David Gregory worries about the terribly unfair criticism of Wall Street bonuses
This past week, or at least the one that ended on Saturday, may have been a rather historic one media-wise. Bob "The Daily Howler" Somerby wrote in his 03/20/09 column, "Few weeks will show our political culture’s inanity as clearly as this week did."
David "Bobo" Brooks was still hyping the Obama-is-trying-to-do-too-much theme this past week in Perverse Cosmic MyopiaNew York Times Online 03/19/09. He does praise the administration's position at the G-20 summit. He gripes about European countries not going along. But he notes that some of them "some reject the idea of using fiscal policy to end recessions", which Bobo declares a meritorious position.
And, being a neocon, he can't seem to resist a 1930s/Second World War analogy:
Many people used to wonder how the world’s leaders could be so myopic at various points in history - like during the Versailles Treaty or the turmoil of the 1930s. We don’t have to wonder any more. We get to watch the cosmic myopia replay itself in our own times.
So now the world economic crisis is "Hitler", too?
Meet the Press on Sunday showed our press corps on display in their role of courtiers to private wealth and power. David Gregory's guests were New York City Mayor Michael Bloomberg, Pennsylvania's Democratic Gov. Ed Rendell, and California's Republican Gov. Arnold Schwarzenegger. These state and local officials have an interest to promote Obama's infrastructure programs, which they did because that was the focus of their interview. They made mostly straightforwardly pragmatic and generally unmemorable comments.
Tom Brokaw and Erin Burnett were on the last hour to discuss economic recovery measures, a painful display. What caught my attention was the priorities and perceptions the Great Pundits there put on display.
Boyish-faced David Gregory was concerned that the President isn't doing enough to defend the failed financial geniuses of Wall Street:
MR. GREGORY: ... When this AIG business came along here and it really blew up this week, the response has been taxes. The House has passed a measure to go back and sort of claw back these bonuses, get 90 percent in taxes. Republicans and Democrats have raised their voices to say the tax code should not be used punitively like this. There's talk of trying to publicly out the people who received these bonuses. Is this the right response? ...
MR. GREGORY: David Brooks writes about this in The New York Times on Friday when he talks about the shortsightedness of this outrage over AIG. He writes this: "The Washington political class has spent the past week going into made-for-TV hysterics over $165 million in AIG bonuses. We're in the middle of a multitrillion-dollar crisis, and our political masters...have decided to risk destroying the entire bank-rescue plan because of bonuses that account for 0.001 percent of the annual GDP."
Governor Schwarzenegger, California's harder hit than almost any, any part of the country. Do you think the populism, the populist anger in the country is good or bad for the country at this point? ...
MR. GREGORY: You're talking about being more positive. President Obama faces great leadership challenges with regard to this economic crisis, and he spoke in, in the context of taxpayers' frustration, bailout fatigue and just anger. Back in--during his address to Congress February 24th, this is what he said.
(Videotape, February 24, 2009)
PRES. OBAMA: I also know that in a time of crisis we cannot afford to govern out of anger or yield to the politics of the moment.
MR. GREGORY: And yet the politics of the moment this week, all about outrage over AIG. This is what he said Wednesday.
PRES. OBAMA: I don't want to quell anger. I think people are right to be angry. I'm angry. What I want us to do, though, is channel our anger in a constructive way.
MR. GREGORY: Is he keeping his promise of not governing in anger? ...
MR. GREGORY: But, Mayor Bloomberg, you've made the point repeatedly in the course of our conversation. We know about a startling figure, $2 trillion at least is how much the banks have lost on their balance sheets from these impaired assets. The taxpayers have to do something about that. The president has said there's $750 billion in the budget for additional bailout money. He's got a steep hill to climb because of that. AIG makes it worse. A lot of critics say look, if you were opposed to the bonuses several months ago when they came to light, you could've fought to renegotiate those contracts to deny the bonuses. If you think they weren't that big of a deal or you wanted to avoid a lawsuit, then maybe the responsibility now is not to feed the anger, but to try to put it into perspective and say, "Look, we have to make priorities. You can't get so mad about this. We've got to think about the long term." What should he be doing? ...
