Breakdown of Legitimacy: How the Disastrous Bailout Passed

I do not profess to know much on economics, especially not an economy as complex as our nation’s. But I do have a brain, along with a few years in business school. And for the past two weeks since this “financial crisis” has been looming, I’ve devoted many hours to researching this plan. Neither the mainstream nor conservative media has been much help.

Americans must realize what role the 24/7 news cycle has played in this debacle. For the past year or so, the words “credit”, “housing” and “financial” could not be said on-air without being followed by the word “crisis.”

Is that really an accurate way to view the world? Or have all these sectors gone up-and-down over the past many decades? Does the market inevitably have cycles?

We live in a world where TV commentators report on a story one day, then in the “follow-up” tomorrow want the issue solved. It’s more entertaining that way, and today the news industry plays the ratings race perhaps more so than dramatic TV.

TV is not alone in thinking only short-term, ultimately trying to build public support for this big-government solution. Here’s my recent letter to the editor of the Wall Street Journal

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Examining the role of media in the recent $700 billion bailout provides a missing understanding of how the events transpired. Though I have long been an avid reader of The Wall Street Journal, it is apparent that this “big tent” of conservative thought has excluded other viewpoints on this risky, highly controversial handout to Wall Street.

On any issue of the day–regarding education, government regulation, corporate policies, technology, health care, military, climate change, gun rights, and many others–I have counted on WSJ for robust debate and a discovery of facts that other media missed. So it was that I visited WSJ.com’s Wall Street in Crisis section trying to understand the pros and cons of the bailout.

Story after story, blog after blog, op-ed after op-ed in this section preached only the benefits and urgency of the bailout. This perspective even seeped into front page news stories. On Monday, September 29, as more Americans than ever were reading The Wall Street Journal trying to understand what was going on, the paper referred to Lehman Brothers as a “158 year-old” financial institution whose collapse meant certain “crisis.”

“Wow, Honey, maybe this financial stuff really is serious if a bank that old is going down?” The problem is, this article said nothing about Lehman Bros. being essentially a shingle for American Express, which spun off this unit in 1994. It said nothing about the 2003 investigation into the company’s shady investment practices.

We were just supposed to think that Lehman was as legitimate a bank as say Wells Fargo, backed with solid collateral but now going under. This was simply not true. Clearly The Wall Street Journal had a dog in this fight, and the editors made sure it ended up winning.

Not only has the financial sector suffered a breakdown of legitimacy in the past weeks–so has the media, even conservative-leaning media previously thought to be trustworthy. Media junkies beware: no news outlet is, in fact, “fair and balanced.”

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The last reference is, of course, to Fox News. It’s notable that Bill O’Reilly bought the Treasury’s arguments early on, and espoused those views for the two-week public debate on the bailout.

From what I could tell, O’Reilly’s stand with President Bush convinced Sean Hannity and others to back down on their hard line against the bailout. Interesting audio clip from Bill here:

Bill O\’Reilly audio clip from The Laura Ingraham Show

So where do we go from here?

For starters, don’t buy the pointless commentary espoused on TV: “We’re concerned about what the market’s going to do tomorrow.” The markets will go up and down. It would’ve gone down if the bailout failed, and that’s natural. We’re likely looking at a worse crash in 2009 due to this bailout; watch Cato.org for the best analysis I’ve seen.

Second, it pains me that President Bush’s legacy is The Republican who Stood for Big Government. Even apart from defense spending, you cannot deny that Bush has bloated the government beyond what any true conservative would ever stand for. He may be the strongest Christian evangelical the White House has seen in a long time, but that’s no excuse for his poor economic policies.

It should be noted, though, that the state of the economy isn’t all Bush’s fault–that’s a really dumb view propagated by the far left. A lot of people are at fault.

Third, the election. I’ve noticed an editorial tilt even in the Wall Street Journal that hopes for an Obama administration. Opinion columns are showing both views, sure, but regular coverage is giving more space to pro-Obama voices. Despite the fact that WSJ has traditionally been against big government, which is exactly what Obama/Biden mandate.

Maybe The Wall Street Journal, clearly in the tank for corporate fat cats, is scared that McCain/Palin would deliver on their promise to affect the financial sector in favor of the American people (to the extent that the Executive branch can, which may be negligible). And WSJ wants nothing of it. This is just my view, though, and less fact-based the rest of the commentary presented here.

Your thoughts?

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