Something very important happened on the way to Rick Santelli of CNBC becoming a right wing and populist icon. People seem to forget that the real target of Jon Stewart was not Jim Cramer, but Rick Santelli.
But there was Rick Santelli on February 19 on the floor of the Chicago Board of Trade railing against the Obama administration housing plans. As he’s pounding away, he elicits boos from the traders and then asserts wildly, “President Obama, are you listening?” The media sure was, they seized on it as a moment to demonstrate mass discontent with the new Obama administration policies.
This was CNBC’s moment. But that moment was completely undone by a savvy investigative reporter that uncovered the truth behind it.
First of all, as Playboy Magazine of all entities discovered that it was staged.
“What we discovered is that Santelli’s “rant” was not at all spontaneous as his alleged fans claim, but rather it was a carefully-planned trigger for the anti-Obama campaign. In PR terms, his February 19th call for a “Chicago Tea Party” was the launch event of a carefully organized and sophisticated PR campaign, one in which Santelli served as a frontman, using the CNBC airwaves for publicity, for the some of the craziest and sleaziest rightwing oligarch clans this country has ever produced.”
Santelli: President Obama, are you listening?
Stewart: Yeah man, Wall Street is mad as hell! And they’re not going to take it anymore. Unless by it, you mean two trillion dollars of their own bail out money. That they will take it.
Now Mr. Santelli was invited to come on this show and accepted the invitation and then on Friday canceled, or I guess the phrase would be bailed out.
How many people would have liked to see Santelli come on this program, are you listening? Are you listening, Rick Santelli? You see, Rick Santelli is angry that these loser home owners are going to get bailed out. He believes in personal responsibility, he believes in not rewarding the losers for missing all the warning signs. For God’s sake, the guy works at CNBC. They’re the best of the best.
Give Jim Cramer a little credit, he at least had the guts to come on Jon Stewart’s show this week. That’s about all he got. For those who saw it, it may be the most complete take down I have seen since Katie Couric accidentally KO’d Sarah Palin. But this one was no accident.
You see, Jon Stewart went for the throat and even when Jim Cramer allowed himself to be put on the floor, Stewart wouldn’t let him up. At one point, Cramer acknowledged all of the problems with Wall Street and that he wanted to see these people indicted. Stewart would have none of this death door conversion, suggesting instead that it was easy to say this now but where was he when it could have made a difference?
Cramer: Look, I have called for star chambers—I want kangaroo courts for these guys. I have not seen any indictments. Where are the indictments? Where is the indictments for AIG? I told the Justice Department, “Here’s the way you get the indictment.”
Stewart: It’s very easy to get on this after the fact. The measure of the network, and the measure of mess. CNBC could act as—No one is asking them to be a regulatory agency, but can’t—but whose side are they on? It feels like they have to reconcile as their audience the Wall Street traders that are doing this for constant profit on a day-to-day for short term. These guys companies were on a Sherman’s March through their companies financed by our 401ks and all the incentives of their companies were for short term profit. And they burned the f—ing house down with our money and walked away rich as hell and you guys knew that that was going on.
Stewart:
I understand that you want to make finance entertaining, but it’s not a f—ing game. When I watch that I get, I can’t tell you how angry it makes me because it says to me, “You all know.” You all know what’s going on. You can draw a straight line from those shenanigans to the stuff that was being pulled at Bear and at AIG and all this derivative market stuff that is this weird Wall Street side bet.
And that’s exactly the problem–it’s all masked as entertainment. As Stewart said at the beginning of the show, “We are both snake oil salesmen to a certain extent… but we do label the show as snake oil here. Isn’t there a problem with selling snake oil and labeling it as vitamin tonic and saying that it cures impetigo”
Stewart takes on the nuances of the market, the financial collapse, and CNBC’s role in it as they climbed into bed cheerleading with corrupt CEOs. Who could forget the image of CNBC interviewing a corrupt CEO who had literally stolen millions, and they asked him if it was fun to be a billionaire, to which he sheepishly answered yes with a sinister grin on his face.
The problem from my standpoint is where the heck is the real media on things like this? Where was the real media during this collapse exposing the robber barons? Where was the real media when Rick Santelli was fabricating a Boston Tea Party? Where was the real media when Jim Cramer was screaming sell sell sell a few weeks after screaming buy buy buy?
We can go back further than that. In the summer of 2001 when Al Qaeda was finishing its plans to attack the US and plunge us into war, the media spent more of their time reporting on shark attacks that were from a statistical standpoint not increasing in ferocity or frequency. In 2002-03, when the administration was leading us into war against Iraq, the media acted as their cheerleader including the liberal New York Times and Judith Miller reporting on weapons of mass destruction. Miller was so convinced that she never bothered to asked tough questions of the administration.
Conservatives rail against the liberal media all the time. But if you read the blogosphere, liberals have as many concerns about the conservative or corporate media as the conservatives do. The difference is that Democrats do not spend their time attacking and running against the media, it makes little sense.
My chief complaint is not even ideological. The media simply do not do a good job of going in, asking tough questions and spilling the apple cart. The media look for an easy story too often rather than try to probe it. We may have anger towards the Bush administration for failing to ask tough questions on WMD, but guess what, they never could have gotten away with it were it not for the complicit news media who never bothered to question to the assumption.
