dated Aug. 10, 2004.
"Societies in which the few are allowed to fatten themselves without limit on the labor of many are not just."
A. Friedrich Engels B. William Ayers C. Michelle Obama D. Timothy Rutten
Any of the answers would make sense, but the headline kind of gave it away. It was Timothy Rutten of the LA Times who penned that immortal line in his column of today. In doing so, Rutten echoes other in the MSM, as here and here, who in the wake of the financial markets' travails indulge in a certain anti-capitalist chic.
Let's have some fun deconstructing the intrepid class warrior's musings . . .
When at the beginning of the current financial mess John McCain declared that "the fundamentals of the economy are strong," he was roundly lambasted by the MSM, while the Obama campaign called his statement "an enormous mistake."
So, should we expect the liberal media and the Obama campaign to go after Barney Frank . . . now that he has said something remarkably similar? Discussing the markets with Maria Bartiromo on CNBC this afternoon, Frank declared: "I think it's clear that the fundamentals are better than the psychology."
"The deregulation of U.S. financial markets did not reflect only the narrow ideology of a particular party or administration," the editorial said. "And the problem with the U.S. economy, more than lack of regulation, has been government's failure to control systemic risks that government itself helped to create. We are not witnessing a crisis of the free market but a crisis of distorted markets."
When the Dow hit below 8,000, the media went nuts, crying the economy was on the brink of collapse. But a lot of that same economy is still doing quite well, despite the mainstream media. Businessman Dan Kennedy, a new columnist with the Business & Media Institute, shows how skewed the standard view really is.
Between 91 and 94 percent of all home mortgages in the United States are current, not teetering at foreclosure. The overwhelming number of banks, particularly community banks, have been managed responsibly and are not on the brink of collapse. The vast majority of public corporations with stock values depressed by 20 or 30 percent are in no way connected to the mortgage meltdown, Wall Street's house of cards or the collapsing auto industry. They are well-managed companies and their fundamentals are sound. And there are still productive, successful, optimistic people.
Kennedy ought to know. He is a successful entrepreneur, consultant, speaker and the author of 13 books. Kennedy is especially known for his seven "No BS" books and that is the title of his new BMI column. Kennedy reaches well over 1-million independent business owners annually with newsletters, speaking engagements and meetings around the country.
On Saturday’s Good Morning America, ABC ran an unusual report that placed some of the blame for the Great Depression’s length on government intervention by Franklin Delano Roosevelt as well as Herbert Hoover, and concluded by questioning whether the current plans could do harm. After an unidentified economist contended that "the government from Hoover to Roosevelt made it worse by intervening too much and too arbitrarily," correspondent Bill Blakemore concluded: "And now, is the Bush government intervening too much arbitrarily with its $700 billion bailout? That’s a million dollar question, so to speak, for those trying to guess when this crisis will end."
Blakemore’s attention to this often ignored take on government intervention came at the end of a report that looked back at the Great Depression. After giving Roosevelt credit for injecting America with a "can do" spirit, Blakemore noted that the Great Depression ended its 10-year run as a result of World War II. He then asked the question of why the Stock Market Crash of 1929 resulted in the Great Depression:
BLAKEMORE: So what made the crash of ‘29 lengthen into a depression?
WOMAN: Because the government from Hoover to Roosevelt made it worse by intervening too much and too arbitrarily.
The stock market is casting a vote of "no confidence" in Barack Obama (D-Ill.) and his Republican opponent is missing an opportunity to slam the freshman senator for an economic agenda that is a rehash of the worst of Presidents Herbert Hoover and Jimmy Carter.
So argued on-air editor Charles Gasparino in an October 13 op-ed in the New York Post, where the CNBC talent mentioned that even Obama's Wall Street backers are nervously telling him to change course on his economic plans (emphases mine):
Overall, his [Obama's] plan includes some of the most lethal tax increases imaginable, including a jump in the capital-gains rate. He'd expand government spending massively, with everything from new public-works projects to increases in foreign aid to a surge in Afghanistan - plus hand out a token $500 welfare check that he calls a tax cut to everyone else.