MR. GREGORY: I understand. But I want to interrupt you because I'm asking you a very direct question about, look, the three of you around this table represent 56 million people. You're leaders, you're communicators. This is a leadership question for the president of the United States. There is rampant anger in the country. We've talked about the fact, I mean, a lot of people have legitimate claims. Is his responsibility now to try to tamp down that anger, or has he allowed himself to get caught up in it for political reasons? [my emphasis]
In his interviews with the officials, Gregory also got to do his usual routines for which he and his compatriots live like the gotcha points and horse-race-type speculation. Having to talk about all this economic policy stuff is just sooo-oooo boring for them. But they do know enough about it to defend the investment bankers from the outrage of having their practices and results questioned by the grubby citizens out there.
One pundit theme that stands out from that Meet the Press episode is that the issue AIG bonuses is trivial, not for Serious People to be bothered about, nothing to see here, folks, move right along. Gregory made the point repeatedly in the bolded passage above during the first half of the program, and quoted Bobo Brooks making the same point. This anger is just so inappropriate in the eyes of our media princes and princesses. During the second half, the pod pundits continued to make that point:
MR. GREGORY: And yet the leadership question for the president of the United States boils down to how do you try to lead people out of this under such difficult circumstance? The president said a couple of weeks ago, "We can't govern in anger," and yet again this week, on Monday, he was talking about AIG specifically. Listen to this.
PRES. OBAMA: In the last six months AIG has received substantial sums from the U.S. Treasury, and I've asked Secretary Geithner to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.
Everybody involved needs to understand this is not just a matter of dollars and sense. It's about our fundamental values.
MR. GREGORY: So the question then, Tom, if it's a question of fundamental values, then why, when the bonuses came up several months ago, did the government not say, "Hold on. We're going to renegotiate the terms of the deal here if we're going to give you an additional $30 billion"?
MR. BROKAW: I don't have an answer for that, and neither do the people who didn't do that at that time. I'm also struck by how many members of Congress who now have all the outrage that we see in these public hearings, Democrats and Republicans alike, who are up shaking the money tree every opportunity they got for campaign contributions. We don't hear a lot of them talking about, "I'm going to send that money back," by the way. So I think everybody is at fault here. And what we need is some statesmanship on both sides. I think we need the president to step up his game, but we also need on the Republican side for people to say, "Look, we made some mistakes when we were in power, as well." We had that enormous deficit projected by the Congressional Budget Office last week, which is going to have our children, grandchildren and great-grandchildren paying it off for a long time. We're all in this together. One of the things that helped Franklin Roosevelt in the first 100 days is that some really hardback Republicans said, "The president wants this. I think we have to go forward and get it to get the country out of this." You don't see very much of that going on in Washington now. [my emphasis]
Brokaw's response didn't make much sense. But then neither did Gregory's question. Brokaw seemed to be trying to direct the conversation onto the Holy Grail of the Big Pundits, that sacred bipartisanship. And, according to him, the problem why the silly citizens are focusing on the AIG bonuses - which the press merrily hyped all week, of course - is because of the deficit of "statesmanship on both sides".
Gregory's gotcha point against Obama, which was essentially the same one he used in the first segment, was so weak one would think the average high school student could see the fault in it. Governing in anger and recognizing the public's anger over and issue are obviously two different things. That segment showed Obama saying, " I don't want to quell anger. I think people are right to be angry. I'm angry. What I want us to do, though, is channel our anger in a constructive way." And Gov. Rendell explained the obvious point to Great Pundit Gregory:
Well, I think he said to channel our anger in a constructive way. Look, I think it's a bigger issue than the momentary anger, and God knows we all have to understand what people are feeling. We've got to change the corporate culture in this country.
It was hard to tell how much the chatter among the three pundits in the second segment was direct recitation of Republican talking points, which seemed to the case with Erin Burnett especially, or just a mentality of deference to private wealth and power that makes them react to even the most obviously sensible measures proposed by Democrats to restrain the blundering banks in our failed financial system right now as the storming of the Bastille.
But the idea of buying up the toxic assets from the banks who created them, a measure of highly questionable benefit to the economy but one which will reward the banks at the expense of the public, now that idea they find all warm and fuzzy:
MS. ERIN BURNETT: As you said, at long last, finally, and we hope it works. Basically you could say this is just a return to what Hank Paulson had proposed last fall when he originally said, "Give me the money, we're going to buy these assets from the banks." Now they're trying to be a little bit more sophisticated about it, but the bottom line is this: they're going to try to get investors to come in, put in a little bit of money, put in some taxpayer money, give some inexpensive loans to those investors and buy the loans from the banks. And if it works, that would mean the banks have some freed up space to make more loans. And that's if it works. I don't think you should expect it to be a mammoth endeavor at first.