Flash ahead, were it not for Jon Stewart, Rick Sentelli would have it made right now. He’d be the right’s hero. Hey it was great moment of theater. And the media spent their time tripping over it as emblematic of the backlash against Obama’s policies. The problem is that it wasn’t real.
This is not a defense against Obama either. There is plenty to criticize Obama for including putting many of the same people who got us into his mess into his economic team. But we do not have to rely on media concocted feigned protests to make that point.
CNBC is a small network. Let’s face it, who is going to spend a lot of time watching an all-finance network. So they tried to package finance as entertainment. Jim Cramer is ridiculous. He dances around his show making financial advice to callers in between childish sound effects. But people watch the show and in-between that he acts like he is a serious reporter.
Like so-many he has pandered to the CEO/ Wall Street Class for so long. He was in bed with them. He was their shill. He never bothered to ask the tough questions.
One of his points of defense was supposed to be that he voted for Obama. Who cares who he voted for? Does that let him off the hook?
For weeks, people have been lamenting the decline of newspapers. I admit it, I like newspapers. I spend a good portion of time reading several each day. But I also suggested a few weeks ago that newsreporting would survive, even thrive, in a new age. A lot of people do not want to hear that.
But this is a perfect example of why things are better now than they were ten years ago. The mainstream media has fumbled the story of the financial collapse and the complicity of CNBC and others in it. They just have. Jon Stewart has a rant. I don’t watch Jon Stewart. I know a lot of people who do, but I don’t.
I saw it on one of the liberal blogs. Clips of it had been passed around and millions of people like myself who never watch Jon Stewart’s show watched it. Because of that the media finally had to report on it.
But Jon Stewart had to finish off Jim Cramer himself, and if you have not seen the clip, he did. Total takedown. Without the new media this story never would have gotten any attention. And yet there was the President’s Spokesperson on Friday commenting on Jon Stewart.
Sadly though it takes a comedian to do real reporting these days. If the newspaper industry wants to lament its downfall perhaps they ought to ponder how they let that happen.
—David M. Greenwald reporting
I saw stewart take cramer down the other night, and it was sad. Complete meltdown. You make a good point… Why is it that comedians are the only people trying to get to the bottom of it this mess?
Did you ever stop to think the reason the media is not doing good investigative reporting anymore is because they have been bought up by the Democratic Party, and have become nothing more than an left leaning opinion column? The same is true of the print media. The Democratic strategy has been to take over all media outlets (that is why they are so ticked off at Limbaugh, whom they have not been able to buy), and in consequence the public is getting liberal media drivel. Meanwhile, the wimpy Republican party has allowed it to happen without much of a whimper (pun intended), relying on two right wing media outlets to carry them – Fox News and Rush Limbaugh. Now conservative Sean Hannity has his own show, having gotten rid of his liberal counterpart. Hannity’s show is nothing but a Republican rant/more drivel.
What the real problem is is that the public is allowing this to happen. In consequence, the public itself is becoming more polarized. I cannot sit and have a decent political conversation in this town, bc so many are ardent Obama lovers no matter what. They will not criticize anything about him, as our country goes down the toilet. And quite frankly, DPD’s column today is more of the same IMHO.
The recession we are in now is the fault of both parties, but particulary due to the Democratic policies of insisting that low income people be given loans they could not pay back. The Republicans are at fault for refusing to regulate the banking industry. And the trend has become for politicians to show up on shows like Jay Leno, David Letterman, John Stewart – legitimizing these comedians almost as if their shows were a newsworthy venue. It is unseemly, unjournalistic, and in my view unethical for politicians to attend these shows.
There literally is no place to go anymore to get good hardhitting news, that is factually based. What we read in the newspapers and see on the news is opinion marketed as if it were fact. Good investigative reporting is just gone, and so are journalistic ethics. News media has been bought out by mostly the Democratic Party. So if you want to blame anyone for the demise of good reporting, look to the LEFT.
The fact of the matter is Obama is clueless. He hasn’t the vaguest notion of how to get us out of this economic mess. The Dems would love nothing better to keep up their mantra “it is all Bush’s fault; it is all the Republican’s fault”, which is nothing but a cop-out. At this point, the Dems need to stop pointing fingers, and fix the problem. Start putting in major reforms so this won’t happen again. The economic mess is now on the party in power, which is the Democrats. It is now their responsibility to stop the whining and get things done. All I see them doing is whining – and the crappy Republicans sitting back and enjoying their discomfiture. A pox on both houses! Whatever happened to the notion of doing things for the good of the country?
“Did you ever stop to think the reason the media is not doing good investigative reporting anymore is because they have been bought up by the Democratic Party, and have become nothing more than an left leaning opinion column?”
How was CNBC cozying up to the corporate CEOs an example of that?
No, I don’t see it because they don’t have left leaning opinion-columns–they have establishment leaning opinion-columns. They have been just as willing to cheerlead for the right as they have the left. They are just saps, shills, and sycophants sucking up to the powers that be in both parties until and unless they are embarrassed as they were by Bush, at which point in time they suddenly do the kind of scrutiny they should have done leading up to the war.