This is clearly the wrong way to go in the wake of an economic meltdown- yet Obama, for all his talk of how willing he is to compromise, of how he'd bring people together, is sticking to his tax guns.
I know at least one top Wall Street executive, an Obama supporter from the start of his campaign, who has recently urged Obama to rethink his tax plan - and that was before last week's record losses on the Dow.
Given that the topic of this post is the Associated Press, I guess I should be pleased to report that one of its two reports tonight about the dive in the stock market last week is correct.
In one article ("Gov't eyes plan to take ownership stakes in banks"), AP's Harry Dunphy and Tom Raum correctly said that "the Dow Jones industrial average just completed its worst week ever, plummeting more than 18 percent." This is sadly true, at least if you "only" go back to 1921 (even I will give AP a pass for not wanting to dig through the muck of 1920, 1907, 1903 and 1901, which the New York Times was using as "hey, it's not that bad" benchmarks as Black Tuesday approached in 1929):
Poor Karl Ritter and Matt Moore of the Associated Press must have a lot of time to kill, a dearth of ideas, and a studied disinterest in accuracy as they await the awarding of the Nobel Prize for Economics in Stockholm, Sweden on Monday. A list of past winners is here.
Besides lamenting that no woman has ever won the Economics Prize (so?), the AP pair felt the need to relate the financial bailout passed by Congress and signed by the President a week ago, and the current steep stock market decline that followed it (or, as yours truly and Investors Business Daily would argue, occurred because of it), to who might win the award.
Along the way, they, as AP reporters are wont to do, erred, and quite seriously.
Here's how their report, weirdly entitled "Amid the meltdown, economics Nobel no easy pick," began (bold is mine):
There has been an unreality in the reports on the falling stock markets for at least the past 10 days. Each day's plunge seems to have been exclusively due to the "global economic crisis" and/or the supposed "freeze on credit."
Oddly enough, the admittedly small bank where I have my business accounts is having absolutely no problem funding mortgage, home-equity, and other loan applications from qualified borrowers -- a fact I confirmed just before posting this entry. With all due respect to the global business press, if there's truly a "freeze," how can that be?
I've put forth an alternative explanation to the media meme a couple of times this week myself, but an editorial at IBDeditorials.com yesterday brought out a major element of what I have been saying much more forcefully and articulately. Remarkably, though the possibility seems pretty obvious to me, and I suspect many others, I have seen no one in the business press covering daily market events even mention the obvious and quite likely alternative that follows.
The editorial, "Investors' Real Fear: A Socialist Tsunami," teases with the plaintive question, "What is it about the specter of our first socialist president and the end of capitalism as we know it that they don't understand?"
The story in question took the skilled labor of a grand total of four ABCNews staffers, chief among them Martha Raddatz. In her lede she noted the Dow dropped 107 points in the course of the seven minutes President Bush spoke from the White House on the ongoing financial crisis.
But it seems Raddatz, along with Lisa Chinn, Jon Garcia and Kate Barrett wrote too soon. The market rebounded from its deepest losses earlier in the day to close down only 128 points.
The Dow dropped 5,585 points since its high a year ago, banks have been afraid to lend and the government bought billions in toxic mortgage-backed securities. So CBS's "The Early Show" went to some top finance experts to explain what was happening to viewers, right? Nope, they went to kids, Oct. 10.
Weatherman Dave Price talked to fifth graders in Arlington, Va., about the credit crisis, exclaiming, "You wouldn't believe how much they know, sometimes we ought to listen to them and their solutions."
"What one thing does your mom waste money on?" Price asked one student.
"Mmm, smokes, I guess," a fifth grade girl from Glebe Elementary School replied.
The Securities and Exchange Commission ended the 16-day ban on short selling Oct. 9, which has left many journalists asking if the ban actually worked to keep more banks from failing.
The staff at the Business & Media Institute's video blog, "The Biz Flog," could have told you the ban wasn't a good idea when they put together "Who's Afraid of a Big Bad Short Seller?"But, it's nice to see some members of the media questioning if the ban worked:
"While the ban was in place, other market forces pushed key indices into a rapid decline. We are going to see if that ban actually slowed the freefall or perhaps made it worse," Fox Business Network host Alexis Glick said on "Money for Breakfast," Oct. 9.
