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Debate Emerges Over Media’s Role in Financial Meltdown

March 13, 2009 at 6:20 PM EST
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Comedian and "Daily Show" host Jon Stewart held a high-profile sparring match with CNBC's Jim Cramer this week over the cable network's coverage in the lead up to the Wall Street meltdown. A panel of business writers weighs the media's role in the economic crisis.
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TRANSCRIPT

JUDY WOODRUFF: Next, the news media and the meltdown. Jeffrey Brown has our Media Unit story.

JEFFREY BROWN: Who done it and who might have prevented it? We’ve talked here about anger aimed at Wall Street CEOs and government regulators, among others. One other occasional target has been the media.

This week, late-night comedian Jon Stewart poked some very pointed humor at the business cable network CNBC. Last night, he mixed it up with the network’s Jim Cramer, host of a program called “Mad Money.” Here’s an edited excerpt.

JON STEWART, Host, “The Daily Show”: It’s the gap between what CNBC advertises itself as and what it is and the help that people need to discern this. Let me show you. This is the promo for your show.

JIM CRAMER, CNBC Anchor: OK.

JON STEWART: All right. So this is Jim Cramer’s promo.

ANNOUNCER: In an economy of freefall, investments on the brink, when you don’t know what to do, don’t panic: Cramer’s got your back. “Mad Money” with Jim Cramer.

JON STEWART: Isn’t that, you know — look, we’re both snake oil salesman to a certain extent.

JIM CRAMER: I’m not disagreeing.

JON STEWART: But we do label the show at snake oil here.

JIM CRAMER: I think that there are two kinds of people. There are people who come out and they make good calls and bad calls, and they’re financial professionals. And then there’s the people who say they only make good calls, and they’re liars. I try really hard to make as many good calls as I can.

JON STEWART: When you talk about the regulators, why not the financial news network? That’s the whole point of this. CNBC could be an incredibly powerful tool of illumination.

It feels like we are capitalizing your adventure by our pension and our hard-earned — and that it is a game that you know, that you know is going on, but that you go on television as a financial network and pretend isn’t happening.

JIM CRAMER: OK. First — my first reaction is, absolutely, we could do better, absolutely. There are shenanigans, and we should call them out. Everyone should; I should do a better job at it.

As a network, we produce a lot of interviews where I think that we’ve been — there have been people who’ve not told the truth. Should we have been constantly pointing out the mistakes that were made? Absolutely. I truly wish we had done more.

Financial journalists made mistakes

Kathy Kristof
Syndicated Business Columnist
Frankly, you'd be better off investing on Jon Stewart's advice, because if you asked him whether stocks are going to go up or down, he's probably going to go, "Yes." And he'll be right.

JEFFREY BROWN: And some thoughts now from Dean Starkman of the Columbia Journalism Review. He's the managing editor of its business section, The Audit. Kathy Kristof, syndicated personal business columnist in Los Angeles. And Peter Coy, economics editor at BusinessWeek magazine.

We did ask both Jon Stewart and CNBC to join us. They declined.

So, Dean Starkman, I'll start with you. Is Jon Stewart right to call out CNBC and others in the media?

DEAN STARKMAN, Columbia Journalism Review: Yes, I think he's absolutely right, and I think you're right to really emphasize what it's happening here. This seems to be a pretty signature moment for the business press, the financial press, and its interaction with the general public.

It's almost like the gaze of the larger public, people who aren't as familiar with business issues, are now turning to the business press. And I think it's all to the good; it seems quite healthy to me.

JEFFREY BROWN: Kathy Kristof, does it seem healthy to you? Maybe it would be good to explain the role that CNBC plays a bit more, in terms of the influence that it has, and someone like Jim Cramer, in terms of his influence.

KATHY KRISTOF, Personal Finance Columnist: Well, I think it's really good that they call out the fact that Jim Cramer makes mistakes, and he should be accountable for those.