I know you want to see an ideological component to all of this. I know there are those on the left who see the media as catering to their corporate interests and those on the right who see it as liberal. I see them as lazy and complicit. They want to sit at the big boys table and are afraid they’ll get kicked to the curb is they don’t kowtow.
DG said: “Flash ahead, were it not for Jon Stewart, Rick Sentelli would have it made right now. He’d be the right’s hero. Hey it was great moment of theater.”
The sad fact is that Sentelli is still the Right’s hero. For gosh sakes, W. is still their hero, Limbaugh and Palin are still in their place of honor in the Right’s pantheon. Don’t try to confuse the Right with facts.
What Mr. Stewart has done is awaken the apolitical print media and the apolitical swing vote to the boob tube’s complicity in the financial crimes and abuses of a runaway Wall Street and an enabling U.S. President federal administration’s regulatory framework.
No, Jon Stewart has not changed anyone’s view on the Right. I mean — if you take the word “Greed” in vain — well… those are fighting words!
Maybe but when was the last time you saw a Sentelli reference on TV?
I agree much with “Fed up with both parties” the media stinks. As far as who has the advantage in terms of opinion and bias in this country, I have to say it is the democrats and the liberals.
The republicans have right wing talk radio there is no doubt. I do not like to listen to this because it is clearly pro GOP. Some of the print media has right wing bias including the Weekly Standard and the NY Post. The democrats however, have the NY times, CBS, CNBC, ABC, they have NPR. Jay Leno and many comdedians are very left leaning as the other person said. Locally, you have Sacramento Bee and the Davis Enterprise which clearly lean left.
Perhaps people do not agree with this assertion and see it differently. I think however it is worth noting that bias is not exclusive to “the media.” What DPD and many liberals conveniently leave out in this argument over bias is the fact that the Democrats have a decided advantage in terms of political thought IN EDUCATION INCLUDING K-12 and COLLEGE EDUCATION BY A MARGIN OF TEN TO ONE. The bias toward the left at major Universities is OFF THE CHARTS. I doubt many democrats would even disagree with this assertion. Left leaning professors often inject their bias in the classroom to captive audiences and push young people to support various causes. I have seen and experienced this first hand. At UC Davis, the speakers that they invite are people like the Black Panthers, Ward Churchill, and others who go on one anti-american anti bush pro-obama diatribe after another. The promotion of Obama in K-12 schools is sickening, and it is blatant. This really gives the Dems and greens an advantage because of the way they get to advertise themselves to our children to get our youth and vote democrat.
Davis SR High school puts on multicultural shows sponsored by groups like the ACLU.
So if we are going to have a discussion about bias, please let us not leave anything out.
8)
Also, please remember that Limbaugh and Hannity do not have captive audiences. University professors do. That gives them the advantage.
If the GOP wants to get their power back then they need to tackle this issue and stop hiding under their desks.
thank you.
😀
I wish that President Obama would have spent the past month putting up new drapes rather than doing what he has done to our country.
He had the impetus of change, the aura of integrity and the opportunity to make a difference. Instead, he has simply followed in another failed leader’s footsteps and continued to pour our nation’s future into bail-outs, stimulus packages and other malarkey that is doomed to fail. It is NOT possible to fight the free market. It will win, we cannot print enough money to fix this. AIG, Citibank etc. MUST fail. They have to go bankrupt. We must stop this expensive nonsense and let the markets find natural equilibrium. It will be painful, but when it is over, things will be rational and our government can then resume its appropriate role.
The media are just biased entertainment, anyone who thinks differently is fooling themselves.
Government is best that governs least.
“Government is best that governs least.”
Lack of regulation and oversight got us into this mess.
Both Fed Up and WHat You don’t Say miss the lesson in this and it applies at home. The media do not do in-depth reporting, they like their cozy relationships, and they are not apt to jeopardize their little sources. This is what CNBC got caught with. And this is what happened when the liberal NY Times got duped on Iraq and WMD. They believed their sources, never challenged their assumptions, etc.
We see this at home with Enterprise, they are a tool of the establishment. They never do any kind of in-depth reporting. They never challenge Saylor or Souza or Asmundson.
It’s not an ideological thing it’s an establishment thing.
I’ll extend the comparison. One time, i can recall Claire St. John doing hard-hitting reporting–Measure X. Why? She caught them lying to her and it pissed her off.
Same thing with the MSM and Bush. They got lied to on WMD and the lead up to Iraq, felt used, and turned on him.
But you know what, that’s the exception and just like with the subprime and other Wall Street crises they have woken up too late.
The media is the problem. That’s why DPD schools the Enterprise on local issues and why the mainstream media got schooled by off all people Jon Stewart.
Both Fed Up and WHat You don’t Say miss the lesson in this and it applies at home…The media is the problem”.
Who said it wasn’t??? But it is the problem bc the Democratic party/Republican party are spending their dollars influencing the media (NPR would be a good example, NY Times best seller list would be another/Fox News & Hannity are another good example); locally the developers are influencing local reporting in the Enterprise. The media is allowing the corrupting influence of money to effect the way it reports, which is against every journalistic ethic I know of.