None of them showed evidence of being aware of the greatest risk of the proposal, which is that the assets have to be valued at some price for a sale. If they are set at market value, i.e., close to zero, then several major banks like Citigroup and Bank of America would be shown to be technically insolvent, requiring the federal government to take them over as failed companies. And the whole point of buying bad assets is really to avoid that eventuality.
On the other hand, if the government values the "toxic assets" at higher than market value, they will be essentially giving most of that money to the banks holding the toxic assets. It will allow the banks to stay technically solvent longer without resolving the problems that have made them "zombie banks".
And one of those problems is the compensation structure of which those controversial bonuses are a major part. Not only does the legal structure for the stock market create an incentive for public companies to boost short-term stock prices at the expense of longer-term investments. But the current laws and corporate practices create an incentive for senior executives to effectively loot their own companies (though normally by legal means) for their own benefit and even more severely ignore the company's long-term needs.
Brokaw again seems in his response to ignore Gregory's follow-up question to Burnett's comment and go in a different direction:
MR. GREGORY: The reality though, Tom, is that if the banks do this at a lower cost, what they think it's worth, they're going to lose some money. So taxpayers have to wonder, will there have to be additional capital provided by the government to keep the banks afloat?
MR. TOM BROKAW: Well, I think we're dealing with two elements here. First of all, politically the secretary of the Treasury, Tim Geithner, needs to get on the board. He needs to have a victory. And speak in March Madness terms, you know, he needs to move to the next round. And the president's going to have to help him more than he has in the past. When it comes to how the banks respond to this and how the country responds to it, a Wall Street friend of mine who is very friendly to this administration sent me an e-mail over the weekend and said, "Look, we didn't have a good sign last week when the Federal Reserve came out with that is called TALF." Now, this sounds like hieroglyphics, but they were making money available, backing it up with student loans and other things, and there was a kind of an anemic response to that.
MS. BURNETT: Mm-hmm.
MR. BROKAW: And what has happened is a lot of these financial institutions, David, are saying, "I'm not sure I want to go there. Because if Congress is going to tee me up two days later..."
MR. GREGORY: Right.
MR. BROKAW: "...and add additional conditions to it, that's not something I want to do."
MR. GREGORY: You've said before, Erin, what the market wants, what Wall Street wants, what investors want is clarity.
MS. BURNETT: Mm-hmm.
MR. GREGORY: And that's what the intervention by Congress has taken away when you change the rules of the road down the line. It's also important to remember there's a lot of money in this economy, but it's on the sidelines because people don't want the risk. But this is a real factor.
MS. BURNETT: It is. And by the way, in terms of money on the sidelines, there's a record. I mean, everyone watching has probably been, whatever money they have, putting it in their bank account as opposed to investing it. That is money on the sidelines. It, it's at a record. But in terms of the rules, this week I think the thing that was most frightening for these potential investors was the retroactivity of the House bill.
MR. BROKAW: Mm-hmm.
MS. BURNETT: That they could say, "Not just are we going to change the rules on you today as opposed to what we promised yesterday, but we can go back and say we're going to tax you on what you earned last year or the year before." And that is a risk that just is unacceptable and would prevent the private capital from coming in. [my emphasis]
I'm not sure how it's "retroactive" if we're talking about taxes on current year's income, which is what the AIG bonuses that were paid out about a week ago are. But no need for a Big Pundit to explain when reciting Republican talking points.
