Brain-Dead Economic Reporting: If Wall Street Approves of Obama's Plan, It Must Be a Winner!

By Brad Reed, AlterNet. Posted March 25, 2009.

When the Dow was crashing a few weeks back, the crackerjack staff at Politico was asking pundits if the Dow was spooked by Obama's socialist plans to raise taxes on rich people to help poor people pay for health care.

But after the Dow rose by more than 500 points yesterday, Politico speculated that "Barack Obama's aides must have been breathing a sigh of relief to see the real-time Dow ticker headed upward after Geithner's big announcement."

Indeed, the Dow Jones' rise and fall is deemed so important by many members of our establishment press corps that it far outweighs expert opinion.

After New York Times columnist and Nobel Prize-winning economist Paul Krugman blistered Geithner's plan yesterday, CNBC's John Harwood smugly brushed off his criticisms by stating, "if the White House had to choose between praise from Paul Krugman or plus-300 points on the Dow, I suspect that they would happily take the latter."

What's so galling about much of the media's response to this plan is how focused they are on the short-term political ramifications: i.e., if the Dow jumps, it must be good for Obama; if the Dow falls it must be bad for Obama. By using metrics such as the Dow to discuss a plan's economic merits, the press ignores vastly more important questions, such as whether or not the assumptions made by the Treasury Department are at all correct.

Under the Geithner team's calculus, the toxic assets weighing down banks' balance sheets are being drastically undervalued by panicked investors. With just a wee little push from the government -- or a bribe, as the more shrill and unbalanced of us would describe it -- they seem to think that the assets will recover at least some of their value, enough to make subsidizing them a worthwhile endeavor for investors and taxpayers.

But what if these assumptions are wrong? What if the toxic assets on the bank's balance sheets really are just piles of trash consumed by underwater mortgages that will never be worth anything approaching their original value?

How will the government react if it turns out that many banks can't sell these assets, even at artificially high prices, because doing so would render them insolvent? Alas, with a few notable exceptions, you won't find a lot of our mainstream press corps asking such questions.

Because after all, the Dow is up today, so things must be going well, right?

See more stories tagged with: media, financial crisis, tarp, geithner bank plan

Brad Reed is a writer living in Boston. His work has previously appeared in the American Prospect Online, and he blogs frequently at Sadly, No.

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