“I think however it is worth noting that bias is not exclusive to “the media.” What DPD and many liberals conveniently leave out in this argument over bias is the fact that the Democrats have a decided advantage in terms of political thought IN EDUCATION INCLUDING K-12 and COLLEGE EDUCATION BY A MARGIN OF TEN TO ONE. The bias toward the left at major Universities is OFF THE CHARTS.”
This is absolutely correct. The fact of the matter is that the Left has purchased their way into more venues to spout their drivel while the Right sits back and lets it happen. Frankly, I don’t know which is worse. Meanwhile, the country is going to hell in a handbasket. And it is going in that direction on the Democratic watch, like it or not. The Dems need to stop the finger pointing, and get cracking on solving the problem. Why aren’t they doing it? Bc they are beholden to too many special interests; and don’t have a clue. Look at how the Obama’s snubbed Great Britain, one of our staunchest allies. Talk about arrogant untutored bumpkins (the Obama’s that is).
“How was CNBC cozying up to the corporate CEOs an example of that?”
Who says the corporate CEOs aren’t Left leaning? CEOs will lean any direction that will keep hands off when it comes to regulating corporate affairs. And neither party seems eager to regulate corporate affairs, and that includes the Obama people, who are still giving huge gobs of bailout money to AIG bigwigs, who in turn are going to get big fat bonuses! Where is all that Obama rhetoric about lowering remuneration for top execs to no more than $400K, and no bonuses if they want to take bailout money? Obama is all talk and no do.
“I know you want to see an ideological component to all of this.”
What I see is a media that has sold out. There are no journalistic ethics anymore, period. And both parties are complicit in prostituting the media, who have become their paid whore.
“Conservatives rail against the liberal media all the time.”
So you are admitting the media is predominantly liberal? Ergo the lack of good reporting is predominantly the fault of the liberals?
“But if you read the blogosphere, liberals have as many concerns about the conservative or corporate media as the conservatives do. The difference is that Democrats do not spend their time attacking and running against the media, it makes little sense.”
Democrats spend all their time whining about all the world’s problems being Bush’s fault. The fact that Obama can’t solve the current crisis is somehow Bush’s fault. Bush is the one who caused the economic crisis. If someone has a pimple on his/her face, it is Bush’s fault. That whopper is just not going to fly for very much longer, even in the liberal sphere. IT IS THE LIBERALS WHO INSISTED THAT LOW INCOME FOLKS BE ALLOWED TO TAKE OUT LOANS THEY COULD NOT PAY FOR. IT IS CONSERVATIVES AND LIBERALS WHO WILL NOT REGULATE THE BANKING INDUSTRY. IT IS BC OF THESE FAILED IDEOLOGICAL POLICIES ON BOTH SIDES WE ARE IN THE MESS WE ARE IN.
“My chief complaint is not even ideological. The media simply do not do a good job of going in, asking tough questions and spilling the apple cart.”
But why don’t they do a good job? Why has the media gone away from good journalism? Bc money is driving the system now – whoever has the money makes the decision on WHAT the news is. Not even what news gets reported, but what the news actually is. Rumor is now reported as if it were newsworthy. It doesn’t take much effort to report on rumor, but it does take effort to do good investigative reporting. Media is taking the cheap way out – and allowing comedians to decide what gets reported as news. Now how much credibility does the media have, if comedians become our reporters?
“Don’t try to confuse the Right with facts.”
And you don’t think the Left doesn’t distort fact? It is this sort of uncritical thinking that polarizes and paralyzes the nation. You have to be willing to put ideology aside, and criticize your own party when necessary. And right now, the Dems are doing a terrible job of getting us out of this economic mess, doing a terrible job in foreign relations. And the Republicans are doing a terrible job in sitting back and letting it happen w/o a whimper.
I think to the extent that I disagree with you it’s that in this case, the comedian is the only one doing the reporting. I agree it’s lamentable.
Heated discussion here. Anywho, the current national establishment is the Dems since they control both houses and the presidency. Locally, Don Saylor, Asmunson and Souza are the establishment. The school board establishment is James Hammond, Susan Lovenburg and Richard Harris. They are in the drivers seat. I am impressed with neither of these choices. They do not get the job done.
I also think the hyper left is in the education establishment. The far right is in the radio establishment. I would argue the media is in the left.
Now the vanguard mentioned corporate control of the media. And the point is? The govt controlling the media is not the greatest alternative. 😛
Uh, what does this have to do with Davis?
Only tangentially I suppose since I see parallels to the local media’s lack of adequate coverage and the overall topic is kind of a theme of the Vanguard. However, I thought it needed to be said.
George asked what this had to do with Davis?
Here’s some info for you.
California, other municipalities get billions from AIG bailoutFont size: A | A | A3:01 PM ET 3/16/09 | Marketwatch
RELATED QUOTES
4:00 PM ET 3/16/09
Symbol Last % Chg
AIG 0.83 66.00%
GS 93.90 -4.96%
BAC 6.18 7.29%
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SAN FRANCISCO (MarketWatch) — Big banks and brokerages like Goldman Sachs weren’t the only ones to benefit from the government bailout of American International Group Inc. last year.