People do watch his show, and they take his recommendations as gospel, and they invest on them. And that's incredibly dangerous to your wealth.

Frankly, you'd be better off investing on Jon Stewart's advice, because if you asked him whether stocks are going to go up or down, he's probably going to go, "Yes." And he'll be right.

And that's the thing. I mean, Jim Cramer might be right for an hour and not for a long-term portfolio. And that's the people he's talking to.

JEFFREY BROWN: Well, so why, Kathy, does he have so much influence?

KATHY KRISTOF: You know, I think that there's an impression that, if you're on TV, you're right, or you're credible.

JEFFREY BROWN: Oh, we don't want to stop that one. Excuse me. Go ahead.

KATHY KRISTOF: Well, I mean, you're not always right. You're not always credible. And, frankly, if you're making individual stock recommendations, you're going to be wrong as often as you're right.

You may be right in the general mathematical equation, but you also have to be right on the timing. And that's practically impossible.

Different kinds of journalists

Dean Starkman
Columbia Journalism Review
But I think, when you look back at the record, you'll see that confronting powerful institutions about their lending practices, not to mention Wall Street, was inadequate.

JEFFREY BROWN: Peter Coy, broaden this out a bit. I mean, one issue here is that I hear people talk about cheerleading. To what extent are journalists either going along or even fanning the exuberance, especially on the upside, as we were -- as the bubble was building? Do you think that is a problem at a network like CNBC, but more broadly?

PETER COY, BusinessWeek: I think that we can make a very clear distinction between what Jim Cramer does and what, say, BusinessWeek does. Jim Cramer is a stock-picker who has a TV show. BusinessWeek is a magazine with journalists who are absolutely prohibited from trading on the companies we write about.

We can't buy the stocks of the companies; we can't short the stocks. We're out there trying to find out information about companies.

And as for cheerleading, tell me if this sounds like cheerleading to you. "Have Banks Been Giving Tequila to a Drunk?" 2001. "Home Mortgages, Where the Money is Easy, Too Easy," 2002. "Is a Housing Bubble About to Burst?" 2004. "Nightmare Mortgages," 2006.

These are all major stories that appeared in BusinessWeek. People may have forgotten them; they may not have read them. But we were out there writing about this all the way through the bubble.

JEFFREY BROWN: Well, Dean Starkman, that brings us to this larger question of to what extent business journalists missed the story. Now, I understand you've been looking at this at the Journalism Review. What do you see, good and bad?

DEAN STARKMAN: Yes, I mean, it sort of the question of the moment in the business press. And I would say that there is at least an enormous disconnect between professional business journalists and, I would say, the wider public that is sort of wondering what went on.

I'd also say another thing. One is that Peter's right, that those stories were written.

I tend to -- this debate is not really a debate. It's not really a matter of opinion. The record is there. The problem is, the volume of coverage was so enormous, it becomes practical. How do you wade through thousands, literally tens of thousands of stories to discern what the actual message was, which is actually what we've tried to do and we'll be publishing it in the May-June issue.

I'd say that -- so the short version is that, no, I don't think the business press did adequately warn the public. And I'd say there were a couple of major shortfalls. And I'm sure Peter and I would have a long debate about this.

But one thing is, interestingly, coverage of predatory lending was actually -- got off to an incredibly good start earlier in the decade and dropped off considerably in the intervening period.

There were good stories about warning about housing bubbles, also good stories about dangerous mortgage instruments, consumer-type stories.

But I think, when you look back at the record, you'll see that confronting powerful institutions about their lending practices, not to mention Wall Street, was inadequate.

Some financial stories came early

Peter Coy
Business Week Magazine
If you went back and read our stories, the stories we wrote, if we had drawn the logical implications of what we ourselves had written, we probably would have been more bearish.

JEFFREY BROWN: All right, let me let Kathy Kristof weigh in here. What did you see that was done well, what not so well?

