Media Gaming Market
by Jordan McClintock
Issue 119 - November 5, 2008

Is it just me or has media coverage of the financial crisis and proposed solutions to it take a more than usual political and ideological slant?

After the severe drop in the stock market in late September and early October, msn.com: reported the following: “Stocks were lower this morning as traders were trying to figure out whether Congressional leaders have the votes to pass a $700 billion rescue plan for the financial markets.”

”The Los Angeles Times agreed: “Stocks declined early today, extending this week’s gyrations as investors prepare for a possible Senate vote on the government’s proposed $700 billion financial sector bailout. Credit markets remained strained, adding to worries about the well-being of the economy. The decline follows a steep sell-off Monday and a snapback rally Tuesday. Stocks logged their steepest losses in years at the start of the week after the House surprised Wall Street by rejecting the plan but then the market then [sic] staged a partial rebound on hopes party leaders would find the votes to pass the measure.”

“The New York Times cleared the phlegm from its magisterial throat and said: “Stocks on Wall Street opened lower on Wednesday as investors again turned to Washington for a vote on the government’s financial bailout plan.”

All three news sources stated without qualification that the gyrations in the market were the direct result of Congress’s failure to pass the bailout package. No one really knew why the market opened lower on Tuesday after climbing out of a deep hole on Monday. Actually, the prospects of a bailout were grimmer on Monday than on Tuesday, since the news was out by Tuesday morning that the Senate had moved to take up the question.

Undoubtedly the collapsing market was affected by the crisis in the mortgage industry. However, these media specifically blamed the precipitous drop on Congress’s failure to act on the bailout legislation the Left overwhelmingly favored, a bill conservative Republicans opposed in the House.

The msn.com story might just as well have begun as follows: "Stocks were lower this morning as traders responded to the prospect of a disastrous bailout that would give the federal government unprecedented powers to micro-manage American corporations, including the setting of executive salaries."

The LA Times account might have read: “Stocks logged their steepest losses in years at the start of the week after the collapse of four major lending institutions that were forced by the federal government to take mortgages from borrowers who should never have been given credit. The market then staged a partial rebound when the House rejected a bailout bill that would have increased government control of corporations.”

The New York Times might have proclaimed: “Stocks on Wall Street opened lower on Wednesday as investors reacted to the news that the Senate might pass a federal bailout plan that would further weaken the U.S. economy.”

Yet these three left-leaning news organizations – and others – were clearly pressuring Congress to pass the bailout, warning that if the conservatives blocked passage, the market would collapse, and brokers and investors would be rattling tin cups up and down Wall Street. The media clearly hoped to empower the federal government to micro-manage corporate America – a giant step toward the kind of socialism practiced by Britain and Northern Europe.

They should have known better. By Tuesday night the Senate had passed a bailout bill. According to media logic, that move should have sent the Dow Jones spiraling heavenward on Wednesday. Instead – surprise – the market declined. According to msn.com, investors had moved beyond the now-irrelevant bailout, to look at other considerations, “predominated by gloom.” Then – in a naked attempt to drive the market down, msn.com told investors what factors they should have considered – i.e., reports that are “expected to be negative.”

Investors are beginning to look beyond the financial crisis to the overall economic picture, and that one is predominated by gloom.

Investors in the US today should watch for reports on unemployment from the Commerce Department and on factory orders.

Both reports are expected to be negative, and could have a further dampening effect on markets opening this morning [emphasis added].

But wait a minute! By noon on Friday – and despite those negative reports – the stock market was up over 200 points! One could easily argue that the big losses over the past week were attributable to Obama’s mounting lead over McCain, and that Friday morning’s surge was the result of Palin’s better-than-expected performance in the debate on Thursday night.

Then came the announcement: The House had passed the bailout – and what did the market do? It plummeted again, closing down 157 points. Back to the old vague phrases; msn.com said it was “profit taking.”

Maybe, just maybe, investors were saying that legislators shouldn’t be empowered to micro-manage corporations by passing laws that require lending institutions to make loans to borrowers with poor credit ratings, as the Democrats did when they were in power during the Clinton administration and since they took control of Congress in 2006. And maybe they were protesting the threat to the freedom of the marketplace posed by setting arbitrary limits on executive salaries and perks.

During October they were charging around the country, waving their arms and rolling their eyes, proclaiming that stockholders were being gouged by greedy executives and irresponsible boards, that CEOs weren’t worth what they were being paid. Their proof? None. Their appeal was to obvious ignorance and raw envy. The less you knew about corporations and the less money you made, the more likely you were to believe that rich people don’t deserve to be rich. A case in point:

Recently I googled the name of the son of an old friend, and found that he had just resigned as CEO of Triad Hospitals and moved to Health Management Associates. So what happened to the stockholders as a consequence – the folks Congress wants to protect from greedy, rapacious executives? Here’s a report from Hospital Impact, which monitors that industry:

As a result of one man's job switch, Triad's stock lost more than 3% that day or $120,000,000 in market cap whereas HMA stock gained 8% or $460,000,000 in market cap. [Market capitalization is the aggregate value of a company or stock.]

These companies are to Lehman Brothers and AIG as green peas are to basketballs. Yet his defection cost one group of stockholders $120 million in a single day. Maybe one of those golden parachutes Nancy Pelosi indignantly denounced – teeth grinding, nostrils flaring – would have saved these investors as much as $100 million. By the same token, the folks who bought him away would have made a handsome profit had they paid him a $50 million salary for the next six years.

So Pelosi and the New York Times are dead wrong when they suggest that no CEO is worth the millions they’re paid. Quite obviously the right CEO can be worth hundreds of millions of dollars to stockholders.

All this goes to show that Congress should let the market decide who deserves what salary and that the news media should quit trying to manipulate Wall Street to promote a political agenda.

Jordan McClintock is the pen name for a long time political activist, writer, and former Reagan Administration official.