In a memo posted at the Poynter Institute journalism website, David Cay Johnston, a former economics reporter at The New York Times, warned journalists about accepting at face value Bush administration claims that a crisis on Wall Street demands the rapid, drastic action that it is demanding. The memo poses questions for reporters that the public should ask as well.
We’ve been told that if the administration’s $700 billion bailout plan doesn’t pass posthaste, there will be a seize-up of credit markets that will cause a Depression-level crashing of the economy. But Johnston advises:
Ask this question — are the credit markets really about to seize up?
If they are then lots of business owners should be eager to tell how their bank is calling their 90-day revolving loans, rejecting new loans and demanding more cash on deposit. I called businessmen I know yesterday and not one of them reported such problems. Indeed, Citibank offered yesterday to lend me tens of thousands of dollars on my signature at 2.99 percent, well below the nearly 5 percent inflation rate. That offer came after I said no last week to a 4.99 percent loan.
If the problem is toxic mortgages then how come they are still being offered all over the Internet? On the main page AOL generates for me there is an ad for a 1.9% loan (which means you pay that interest rate and the rest of the interest is added to your balance due.) Why oh why or why would taxpayers be bailing out banks that are continuing to sell these toxic loans?
The memo is a must-read as an antidote to what Johnston (now retired) scathingly called “lightweight faux journalism” about the economic crisis. “As of now,” he writes, “we are, as a group, behaving just as we did the last two times the administration sought to rush through a hastily thought out, ill-conceived plan”—the war in Iraq and the passage of the Patriot Act.
One of the most drastic government interventions in the private market in recent history is being done by an administration that has told us it is ideologically averse to such interventions, even as it has a track record of tilting government policy to favor the biggest corporate players. And yet, we know little more than what this administration told a handful of congressional leaders. Johnston’s memo is a good start on a list of tough questions that demand honest, direct answers.
Updated to note that Johnston is retired from The New York Times.