Glick went on to point out that the ban also affected companies that weren't banks:
When Lehman Brothers CEO Richard Fuld testified before the House Oversight Committee Oct. 6, the media criticized his wealth and spending amidst financial turmoil in his company and on Wall Street. But conspicuously missing was the story of Fuld's political contributions.
It's the kind of socialist attitude that would make Venezuelan dictator Hugo Chávez proud. Unfortunately, it's coming from a New York Times columnist making recommendations for the U.S. financial system.
"[W]hat we really need is we need, well capital that the banks - we need to put money into the system," Krugman said. "And in effect, what always happens in financial crises is a partial nationalization - partial and temporary nationalization of the financial system. And, that is - you know and, I predict with almost 100-percent confidence that's how it will end, but the [Henry] Paulson Treasury wasn't willing to talk about that."
The Media Research Center's Director of Communications and NewsBusters.org Contributing Editor Seton Motley appeared on Friday afternoon on the Fox News Channel's American Election HQ to discuss how Bill O'Reilly handled his interview of Rep. Barney Frank, as well as how ABC's The View routinely abuses Gov. Sarah Palin.
Motley expressed thanks and gratitude that FINALLY someone in the media was asking Rep. Frank about his extensive history of blockading, stonewalling and grandstanding against attempts to reform Freddie Mac and Fannie Mae, O'Reilly's righteously indignant questioning notwithstanding.
Motley also cautioned that "there is no diving in The View's thought pool," and pointed out that their panel make-up is biased in typical media fashion: three liberals and one conservative.
Updated below. Last Monday as the U.S. House of Representatives voted down the initial bailout package,both Fox News and CNN sent e-mail alert subscribers numerous alerts about the Dow's dive. The market recovered some the following day, a development that CNN neglected to mention in the same e-mail alerts.
One of CNN's citizen reporters on their new iReport service caused a bit of panic for Apple's stock prices this week when one of those reports featured a false claim that Apple CEO Steve Jobs had suffered a heart attack. With rumors swirling the stock price fell until official news from Apple quashing the rumor calmed investors' fears.
You've got to love brutal honesty, especially when it comes from the financial media.
The Senate's version of a bailout bill, which passed last night by a margin of 74-25, included "sweeteners" - or obscure tax breaks - including benefits for the manufacturer of wooden arrows used in children's toys and another for litigants in the 1989 Exxon Valdez oil spill.
Remember all the doom and gloom warnings that if the $700 billion bailout bill did not pass yesterday that we would be facing an immediate financial collapse? Well, the bailout bill didn't pass yesterday thanks in large part to House Speaker Nancy Pelosi's partisan rantings in that chamber. So today comes and instead of financial collapse and panic, the stocks surge as you can see in this Associated Press story. However, the fact that the economic sky did not fall hasn't kept the AP Chicken Littles from continuing to plug for that bailout bill (emphasis mine):
While both CNN.com and FoxNews.com sent e-mail alert subscribers "breaking news" alerts on the Dow's steep slide yesterday in reaction to failure of the bailout package in the House of Representatives, CNN didn't think it worthy of a breaking news text to note the gains made today in the market.
Here are the Fox News text messages sent on September 30 regarding the Dow Jones:
DOW REGAINS NEARLY 500 POINTS ONE DAY AFTER RECORD LOSS (received 4:08 p.m. EDT)
DOW REBOUNDING, UP MORE THAN 300 POINTS A DAY AFTER 778-POINT FREEFALL (received 1:27 p.m. EDT)
Below, in reverse chronological order are the text message alerts I received from Fox News and CNN.com yesterday tracking the Dow's drop.:
The shock and awe of the financial market meltdown is just beginning according to CNBC star Jim Cramer.
Cramer on CNBC's Sept. 29 "Mad Money" cautioned viewers about the current market. His advice - do nothing because there's more pain to come if no rescue plan makes it out of Congress. As he put it: "sit on your hands."
"Only those stocks that are sure enough to pull the trigger on until we get to Dow 8,200 ... I said if the plan failed - only those you should be looking at - looking at," Cramer said. "Today's 777-point drop was just the beginning. Now is not the time to put your money at risk, it's the time to protect your nest egg."