California got $1.02 billion from contracts known as guaranteed investment agreements that the state had with AIG (AIG), according to disclosures by the insurer on Sunday.
States and other municipalities, including Hawaii, Ohio and Virginia, got a total of $12.1 billion from AIG’s bailout.
For California, the payments, while smaller, may have eased the state’s budget crisis a little.
“Billions in government assistance flowed to dozens of financial counterparties and municipalities during a time of acute stress in the economy,” AIG Chief Executive Edward Liddy said in a statement.
Guaranteed investment agreements, or GIAs, provide institutions a certain rate of return on specific amounts of money. Providers promise to pay an agreed rate and get the money to invest in return. Profits are made on the spread between the rate the provider offers the buyer and the returns it can generate itself.
States often buy GIAs to a get return on money they raise from selling bonds before they use the funds for projects.
When GIA providers are downgraded by ratings agencies, they are often required to post more collateral to support the agreements, or come up with collateral if the contracts are terminated.
When AIG was downgraded by leading rating agencies last year, the insurer almost collapsed under the weight of massive obligations from credit derivatives, securities-lending agreements and GIAs. The government saved the company from bankruptcy with an emergency $85 billion loan, which helped AIG meet these obligations.
Goldman Sachs Group (GS) got $12.9 billion, while Bank of America Corp. (BAC) and Merrill Lynch together received $12 billion, as counterparties on credit derivatives and securities-lending contracts. These payments may have averted the collapse of another major financial institution. Read more.
The “liberal media” of the seventies uncovered Watergate, reported on the travesty of the Vietnam War, brought to light the effects of racial discrimination, and on and on and on. “Liberal media” educated us about AIDS, so that the community finally understood it to be a disease and not the result of a lack of moral values. The “liberal media” reported on global warming, which is resulting in the development of new, cleaner technologies, rather than being an economic blow, as loudly claimed by “conservatives.” I count on the “liberal media” to report on things that need to be changed, supported and improved. Rush Limbaugh doesn’t do this. If not for the “liberal media” he would have nothing to rail against and he would be out of a job. When the media becomes conservative, careful and blind, things are missed (WMD’s, economic crisis, torture, fraud, …). I believe that the “liberal media” has a huge part in helping us retain our liberty and freedom.
“The “liberal media” of the seventies uncovered Watergate,”
and they buried whitewater.
“reported on the travesty of the Vietnam War,”
we’ll put “travesty” in quotes. We were actually winning that war before we pulled out.
What the media did not do is a story of all of the so called “peace activists” in SanFrancisco that threw bags of feces at us troops as they came home.
brought to light the effects of racial discrimination, and on and on and on.
Excuse me, but the media then wasn’t what it is now.
“Liberal media” educated us about AIDS,
so that the community finally understood it to be a disease and not the result of a lack of moral values.
It is a disease that is spread because of lack of moral values. Adultery and polygamy spread aids.
The “liberal media” reported on global warming, which is resulting in the development of new, cleaner technologies, rather than being an economic blow,
Just because you say global warming is factual doesn’t make it so.
as loudly claimed by “conservatives.” I count on the “liberal media” to report on things that need to be changed, supported and improved.
My definition of what needs to be changed or improved is different from yours.
Rush Limbaugh doesn’t do this. If not for the “liberal media” he would have nothing to rail against and he would be out of a job.
When the media becomes conservative, careful and blind, things are missed (WMD’s, economic crisis, torture, fraud, …).
Just because you say torture occurred at Gitmo doesn’t make it true.
I believe that the “liberal media” has a huge part in helping us retain our liberty and freedom.
Depends on your definition of “liberty and freedom.”
Freedom from terrorists? Freedom to own firearms? Freedom to make lots of $? Freedom of politically incorrect speech?
😛
While I generally agree with David that the media is doing a poor job of reporting, I don’t think Jon Stewart deserves credit as a reporter, especially with the story about Rick Santelli. Mr. Stewart provides entertainment, not in depth, balanced reporting of facts. The show in question was designed to titillate his populist anti wall street audience with a selected set of snippets of CNBC segments. If Mr. Stewart was a a good reporter or cared to present a balanced report , he would have shown the many segments that CNBC has presented which called for concern about valuations in the nation’s housing markets and for concerns about some of the financial institutions. He also would have shown the many instances in which Jim Cramer told his viewers to sell certain stocks. Cramer certainly missed some calls, as did many others, but he isn’t “in bed” with CEOs of companies to tout their stock without regard to any analysis.
Rick Santelli never argued for bailout money in the segment that Mr. Stewart skewers. He simply called for an end to the bailout money for homeowners who borrowed money under terms that many of them understood they would not be able to repay. The residential bailout is in fact a slap in the face to the great majority of homeowners who did not borrow too much money or who had the discipline not to buy in the peak of the residential price boom. Far more homeowners did the right thing than the wrong thing. I worry very much about the message being sent to the citizens of this country – we are dangerously close to telling ourselves that personal responsibility is not important and not to fear the consequences of ill advised decisions. No worries – we’ll tax everyone to make sure those that act without regard to prudence or caution are taken care of.
