Business And Financial News

News And Financial Media Partly Responsible For Turning Minor Banking Crisis Into Catastrophic Panic And Crisis?

The international news media did the right thing with the SARS epidemic. They generated hysteria that helped slow down communications with affected far east countries and kept people isolated. The News Media was doing the best they ever had and actually helped do more than anyone else to stop a world pandemic. The News Media still does not know the extent of the good they did in that case by generating pure hysteria. When the SARS virus appeared in Toronto , Canada. Reporting that fact and practically shutting down the Canadian Border turned out to be worthwhile temporary condition to stopping the spread of a deadly virus. That was the first and last great moment for the oligarchy of the American mass news media! The same folks that gave us nonstop Michael Jackson on trial, Martha Stewart, Spotted Owl hysteria, Global Warming Hysteria, OJ Simpson Trials and tribulations and Tonya Harding would soon find that the banking system could make for an enduring mass hysteria .

The recent financial news reporting has generated even more hysteria with potential catastrophic results with the banking system handle than I ever before. One view is that the news media actually hounded Bear Sterns out of business and helped create a run on their assets, the same happened with Fannie Mae , Freddie Mac, Lehman Brothers and then Washington Mutual , "the biggest bank failure in history." Bloomberg , Fox News, CNN, ABC, CBS, CNBC, NBC, MSNBC will bring experts on market doom into their studios when the market dips and market optimists into their studios when the market goes up. The evidence from the collapse of Washington Mutual , especially, is that the bank experienced an old fashioned run on the bank in panic even though all accounts were FDIC insured. Where was the public withdrawing funds from Washington Mutual in a panic getting their information?

I think that the News Media might have some financial liability when it comes to generating panic and crisis mentality when there really is not one. There was no reason for anyone to remove money from Washington Mutual accounts unless they had over 100, 000 dollars in deposits there. I had friends who withdrew a few thousand dollars. Why? The information about our having a financial crisis was manufactured from the start it seems. Even the idea of a housing bubble does not make sense everywhere in the USA because prices were not falling uniformly across the whole country in every local market. There was no recession to begin with and then suddenly after the OJ Simpson effect took hold there seem to be one over the edge of the precipice cliff that the market was about to stumble over. The media put one company on death watch after another. Letting everyone world wide know to withdraw funds.

Realizing that a number of banks are in a weakened state of financial condition is really no reason to spur a mass hysteria to withdraw government insured FDIC funds from those banks. Jim Cramer who has a show called Mad Money on CNBC, a franchise of the General Electric Company, Came on television one day and was telling his audience to sell stocks and buy gold. I was sitting watching TV and started laughing. This guy is panicking now. I know markets pretty well and this would be a most exceptional time to sell panicking people gold if you happened to have gold to sell. The next thing you hear on CNBC is how the markets have suffered a loss of confidence and that the country needs a massive trillion dollar bailout from the same federal government that cannot be trusted to so that you can leave your money in a bank instead of buying gold when it has FDIC insurance. General Electric should be ashamed of itself, even if the company so badly managed their finances that they are looking for a government hand out to cover their own butt.

News reports came out in the mass media that the 700 billion dollar plan to save the financial system real purpose was to keep the economy from rolling over into recession. Yes "recession"! Since when was the purpose of a government to stop an economic downturn led my major bank failures? I thought the bill was to save the financial system and then suddenly it is to stop a pending recession that has not materialized. I go to the mall and see people shopping in all the store. There is no sign of recession. Some real estate prices have fallen leaving some banks with big losses. I turn on the television or open the newspaper and there is a completely different reality. It was under the Bush Administration that credit card issuing companies got a bill passed by Congress and signed by the president preventing bankruptcy abuse and it was the republicans and Alan Greenspan that warned in advance that Fannie Mae and Freddie Mac were building an unsustainable business in the housing boom. Alan Greenspan wanted the two quasi government agencies to allow banks to retain more risk in the loans that they issued.

The regulated economy and business and market laws are in the USA so the argument that that private enterprise was all to blame for the bank failures is nonsense. It is true that far too many Big public American companies pay their managements far too much money for their services and even reward complete failure. What happened at Washington Mutual is that management went over the cliff seeking unnecessary banking risk because better results boosted the salaries and benefits of top employee management people. Washington Mutual went from being a smallish sound conservative bank that pledged it's shareholders that it would pass on risky mortgages to Fannie and Freddie to one doing something considerably different than advertised to the public. Shareholders who lost everything will find themselves in horror when the truth about what really happened at Washington Mutual really comes out. They will find out that the management knew the looted the bank enron style long before the shit hit the fan with the failures of Freddie and Fannie. They knew they were on borrowed time though the bank probably would have survived just with no shareholder equity left. The media did the rest to kill the remaining company.

