While discussing the collapse of investment bank Bear Stearns, grainy footage of panicked '30s bankers appeared onscreen as Golodryga intoned, "The problems are so massive that the Fed is taking measures not seen since the Great Depression..." And while President Bush was briefly highlighted, assuring Americans that the United States will rebound, Paul McCulley, the managing director of the investment company Pimco, continued the comparison to the worst economic crisis the United States ever faced. Referencing impending action by the Federal Reserve, he asserted, "...You could have the Fed with great intentions but still a downward spiral in property prices that would give you a modern day depression." For comparison's sake, during the Great Depression, almost 25 percent of Americans were unemployed.
GMA co-host Diane Sawyer, in a follow-up segment, interviewed Treasury Secretary Henry Paulson and demanded to know when things will get better. After an optimistic answer by Paulson on the outlook of the market, Sawyer urgently asked, "Making progress? Taking a while? What does taking a while mean? How much-- Just give people a general sense when they might start looking for some type of up-turn?"
Sawyer repeatedly insisted that Paulson just come out and label the current situation a recession. The ABC host started off by wondering, "This morning, are you willing to say that? The economy is in a recession?" Not getting the answer she wanted, Sawyer reiterated, "But, the fact that you won't use the word, does that mean you just don't want to use the word or you actually do not believe this is a recession?" After Paulson restated that he didn't know how helpful it would be for him to officially use the term, Sawyer yet again quizzed, "But, do you not feel it's a recession?"
Finally, the GMA host also insisted that Secretary Paulson take questions of a personal nature, as if to imply he was somehow detached from everyday Americans:
DIANE SAWYER: We have heard, Mr. Secretary, from so many people who have questioned, these are ordinary Americans, who have questioned the fact that the federal government has guaranteed the purchase of Bear Stearns, and we see from the National Community Reinvestment Coalition that the total fiscal assistance so far to banks has been $230 billion. Homeowners, they say zero. I'd like to play, if I can, a sound bite from a family, a family sitting in their own house. And they want to ask you the question, this is not me, I want you to listen to them.
UNIDENTIFIED MAN SITTING NEXT TO HIS WIFE AND DAUGHTER: You're helping out all these big corporations but if it wasn't for the common people, you know, who are helping build these big corporations, that they wouldn't be there.
For more on comparisons to the Great Depression, see a February 27 commentary over at the Business and Media Institute.
A transcript of the first segment, which aired at 7:01am on March 18, and a partial transcript of the second segment, follow:
ROBIN ROBERTS: But first, to the explosive roller coaster ride of Wall Street. It's likely to continue today. Two more big banks are expected to report earnings today. And on the heals of that bailout of Bear Stearns, that news could send another shock wave through the economy. All this as the Federal Reserve is set to make another preemptive move today to cut interest rates. Our Bianna Golodryga is at the New York Stock Exchange this morning with the latest. Good morning, Bianna.
BIANNA GOLODRYGA: Good morning, Robin. As soon as that news about Bear Stearns came out, everyone asked what is the next shoe that could possibly drop, what is the next bank that could take a hit? The name that came to everyone's mind was Lehman Brothers. Lehman Brothers and Goldman Sachs will be reporting earnings within the next hour. I spoke with a high level official inside the bank at Lehman Brothers. He said they're financially sound, but right now it's all about Wall Street's reaction. And we could be in a credibility crisis. Meantime, the Fed is stepping in. Today's expected interest rate cut by the Federal Reserve is just the latest in a series of extraordinary moves to sure up a faltering credit market and a teetering banking system threatening to send the entire economy into a tailspin.
SENATOR HILLARY CLINTON: Now we are in the soup.
SENATOR BARACK OBAMA: I don't want to lose sight of the long-terms structural problems that we have.
GOLODRYGA: The problems are so massive that the Fed is taking measures not seen since the Great Depression, [file footage from 1930s type newsreel] stepping in to help save the fifth largest investment firm Bear Stearns and pumping billions of dollars into the economy.
PRESIDENT GEORGE W. BUSH: The United States is on top of the situation.
[Montage of cable anchors saying "Bear Stearns."]
GOLODRYGA: But are these moves enough? Some say the economy is like a house of cards. [Graphic of house of cards.] In the best case scenario, the Fed's move will enable a new foundation to grow.
PROFESSOR PETER MORICI, PhD (University of Maryland School of Business): Hopefully this would stabilize credit markets and permit banks to make more mortgages going forward and help stabilize the housing market.
GOLODRYGA: But the worst case scenario? [ABC graphic of house of cards collapses.] The bottom could still drop out, sending markets into a free fall.
PAUL A. MCCULLEY (Managing director, Pimco): You could have the Fed with great intentions but still a downward spiral in property prices that would give you a modern day depression.
GOLODRYGA: The Fed is hoping today's rate cute will be another booster shot for a severely ailing economy and that all its moves are not too little, too late.
MORICI: We are closer to the worst case scenario then we are to the best case scenario.
MCCULLEY: While I am still pessimistic on the depth of the recession that will be unfolding, on the back of the property market, I'm developing a touch of optimism that Washington finally gets it.
GOLODRYGA: A positive sign right now is that we are looking at a higher open on Wall Street. Of course we know that could change at a dime's notice. Diane?
7:07
DIANE SAWYER: One more question for you, if I can. As you know, the former Fed chairman Alan Greenspan has predicted this financial crisis will be judged by history and these are his words, as one of the most wrenching since the end of World War II and there's a poll on the front page of USA Today which says that 76 percent of the people in America, those polled, now say, let's basically call it what it is, the economy is in a recession. This morning, are you willing to say that? The economy is in a recession?
HENRY PAULSON: Diane, listen, economists are going to argue about the technicalities here for some time. There's no doubt the economy is in a sharp decline. I know it. The American people know it. I think it's much less important to them, the label that economists put on this, much more important is what we do to address it. And we're working very hard to address it, to get those stimulus payments out. We're working hard to limit the turbulence in the financial markets so there won't be -- to minimize a spillover into the real economy and to deal with, and help homeowners who want to stay in their homes and have capabilities to do that. So we're working hard --
SAWYER: But, you're not willing to use-- But, the fact that you won't use the word, does that mean you just don't want to use the word or you actually do not believe this is a recession?
PAULSON: I -- Diane, I know the economy is turned down sharply. I know it, I feel it. We're working to deal with it. And I don't think it's particularly helpful to, right now, be debating what term to use this. We're all over this, Diane.
SAWYER: But, do you not feel it's a recession?
PAULSON: I-- Who knows? Let the economists decide that. The label they put on it is much less important to me than what we do about it.
SAWYER: Well, again, Mr. Secretary, thank you for being with us this morning. Good of you to get up and be with us.