[i]”He simply called for an end to the bailout money for homeowners who borrowed money under terms that many of them understood they would not be able to repay. The residential bailout is in fact a slap in the face to the great majority of homeowners who did not borrow too much money or who had the discipline not to buy in the peak of the residential price boom. Far more homeowners did the right thing than the wrong thing. I worry very much about the message being sent to the citizens of this country – we are dangerously close to telling ourselves that personal responsibility is not important and not to fear the consequences of ill advised decisions. No worries – we’ll tax everyone to make sure those that act without regard to prudence or caution are taken care of.”{/i]
Very well said, and right.
Our country — including many individuals and families, corporations and government at all levels — has for many years acted irresponsibly with regard to debt, borrowing too much and living too high on the hog. This overconsumption and lack of savings finally caught up to us and has put us in the crisis we are now in and will be in for a long, long time.
Yet people sympathetic to Obama’s economic program, including people who know we need to reduce our national debt burden, are not questioning his economic program, which amounts to adding trillions more in debt. I find this strange. I’ve never gotten into jabs about the “corporate media” or the “liberal media.” That’s mostly a bunch of populist hogwash. We have a wide variety of media. But I worry that too few journalists, today, are questioning the president, questioning why more and more borrowing is good? question why people who borrowed more than they could afford should be given a break? questioning why so many irresponsible corporations which took huge gambles that failed should be bailed out of their losses?
It is a fact that our economy needs liquidity to function, and therefore we need a working banking system. I’m not expert enough to say I know just how the government should have responded to the collapse of the large financial firms. However, I would feel a lot more comfortable if Bush (and now Obama) had not kept the companies which made horrible decisions afloat, but instead fed the necessary cash to bankers who behaved responsibly.
“Just because you say torture occurred at Gitmo doesn’t make it true.”
It is significant that the Bush administration couldn’t come out and unequivically repudiate the use of torture and waterboarding.
And I suppose you say WMD’s are still there even if they haven’t been found?
And that the Reagan administration proved that deficits don’t matter?
Rich Rifkin said “It is a fact that our economy needs liquidity to function, and therefore we need a working banking system. I’m not expert enough to say I know just how the government should have responded to the collapse of the large financial firms. However, I would feel a lot more comfortable if Bush (and now Obama) had not kept the companies which made horrible decisions afloat, but instead fed the necessary cash to bankers who behaved responsibly.”
Yes, while “saving” some banks and investment banks which managed their risks very poorly is deplorable at many levels, I am confident that the first bailout plan prevented the financial markets from going into complete shutdown. Our entire financial system depends and confidence and liquidity, and when those two items are not present, then there is significant risk to life as we know it. So, while I don’t like it, I view the first bailout as necessary (although there may have been other ways to do it, there wasn’t alot of time to construct the perfect scenario). Note that while Henry Paulson was skewered for presenting a very brief outline of how he would spend $700 billion, there were no handouts to unrelated programs or earmarks in that bill. Everything was designed to help the financial system from failing. And we have seen that California and other states, as well as many large financial institutions were paid on contracts by AIG (and other firms) which likely would have failed in the absence of the first bailout.
Going forward, Congress should worry less about other bailout programs, and spend more time constructing a regulatory framework which monitors and prevents private firms from becoming “too big to fail”. AIG and others, had taken on enormous derivative contracts without adequate capital to back them up. When the residential markets began to soften, many firms simply did not have the capital necessary to make the payment due under the contracts. Had AIG, Bear or others failed on the contracts, then states like CA would be in much, much deeper trouble than they are now, and the financial system very possibly would have completely failed. If the next regulatory framework can manage to prevent the “too big to fail” concept, then we as taxpayers will not have to “bail out” any firm. The firm will simply be allowed to fail and the world will continue to function.
[i]”Had AIG, Bear or others failed on the contracts, then states like CA would be in much, much deeper trouble than they are now, and the financial system very possibly would have completely failed.”[/i]
I don’t doubt the truth of that, but it is a wonder why states and other government entitities were effectively gambling with these large companies. It’s not as if the State of California had made an equity investment in AIG stock, as a part of a much larger portfolio. Instead, as I understand these GIAs, they were much like effectively high risk (and higher interest rate), uninsured CDs.
One of the big lessons about the Great Depression that everyone who studies that era of finance learns is that a huge mistake the Fed made was to have a tight-money policy after the panic of 1929. That led to illiquidity in the entire system, as banks were starved of cash, depositors ran to retrieve their deposits, and with the Fed holding tight, bank after bank went insolvent. What ultimately resolved that economic crisis a decade later was a return to liquidity, brought on largely by looser Fed policies. (It is a myth that WWII ended the Depression.)
As I see things, the US government today is misapplying the lessons of the Great Depression. The great majority of the banks which failed from 1930-32 did so not because they made reckless and irresponsible financial decisions. They failed because we hit the end of a normal business cycle and the Fed (bizarrely) starved the economy of cash in response. We never would have had a Depression in the 1930s had liquidity been fed back into the system by way of the money-center banks. But today, banks* are in trouble because of the terrible market decisions they made. If you are in business and you make terrible decisions, you need to fail. Our economic health depends on punishing those who are unwise and rewarding those who are wise. But instead, the government is not allowing these enterprises to fail, applying the “the system needs liquidity” mantra of the Depression-era lesson.
