If cable television and newspapers like the Washington Post were your only sources of news, then you would probably think the debate over the $700 billion bailout for politically connected Wall Street investment firms was divided between the experts and journalists on the one side — united in their belief that “something must be done” — and on the other, the simpletons and country bumpkins who just didn’t understand that the modern economy requires using taxpayer dollars to subsidize the risks and socialize the losses of Henry Paulson’s golfing buddies.
Indeed, the Dow’s fall by over 700 points last Monday was, to the financial press and other professional agitators for expanded corporate and government power, clear evidence that the House’s (short-lived) rejection of the Wall Street bailout was directly harming the economy. No doubt these self-styled financial experts will interpret/spin today’s events — where the Dow fell more than 800 points at one point — as further evidence that the government must take bold, decisive action to intervene in the economy (as if the Federal Reserve hasn’t already been doing so by injecting more liquidity — that is, more dollars — into the banking system; just today the central bank cut interest rates to just 1.25%, after doubling the amount of money it was lending to major banks).
As after 9/11 and with the the lead up to the Iraq war, the establishment media has parroted the line that there is a crisis that demands the public defer to the very same inept elite that failed to predict — much less understand the causes of — the catastrophe that had just taken place. And as in the months before the United States unleashed “shock and awe” over Baghdad, the last few weeks have seen voices critical of the stampeding toward an ill-considered and destructive policy generally marginalized as simple folk incapable of grasping the world’s complexities (which invariably demand that the U.S. government assume evermore power).
However, as Congressional Quarterly’s Daniel Parks pointed out in a piece for the Chicago Tribune, the divide over the bailout was not simply between those journalists/politicians/bankers who understand economics and the ignorant, Dancing With the Stars-watching proles, but rather “between Wall Street and its allies in Washington, and the rest of the country.”
As Parks notes:
While it is true that most Wall Street economists predict doom and gloom for America without immediate government action, many of these economists are connected in some way to the institutions that would benefit from a bailout.
Though opponents of the bailout were accused of just not getting the connection between Wall Street and Main Street (and one can only hope that phrase dies a sudden, albeit violent, death), most people can understand what’s going on rather easily and don’t need the help of a screaming cable TV financial guru to explain to them why 21st century living demands that the poor subsidize the tennis lessons of the rich. In fact, much of the opposition to the bailout can be chalked up to the fact that people know all too well what is going on: politicians enriching influential corporate interests at taxpayer expense.
As Parks writes:
The fact is, most people do understand. They just aren’t convinced that this particular approach—or any government approach—is the best answer. And there are plenty of smart, highly educated people on their side. Just because you won’t find many of them on Wall Street, or in Washington, doesn’t mean they don’t exist or their analysis is any less sound.
Even among the voters who believe a bailout would help, many remain opposed regardless. They want to see Wall Street suffer for its excesses, even if they must suffer, too. Normally the media would seek out and admire stands on principle such as this, but not on this story.
The disconnect appears to stem from the fact that in many cases, financial journalists have simply gotten too cozy with the Wall Street crowd. These journalists have failed to cast a critical eye on what their small circle of East Coast experts in the financial world tell them, and they have ignored other sources in most cases.
One would think that after being taken to the woodshed for failing to challenge the underlying assumptions on the need to go to war in Iraq, journalists would be more cautious about accepting the establishment explanation of any undertaking of this magnitude. But the journalists who covered the war for the most part are not the same journalists who are now covering the economy.
Perhaps the two groups should have a chat.
While the U.S. establishment may have gotten away with openly transferring the wealth of the middle class and the poor to the politically influential upper class (yet again), the opposition to the latest display of crony capitalism was at least somewhat inspiring, and — one can only hope — perhaps indicative of the “realignment of American politics” that Ralph Nader spoke of at last month’s press conference with Ron Paul and the Constitution and Green party presidential nominees, Chuck Baldwin and Cynthia McKinney.