The Bear Sterns blow up had the media staked out doing a corporate death watch drumming up a story where there really was none. There was no FDIC insurance for all depositors there necessarily but it is rather interesting how the value of bear got fixed and sold ahead of its failure suggesting that , obviously , it was not bankrupt. The same is true of Lehman. Not bankrupt until the media fanned the flames of doubt and caused a run on deposits. Why? Ignorance and lack of public education.. The Michael Jackson trial news media we have is incapable of educating any one. The news media is in the entertainment business. The 911 attacks on the world trade center and the Pentagon could have happened and no one would have heard a thing about them if the OJ Simpson Trial was still going on in Los Angeles. The media personalities and reporters know nothing about the economy or finance. O'Reiley on Fox does not know how world oil prices are set in a world oil market and thinks punishing big oil companies for not giving away their products is the way to stimulate production! That is beyond stupid. It is a popular point of view but still totally stupid.

The media fails to give facts about where the USA is in the economy right now. The fuss about a 700 billion dollar bail out of Wall street has no perspective. Not one network I watched told anyone that the USA had total financial assets over 80 trillion dollars as recorded sometime in 2007 before the housing market "crash". The US congress has budgeted about 3 trillion dollars in spending for 2008. That money maybe partly borrowed or may all becoming from various forms of taxation. The gross national product and gross disposable income of the population also happens to be at a record high in the USA otherwise with congress budgeting so much money we might all be starving to death unless the government were paying for our food. The 3 trillion dollar congressional budget is less than 4% of the nations wealth and probably less than half of total net income for the nation. 700 billion dollars happens to be less than 1/80th of the nations wealth and only a third of the existing congressional budget. So when the big talking media heads go on about the congressional bail out bill for banks being the end of the world as we now know it . Watch out they are either lying or totally ignorant about the nation's economy! When I turn on a TV and hear CNBC and Bloomberg telling me to sell everything and buy gold. I think they are either giving the public the best possible advice or they are stirring up unnecessary panic and actually to blame for the hysteria and panic. I am leaning toward blaming the media now. This must be an intentional manipulation of the media because they leave out such basic facts. Say we did have a 20 percent decline in total asset valuation in the USA of 20 percent then instead of a 80 trillion dollar economy we would have a 64 trillion dollar economy. Not all parts of the economy stopped growing. The United states is still in a growth period compared to the rest of the industrial world so some looses will be offset by gains which might mean we end the year with 70 trillion dollars in net Assets. If we value us assets in euros the net worth of the country is lower to begin with. If Europeans and the Chinese buy up the whole country that would immediately re-inflate the valuation of the total and we might consider revaluing the net worth in Euros then.

I am getting the real sense that something is unfair about the media crisis coverage because of any lack of metrics in the reporting. I read that Goldman Sachs' leverage was 27 percent higher than their assets and I flip thinking how or why the US government would go in and try to save that mess. Goldman is a private company supposedly run by the best of financiers the world has to offer and they over extended themselves to that extent? The US Government could give them 7 trillion dollars and send them into Las Vegas to save the failing casino companies who have suffered as badly as many banks have with wall street firms that leverage their assets by 27 times. Then when the wall street pros loose all their money again we certainly can repeat the mistake again and again and again. The casino gambler lost all his money so we need to save the economy by giving him a lot more.

I understand the academic demands to pass the Paulson plan to prevent a continuation of the crash but it is no sure thing since the crash looks a bit too artificial. The whole episode looks as artificial as the OJ Simpson trial of the century news entertainment show that went on for months and months. It is even starting to seem as irrelevant as OJ was to real life. A number of market experts are telling us now that one reason the bank failures started was because congress passed a really stupid law , supposedly to protect investors in reaction to some former market abuses, where securities were supposed to be valued on the books of a company at what the market price is and not as one might value the Asset in the long run or on the basis of what kind of income it generates. The rule is called the marked to market rule . It would be like the bank sending you a daily statement that the home you own and are living in is valued at ten or twenty percent less than it was a day ago. The law, as well intended as it originally might have been . This law can give companies the look of having negative asset valuations on their books when the assets are still productive to the bottom line.

Looking at the whole picture, I think investors in companies like Washington Mutual and Bear Sterns and Lehman might consider eventually suing CNBC and Bloomberg for creating absurd and unnecessary hysteria and not putting any financial facts or figures into perspective. Maybe the whole financial system will come crashing down. It is bad enough that some companies were to blame but it is even worse that the mass media seems to be creating unnecessary hysteria such that there are runs on insured banks.