I am fully aware of the need for liquidity. Money is the life-blood of a capitalist economy. Too much is bad; too little is dire. But I suspect that liquidity could have been fed into the system by way of healthy financial corporations. The losers in that would have been the investors and employees of the badly run financial houses which did not appreciate the risks they were taking. Because we have kept afloat all of these bad actors, the taxpayers (of the future) are paying the price; and these guys are still massively being rewarded, as the AIG bonus scam plays out.
* “Banks” include companies like AIG and Citigroup, which are involved in many non-banking activities.
“Going forward, Congress should worry less about other bailout programs, and spend more time constructing a regulatory framework which monitors and prevents private firms from becoming “too big to fail”. AIG and others, had taken on enormous derivative contracts without adequate capital to back them up. When the residential markets began to soften, many firms simply did not have the capital necessary to make the payment due under the contracts. Had AIG, Bear or others failed on the contracts, then states like CA would be in much, much deeper trouble than they are now, and the financial system very possibly would have completely failed. If the next regulatory framework can manage to prevent the “too big to fail” concept, then we as taxpayers will not have to “bail out” any firm. The firm will simply be allowed to fail and the world will continue to function.”
Going forward, there needs to be some stipulations about bailout funding. You don’t hand over huge gobs of money to AIG, while AIG continues to pay its top execs big fat bonuses. The gov’t needs to make sure certain strings are attached to any bailout money. My understanding is that was an Obama promise that he is not keeping. For shame! This is unexceptable.
“Our country — including many individuals and families, corporations and government at all levels — has for many years acted irresponsibly with regard to debt, borrowing too much and living too high on the hog. This overconsumption and lack of savings finally caught up to us and has put us in the crisis we are now in and will be in for a long, long time.”
This is an oversimplification, and does not take into account predatory lending. Consumers are often talked into loans, w terms not explained. For example, many homeowners who took out Adjustable Rate Mortgages (ARMs)were not told about huge balloon payments that would be triggered in 2 to 3 years. Your explanation also does not take into account the push by the Dems to force banks to lend to low income folks who could not afford to repay. Nor does your explanation take into account the Republican and Democratic Partys’ refusal, on both sides of the aisle, to regulate the banking industry or Wall Street. Remember, subprime mortgages were bundled with good loans, sold off quickly to hedge funds, so the originator of the bad loan was no longer identifiable.
Bottom line, politicians had a big hand in this economic mess we are in. Both parties pushed policies that were not sound, but went way beyond “too much borrowing” and “overconsumption”.
Kaine’s comments about the liberal media are right on!
“And I suppose you say WMD’s are still there even if they haven’t been found?”
Do you think if you say this enough times, it will get traction? Traces of Seron were found in the river that runs through Baghdad. Surveillance footage was taken of huge trucks crossing the border from Iraq right before American troops went into Iraq. Russian troops were photographed inside Iraq one week before our troops went into Iraq. The real problem is that Bush pussyfooted around so long, it gave the enemy ample time to get rid of or hide anything they had. No one will ever truly know if there were WMDS. What we do know is that Hussein used poison gas against his own people and invaded Kuwait. Did you want to leave Hussein in power to corner the oil market?
And while you rail against the Iraq War, notice how it fostered the spread of democracy in other countries. It shook up the Russians so much they took the trouble of trying to poison the head of a country that wanted to establish a democracy. Life is not as black and white as the lefties would have us believe.
Get over the Gore loss, Bush’s presidency, and move on… The Dems are in power now, and have every opportuntiy to do things right. Seems to me they are finding it pretty hard going. They need to stop wasting time pointing fingers through surrogates like John Steward, and do the job they were paid to do!
Fed up W Both Parties said “This is an oversimplification, and does not take into account predatory lending. Consumers are often talked into loans, w terms not explained. For example, many homeowners who took out Adjustable Rate Mortgages (ARMs)were not told about huge balloon payments that would be triggered in 2 to 3 years. Your explanation also does not take into account the push by the Dems to force banks to lend to low income folks who could not afford to repay. Nor does your explanation take into account the Republican and Democratic Partys’ refusal, on both sides of the aisle, to regulate the banking industry or Wall Street. Remember, subprime mortgages were bundled with good loans, sold off quickly to hedge funds, so the originator of the bad loan was no longer identifiable.”
There are certainly examples of predatory lending or lack of understanding by consumers, but these represent a small minority of the cases. There is no doubt that lenders pushed inappropriate leverage or loans on people, but likewise, consumers accepted them. Many of them were so happy to have the loan that they felt fortunate. Many were aware of step up payments or balloon payments and were ok with them, because that structure was the only way they could qualify for the loan.
With respect to lack of regulation of Fannie Mae and Freddie Mac, this was largely a Democratic issue. The Bush Administration, while encouraging home ownership, tried on multiple occasions to regulate and restrict the agencies, but were defeated by Barney Frank and peers. There are some very damning recordings of Barney Frank castigating Fannie Mae executives for being too conservative with their lending standards and for effectively prevent lower income families from participating in home ownership and the wealth building that would ensue. I find it humorous to listen to Mr Frank rant today about the things he so fervently promoted only 2 or 3 years ago. Talk about lack of accountability.