KATHY KRISTOF: Well, you know, I think all of the major publications had done a number of stories about toxic mortgages, about companies that were going way off the rails on what they were approving.

The problem is, is kind of what the other two have been just nipping at, is that we were early. And we kept on, you know, being the voice in the wilderness, the voice in the wilderness, the voice in the wilderness. And pretty soon, you say, "OK, how many times can I do that story?" And so you stop.

And we also got incredible flak toward the end of the bubble when we would write stories about toxic mortgages, because there were all sorts of bloggers who were trying to keep this fraud going. And they would just attack you, attack the people who you had quoted. They would do all sorts of things in order to stop you from publishing.

And I think that it actually had an effect. I mean, some of us looked at it and thought, "Oh, my gosh, are we actually, you know, quoting crooks? Are these people not legitimate borrowers?" Well, actually, some of them were really bad borrowers; some of them had been bankrupt; some of them shouldn't have gotten loans. And that was actually the point.

JEFFREY BROWN: Peter Coy, come on back in on that. Go ahead.

PETER COY: I want to agree with something that Dean Starkman said, which is that we didn't always get it right and we had a mixed message at times.

And the one thing I would plead guilty to is, I would say, a failure of imagination. If you went back and read our stories, the stories we wrote, if we had drawn the logical implications of what we ourselves had written, we probably would have been more bearish.

But it was simply hard to believe that we were ever going to have the stock market fall by 50 percent, have housing starts fall by, whatever, 75 percent. It's just so far to the extreme that even we, who were in there writing about these things, maybe didn't fully grasp the full implications of what we ourselves were saying.

Limited ability to predict

Kathy Kristof
Syndicated Business Columnist
And so the only part of journalism that tells you what is going to happen is investigative journalism. And that's getting savaged right now in a lot of media companies where they're laying people off.

JEFFREY BROWN: Well, Dean Starkman, you started this by saying this was a moment where media organizations were looking at this, debating it. To what extent? I mean, how much of a reassessment is going on, especially because, of course, this isn't over? I mean, now we're faced with a period where a lot of people want to know what's going on. We're getting new possible bailouts and rescue plans thrown at us all the time. Where are we now?

DEAN STARKMAN: Well, in terms of -- if you're asking to what extent is the media looking at itself and examining itself, overall, I'd say to a minimal extent.

I think that Kathy and Peter, you know, reflect the institutional response to the question. I don't fully agree with it, or I don't really agree with it at all.

But, you know, the issue is, are they -- you know, what was the message delivered over time? And you can cite really excellent stories that did appear episodically over time, but you also have to take into account other headlines that you could mention.

"Washington Mutual is using creative retail approach to turning the banking world upside down," Fortune in 2003. "Sachs Appeal: Goldman Sachs has Emerged from the Market Bust as a Trading Colossus," Forbes, 2007. You could really pick any number of these stories.

And what you're looking at there are stories that aren't really warnings, but, in fact, is the opposite. They're basically saying, hey, these institutions are all clear. And I think that has to be taken into account.

JEFFREY BROWN: Kathy Kristof, just a brief last word from you. Where do you see us now, in terms of business journalism, looking at what's going on now?

KATHY KRISTOF: You know, I think business journalism could be better. And I'm always going to tell you that we should always try and raise the bar.

But when it comes right down to it, you do what you can do. And the thing that people need to realize about journalism is that it's largely telling you what has happened, not what is going to happen.

And so the only part of journalism that tells you what is going to happen is investigative journalism. And that's getting savaged right now in a lot of media companies where they're laying people off.

And so I think that, you know, there's a lot of blame to go around. But journalists, I think, are doing what they can do.

JEFFREY BROWN: All right, we'll leave it there. And, of course, you touched on the other big news in journalism, the losses at many newspapers. And we're going to come back to that next week, actually. Kathy Kristof, Dean Starkman, and Peter Coy, thanks very much.