As evidenced by Paul’s press conference — where the assembled candidates all agreed that the the empire should be ended, the Federal Reserve’s power should be greatly curtailed (and perhaps abolished), and that “There should be no taxpayer bailouts of corporations and no corporate subsidies [and] corporations should be aggressively prosecuted for their crimes and frauds.” — there appears to be something of an emerging anti-war, anti-corporate shift in the United States, with an increasing number of people recognizing that both the Democratic and Republican parties are thoroughly committed to corporatism and imperialism (their respective claims to represent the “little guy” and the “free market” notwithstanding). That’s not to say that the bipartisan corporate/government power structure is on the verge of a collapse, but it’s at least something to be hopeful about in these rather dark times.
This emerging consensus, though obviously limited to what the likes of the Washington Post’s Dana Milbank would dismissively term the “lunatic fringe”, is readily apparent, as the Chicago Tribute notes, in the fact that Dennis Kucinich and Ron Paul — long allies when it comes to fighting the warfare state — appear to now be making a shared and explicit case against the corporate welfare state. As Kucinich wrote to his supporters last week, echoing Paul’s criticism of the Federal Reserve’s manipulation of the U.S. economy for the benefit of Wall Street and the openly corporatist nature of the bailout scam:
[Under the bailout the] taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.
This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the “$700 billion” transaction. People will explain this to you in many different ways, but this is what it comes down to.
The banks needed Congress’ approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world.
The globalization of the debt puts the United States in the position that in order to repay the money that we borrow from the banks (for the banks) we could be forced to accept International Monetary Fund dictates which involve cutting health, social security benefits and all other social spending in addition to reducing wages and exploiting our natural resources. This inevitably leads to a loss of economic, social and political freedom.
Under the failed $700 billion bailout plan, Wall Street’s profits are Wall Street’s profits and Wall Street’s losses are the taxpayers’ losses. Profits are capitalized. Losses are socialized.
As Kucinich highlights, the bailout is simply more corporatism dressed up as an “economic rescue”, highlighting the fact that in the United States — under the guise of a market system — the Wall Street rich win, even when they lose.
The apparent realignment of politics was also evident, to me at least, in a surprising post at the liberal-hipster-media website, Gawker, which — when their writers are not assuming the posture of uber-cool ironic detachment, is capable of some worthwhile commentary:
[T]he larger problem here . . . is that no one understood that the nation’s economy was built on a house of cards except for the people who didn’t care, the people who constructed the house of cards, and Ron Paul.
So we understand the crisis through an unhelpful lens of politics—we can explain the political machinations behind the bailout bill, yes, but is it good or bad policy? Paul Krugman says it’s bad-but-necessary, or something. What a cop-out!
The People are actually to blame, yes; the stupid people who didn’t pay attention to the terms of their loans and lived outside their means and gambled everything away while gorging themselves on bacon-wrapped shrimp at Red Lobster. Except who were the ones pushing the “ownership society,” giving huge incentives for homeownership to people who shouldn’t own homes, never providing anything but misleading information, convincing themselves that housing prices would never ever ever fall? Both political parties, two presidents, and all the respectable press. There was a dereliction of duty by everyone in the nation responsible for serving the public trust, which certainly used to mean journalists too.
It took Time until March of this year to explain credit default swaps, but at least they did explain it in March. And now we’re probably in for another corrective period, in which like after the Lewinsky free-for-all and the credulous lead-up to the Iraq war, the press will spend a self-flagellating year promising to do better in the future.
I just have one small quibble with Gawker’s analysis: the idea that corporate journalism was ever about “serving the public trust” is not based in anything remotely resembling fact, and is instead based on the same fiction that the U.S. government — which massacred the native American population and enslaved hundreds of thousands of others — was established to uphold decency and justice but has only rather recently been corrupted by the mean ‘ol Republicans. While the media’s selling of the war in Iraq was undoubtedly egregious and not in the American public’s interest (to say nothing of the Iraqis), have you ever heard of William Randolph Hearst?
Still, some recognize that the major media outlets fail 90% of the time at providing the American public a complete and unbiased view of the world — and only at most 10% of the time displays any measurable amount of skepticism toward government demands for new power — and view that as a reason to improve on that last 10%; you know, get the media back to what its “job” was supposed to be, with all that “speaking truth to power” stuff.
Others, however, see that the major newspapers and television stations invariably shill for those in power — both in the corporate sector and the U.S. government (or do I repeat myself?) — and think, “hmm, maybe the media is doing its job…”