Finally, a technical point. The originator of a loan is never “unidentifiable”. They may not own the loan or any of the risk (other than for some warranties that they made when selling the loan). Subprime mortgages were not generally bundled with the higher quality mortgages and then sold to hedge funds. Sub prime mortgages are generally secured in pools by themselves, and the resultant senior securities were purchased by Wall Street firms or hedge funds. The riskiest portion of those securities were generally held by the originator and later resecuritized in CDOs. Firms like AIG, the bond insurance firms and insurance companies purchased many of these cdo securities, and it was these securities, with the onset of a softening housing market, that began to default and started what will come to be recognized as the “great unwind” of leverage in our system.
[i]”Consumers are often talked into loans, w terms not explained. For example, many homeowners who took out Adjustable Rate Mortgages (ARMs)were not told about huge balloon payments that would be triggered in 2 to 3 years.”[/i]
All of us, even people with oversized eggheads, make dumb mistakes. Other than in cases of fraud, the fault lies with the people who made dumb mistakes. They didn’t read or understand the contracts they signed; and therefore they should pay the price for their mistakes, and not blame a fancy-shmancy salesman.
The biggest mistake a lot of homeowners made was to think that the housing prices would endlessly go up. So there are many people in houses today — houses in which they can afford to pay their mortgages — where the loan is more than the value of the house: a $600,000 note on a $400,000 home, for example. The bank which owns that loan and the person who took it out, but not the taxpayers, needs to pay the price for that miscalculation.
Excellent article, David.
“There are certainly examples of predatory lending or lack of understanding by consumers, but these represent a small minority of the cases.”
If you are not told the terms of the loan, in full, or are convinced to take a loan you do not need, that defines what is called “predatory lending”. Hiding the ball and obscating the true terms of the loan from the consumer is fraudulent. It happens more often than you might think.
For instance, did you know that banks are in the habit of targeting well to do seniors, and literally steering them via a teller to investment advisors sitting in the corner of the bank? This investment advisor is either renting the space, or is a representative of a subsidiary of the bank. Either way, any investment is not FDIC insured, even tho it “says so” on the window. Banks are well known for their tricky manuevers to mislead the public.
“Many were aware of step up payments or balloon payments and were ok with them, because that structure was the only way they could qualify for the loan.”
How many consumers were aware that if they defaulted on their mortgage, and walked away from the house (i.e. gave back the keys), the consumer would still be on the hook for whatever amount of money the bank loses on a short sale? I very much doubt that minor detail was ever explained to perspective homeowners. Nor were huge balloon payments explained to many consumers.
When a bank tells the consumer they can afford a loan, the consumer is inclined to believe the bank, figuring the bank would not want to make a bad loan – after all the bank stands to lose money on the deal if the homeowner can’t repay. What the consumer does not know is the bank will sell off risky debt quickly, and make their money on fees charged for making the loan. Brokers then make their fees by passing the risky debt along even further.
“With respect to lack of regulation of Fannie Mae and Freddie Mac, this was largely a Democratic issue.”
I absolutely agree w you here. However, banks still had a responsibility to be responsible, Barney Frank notwithstanding. The law requires it, Barney Frank notwithstanding. Just because your superior tells you to do something, does not mean you have the right to do it, nor absolve you of responsibility for what you do! That is Black letter law.
“Finally, a technical point. The originator of a loan is never “unidentifiable”.”
Don’t you believe the originator of a loan should be identifiable and accountable for the product they sell to consumers? Don’t you think that is very much a part of the problem – a lack of accountability?
“All of us, even people with oversized eggheads, make dumb mistakes…, the fault lies with the people who made dumb mistakes.”
When a consumer is not told the true terms of the loan and its import, then the “mistake” was made by the lender, not the consumer. Think about it from a logical point of view. Prior to Barney Frank et al encouraging low income folks to take out loans, it didn’t happen. Once banks were given the go ahead, the sky was the limit. Banks were making money hand over fist in fees charged, making bad loans w/o full disclosure. The bad loans were bundled and sold as securities quickly, so the originator was not identifiable. Who benefitted from the predatory lending? Certainly not the consumers nor taxpayers. But the banks made a boatload of money, and so did brokers on Wall Street.
To lay all the blame on consumers is misguided. Banks and politicians are the primary cause of the mortgage meltdown. Banks need to be more strictly regulated in how they do business, as does Wall Street.
“The bank which owns that loan and the person who took it out, but not the taxpayers, needs to pay the price for that miscalculation.”
It is the banks that are getting the bailouts, not the duped consumer. Frankly the “assistance” given to homeowners is a failed mission, and is more political PR than anything. Yet a glut of foreclosed houses on the market is bad for taxpayers – as the price of housing seriously declines, which causes property tax revenue to precipitously slide downward.
Meanwhile AIG is getting bailout money from the feds as it continues to pay its top execs huge bonuses. Who is primarily at fault here? The consumer? I think not.
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