Cramer recommended only stocks of companies that didn't need to borrow money in an environment with tough credit and sold products that would still be in demand during a bad economy - a very narrow spectrum of stocks. Otherwise, he told viewers to put their money in FDIC-insured banking accounts.
The theory that bailout legislation recently defeated in the House of Representatives would make money for the federal government has been propagated by the financial media. But according to a recent report released by the International Monetary Fund (IMF), a profit is unlikely.
"What you find in the IMF report is of course that banking crises happen all the time," Patelis said. "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."
CNN’s Web site this morning tracked a developing story involving the stock market opening, by featuring a photo of an Iran anti-war protest.
The photo, provided by our friends at the AP, was simply too perfect to pass up apparently. After all, any photo which includes a man brandishing a banner which reads ‘Jail Bush,’ is something that a biased news organization simply has to take. Pertinence be damned. Seriously, nothing says the economy quite like a placard reading ‘No attack on Iran.’
CNN probably could have found a photo that actually applied to the topic of a sliding stock market. Was a stock photo of a line graph with a red arrow pointing down not available at the most trusted name in news? No picture of someone ringing the opening bell?
The story itself was titled ‘Wall Street Drops at Open,’ and to its credit, did not include the photo within the article. Oddly enough however, there was no mention of 'Iran' in the article that the above photo linked to either. Nor was there any mention of the word 'war.' Or 'protest.'
NewsBusters is, of course, a site dedicated to exposing liberal bias in the press. But, once in a while the liberal press gets something right and this is one of those cases. On Spetember 20, Newsweek hosted an article by FactCheck.org that exposed the outright lies contained in the claims Barack Obama made against John McCain's record on Social Security in order to scare as many elder citizens as he can. Obama may have expected every Old Media outlet out there to cover for him, but Newsweek didn't oblige this time. So, I thought I'd highlight this piece and give Newsweek the thumbs up for hosting the FactCheck.org article.
Over the weekend, Barack Obama appeared in the battleground state of Florida and made to scare citizens over McCain's votes on Social Security. Obama claimed that McCain voted for a plan that would have seen the Social Security benefits of "elderly women" at risk in the stock market during the recent wildly fluctuating market. Telling his audience, "if my opponent had his way, the millions of Floridians who rely on it would've had their Social Security tied up in the stock market this week," Obama tried to claim that the elderly would have lost their money because of John McCain. FactCheck.org called these claims "not true."
In a September 19 "Good Morning America" preview of a report scheduled to appear on the same day's edition of ABC's "20/20," chief investigative reporter Brian Ross took a few jabs at the rich who had fallen.
Ross called it "the end of a shameful chapter of American history," and although top executives on Wall Street had been hit hard in a way "they never thought was possible ... it's hardly the soup kitchen."
There was also much indignation in the report over the assets of Richard S. Fuld Jr., chairman and chief executive officer of now fallen Lehman Brothers Inc., and Alan Schwartz, the CEO of now "busted" Bear Stearns.
Of course we all know that it's absolutely wrong and mean-spirited to suggest that anyone on the left could conceivably be unpatriotic [though an exception might be made for unrepentant terrorist friends of Barack Obama who accept from Vietnamese communists rings made from downed US planes.] So while we won't be using the u-word here, two recent MSNBC shows offer a remarkable contrast. Let's compare Chris Matthews' giddy reaction to news of difficulties in the markets with Mika Brzezinski's gloom in begrudgingly discussing the Iraq surge's success.
The first portion of the video is from the opening of Hardball of September 15th, the day when news was breaking of Lehman and Merrill Lynch's travails, and the DJIA had sunk over 500 points. Matthews could hardly contain his glee, comparing McCain to Hoover, and declaring that because of the "terrible news" about the economy, "as of today, this is no longer an election about lipstick on pigs, misleading ads or how many houses a candidate owns. This is serious. The economy is a real issue. With real consequences." Then there was today's discussion on Morning Joe of the surge's success. Mika's pout—on view in the screencap—epitomizes her reaction. I commend the entire video clip to your attention, but would focus on these exchanges.