The Washington Post’s Richard Cohen believes that Jon Stewart’s run at CNBC was unfair. However, there is a certain Swiss-cheesy quality to his argument.
What Jon Stewart needs is Jon Stewart. He could use a droll comedian to temper his ferocity and correct him when he’s wrong, as he was about the financial media, particularly CNBC and its excitable analyst Jim Cramer. They didn’t cover up the story of financial shenanigans. They didn’t even know it existed.
For proof, I can offer some names. Let’s start with Maurice “Hank” Greenberg, who was instrumental in building what is now probably the world’s most reviled corporation, AIG. He resigned as chairman and CEO in 2005, but still it is logical to assume that few people knew more about the company than Greenberg. He kept much of his net worth in AIG stock. He’s now lost much of that worth.
Or take Richard Fuld. He is the former chairman of Lehman Brothers, which, as we all know, is no more. He lost about $1 billion.
Or take Citigroup’s former chairman, Sanford Weill. He lost about $500 million.
Or take all the good people at Bear Stearns, the company Cramer adored almost to the bitter end. They went down with their stock.
If these people kept their money in these companies — financial and insurance giants they had built and knew from the inside — how was even Jim Cramer to know these firms were essentially hollow? …
The acclaim visited on Stewart for spanking Cramer tells you something. In the first place — and by way of a minor concession — he’s got a small point. CNBC has often been a cheerleader for the zeitgeist — up when the market’s up, down when it’s down. This is true of the business media in general.
But the role that Cramer and other financial journalists played was incidental. There was not much they could do, anyway. They do not have subpoena power. They cannot barge into AIG and demand to see the books, and even if they could, they would not have known what they were looking at. The financial instruments that Wall Street firms were both peddling and buying are the functional equivalent of particle physics. To this day, no one knows their true worth.
I guess my question at this point is this: If Cramer and other pundits don’t really know anything, then why were they defending the worth of these companies? It would have been more honest to say: “I’d like to make a buy-sell-hold recommendation to you, but I simply don’t have enough knowledge about the company in question’s workings to do so.”
But then they wouldn’t look like confident experts, would they?
Here’s Jim Cramer on Bear Stearns. The date? March 11, 2008:
A brief excerpt: “‘Should I take my money out of Bear Stearns?’ No! No! No! Bear Stearns is fine! Do not take your money out … Bear Stearns is not in trouble. If anything, they’re more likely to be taken over.”
Some CTV.ca headlines:
Friday, March 14, 2008: Feds and rival bail out investment bank Bear Stearns
Sunday, March 16, 2008: JPMorgan says it will buy ailing Bear Stearns
Monday, March 17, 2008: TSX tumbles as Bear Stearns buyout raises worries
Here’s an analysis piece I wrote on Tuesday, March 18, 2008: Breaking down the U.S. credit crisis.
And here’s another story from year’s end: Economy in 2008: A stunning reversal of fortunes.
Stewart had some great sport on March 8 with other CNBC pundits making bad calls:
The audience couldn’t really enjoy a belly laugh. It was ghastly, not funny. Pay particular attention near the end to the CBNC personalities lobbing puffballs at CEOs of soon-to-be-doomed corporations.*
* For more on that theme, see this Frank Barnako March 14 blog posting: Jim Cramer is not the problem
Cohen is right. It’s not fair to make Cramer carry the can for poor financial journalism — although I would argue from my layman’s perspective that more attention should be paid to economic fundamentals than some of the breezy commentary that has come to pass for financial punditry.
Some news organizations did try. This is from NYT public editor Clark Hoyt’s March 15 column:
A newspaper’s responsibility is not to be an economic cheerleader, but to maintain a level head and help put the world in perspective for readers. How well has The Times done that? And, to turn the question around, how well did it warn readers before the roof fell in that a dangerous housing bubble was inflating on the strength of reckless lending?
I’ve been looking at front pages, examining articles dating to 2000, interviewing editors and reporters, and corresponding with readers, and I think The Times gave pretty fair warning of what could — and then did — happen. And it has reported the calamitous aftermath with good balance, including notable efforts to avoid exaggerating how bad things are.
Exactly nine years ago, The Times published a 6,000-word investigative report by Diana B. Henriques and Lowell Bergman about a California-based home-equity lender using deceptive sales practices “to lure homeowners into high-cost loans that expose them to the threat of foreclosure and financial ruin.” The money for the loans came from Lehman Brothers and other Wall Street investment banks that were creating new mortgage bonds backed by subprime loans.
Over the years, Gretchen Morgenson wrote that mortgage markets were out of control, that the housing bust would not be pretty, and that high-yield, mortgage-backed securities “are not as secure as many believe.” Edmund L. Andrews, Floyd Norris and Goodman wrote about the problem. So did Leonhardt and Motoko Rich, who in 2005 co-authored an article comparing the real estate frenzy to the dot-com bubble of the late 1990s. They warned that homeowners taking out adjustable-rate mortgages were making a risky trillion-dollar bet that interest rates would remain low.
Leonhardt wrote last fall that he cringed when he reread a paragraph in that article. It quoted economists as saying that if the bet went bad, the impact would not derail the economy. I think he was being too hard on himself. Reporters cannot predict the future. The important thing was that they were focused on the right problem.
I would concur. But too many others who had influential voices weren’t.