Jon Stewart and Jim Cramer go head to head
Everyone has been talking about Jon Stewart’s intense questioning of Mad Money‘s Jim Cramer on “The Daily Show” on Thursday night. The interview was intense, and I highly recommend it on www.thedailyshow.com.
The question that seems paramount in my mind after watching is what role the financial media should have taken in regards to the financial crisis and its prevention. Did the media just sit back and watch this happen? Did the media have a responsibility to see through the muck, and what should they do now?
While there are some people who felt the housing bubble might burst and the market was at risk of crashing, I think no one could have been expected to pinpoint the where, when, and how. But that does not mean the media has not exacerbated the crisis:
“Since the market represents people’s opinions of the value of companies, the media played a large hand in aggrandizing the crash,” says Chandni Patel, a Financial Mathematics graduate student at University of Chicago. “A viscous cycle was started. The news emphasized the dangers of the stock market and companies failing, and influenced people to pull out money. This in turn pushed the market even further into the abysmal depths of no confidence, that the media could not resist talking about some more.”
According to this theory of looking at the stock market crash, the media is partly responsible for exacerbating the crash. I sometimes wonder if the media suddenly declared the economy strong again, would the market recover by itself? I think that it might.
Journalists do have the ability to get under the surface of a problem. The good ones ask the difficult questions that uncover the scandals and drive inquiry and acquisition of knowledge. Yet in cases where the level of corruption is high, even that may be tough. Cramer says that the problem was that CEOs lied to his face, but he believed them. In cases where only a few people tightly control the information or knowledge of a scandal and most of the company’s employees have no knowledge of what is going on… those are the scandals that are generally the most damaging and the hardest to catch.
Therefore, while it is possible that the media could have predicted the financial crisis, it is unlikely. The sudden collapse of Lehman Brothers caught most people by surprise, for example, including (it seems) many of the company’s top executives. While other instances of corruption could possibly have been uncovered by the media (the Madoff scandal), instead I think the focus of the media should be continuing to report the objective facts, helping to hold the people accountable who have committed wrongdoing, and doing their best put the country back on the right track-in spirit as well as in action.