Burnett also seems to think that it's a shocking concept that a mere Secretary of the Treasury should tell some Wall Street titan that a suggestion of the titan's might not work:
MS. BURNETT: Yes, there is. And it was interesting watching your roundtable before, how the governors, all of whom are very respected in financial circles, were, were defending him. I, I spent a lot of time this weekend talking to Wall Street CEOs and executives. All of them supported Tim Geithner and all of them still say this is a man who understands what he's doing. They respect his intelligence and his knowledge of the complexity. They don't want someone in there who doesn't have those characteristics. That being said, some of them said they are very disappointed not just with the--some of the charisma challenges that he has had, but with this specifically, which is he asks for them to bring plans. You know, "Show me some ideas," and then sort of says, "Hey, they may not work." What they miss is the proactivity and the creativity of a Hank Paulson, where he said, "Here's an idea, take a look at it," and sort of, "Let's get this done." There is some real criticism on that, and that is a new thing from those executives. [my emphasis]
In this part, the defenders of exorbitant Wall Street bonuses remind us that they are in touch with the regular people at the same moment they cite their own corporate CEO as though he were uttering the wisdom of the ages:
MR. BROKAW: Well, it's not just the psychology, but how businesses are responding to these circumstances that they find themselves in. Not just how they're downsizing, but how they're positioning themselves for the new economy. Not just because he's my boss, but Jeff Immelt of GE has had the best single line that I know: "It's not a cycle," he says, "it's a reset." And it's a reset not just economically, it's a reset culturally, it's a reset politically, it's a reset in terms of our expectations. So Highway 50 goes from eastern Maryland all the way out to the California coast, touches most of the political bases in this country, and I've always believed as long as I've been a journalist, and I've been covering Washington for 40 years now, that we don't hear enough from there back this way. That it's always, "We talk, you listen," in Washington. People want to be heard now. They've got something to say, they're tuned in and they've said, in effect, to people in Washington and Wall Street, "You've had your turn..."
MR. GREGORY: Hm.
MR. BROKAW: "...and look where we are."
MR. GREGORY: And the reality is that whatever recovery looks like...
MS. BURNETT: Mm-hmm.
MR. GREGORY: ...it's going to be a lot different. The notion that wealth comes back, that it's a return to where we were is simply fiction.
MS. BURNETT: It is. I mean, you say Route 50, by the way, I grew up on Route 50.
MR. BROKAW: Yeah. You did?
MS. BURNETT: Actually in eastern Maryland. So that was--when you say that, oh, yeah. [my emphasis]
"It's not a cycle, it's a reset" is the best line Tom Brokaw knows? Burnett continues immediately to explain how here down-home, in-touch-with-her-roots outlook lets her sees that the pitifull masses are going to have to stop living so extravangently:
It is, though, a complete reset, and I think Jeff Immelt's right in saying that. When we're trying to talk about can we get lending--all of these acronym plans we're talking about are trying to reinflate the economy. And the question is, can it be reinflated? We had expectations that we were going to have three cars in every driveway. Well, we're probably not going to have three cars in every driveway. We might have two cars, we might even have one car. There's going to be a different standard of living. And how much lower will that be than where we were a year ago? Fundamentally nobody knows, and that is the uncertainty that you see. And in these little specific fights we see over bonus compensation or over a Treasury plan or--that's what all of these fights are about, is about that bigger question and the uncertainty we all feel. [my emphasis]
In the Web-only Take Two segment, of which there doesn't seem to be a transcript available at the MSNBC site, the three pundits came about as close as their crew ever come to admitting that they don't really understand the economic issues on which they are pretending to report:
GREGORY: Well, there's also an aspect of this that I think is important, also a challenge for the news media, but it's a challenge for everybody. And that is that the, the carnage that you're talking about, Tom, is so complex that people who are in don't understand the full range of the complexity but certainly a lot of Americans simply don't understand the complexity of what led us to this point or necessarily how we get out of it.
BURNETT: I think that's true. And what has amazed me is that even on Wall Street don't understand it. People who you think should, because they were creating because they were creating a lot of the complexity themselves, really don't.
BROKAW: ... liquidity puts [chuckles]
BURNETT: I'm mean, right, well, they have all these, all these words. But, but I would say this, that, that, that, how we get out of this from here is actually an interesting point, that, the areas where it is worse, and the areas that are creating the carnage, as you say, still remain focused in the areas where housing prices surged the most.
But Gregory doesn't seem to take it as a factor in the public's understaning of these issues the job that the news media on which most of us rely to try to understand these things do such a poor job explaining it. So, for instance, we have the humiliated stock-market-hype cable channel CNBC being praised by Brokaw in this Take Two segment. (CNBC is Burnett's regular gig!) We have three Big Pundits - Gregory, Brokaw and Burnett - who all but admit they don't know what they're talking about on economic policy, spending 30 minutes on the lead Sunday morning news program talking about it instead of bringing on some economists, finance experts, or financial writers who actually might be able to explain some of it. Instead, we get Brokaw quoting an inane saying from Chairman Immelt as the core of wisdom on the economic crisis.