The Media's Top 10 Economic Myths of 2008 (No.5)


5. The economy has a fever and the only prescription is more bailouts.

Media myth: From the economic stimulus early in 2008 to the call for a Big Three auto bailout in December the media couldn't find a bailout it disliked.

Originally published by the Business & Media Institute

Bear Stearns, AIG, Fannie Mae and Freddie Mac. 2008 was the year of the government bailout and the news media supported such interventions time and time again.

One particularly vocal advocate for bailouts was CNBC's Jim Cramer who warned that without a financial bailout the U.S. could face a second Great Depression. He said the same thing months later about an auto industry rescue. Before AIG was given a loan package from the Federal Reserve, Cramer warned that the company absolutely "cannot fail."

When public opinion was turned against the $700-billion bailout CNN correspondent Carol Costello admitted that the network's experts were confused. Costello said, "I talked to our own polling experts and they are perplexed by the numbers" which showed a majority against the bailout.

The $25 billion housing bailout of Fannie Mae and Freddie Mac was also embraced by the media. "CBS Evening News" called the bill a "lifeline" for the government-sponsored enterprises, but correspondent Jim Axelrod didn't explain that the "unlimited capital from the government" would come from taxpayers.

But Jerry Bowyer, the chief economist for the Benchmark Financial Network, criticized the Fannie/Freddie bailout: "It's bad in the short run, unless you are either a highly paid Fannie executive or currently a staffer for any Democratic member of a Congressional Banking Oversight Committee, in other words, a future highly paid Fannie execute [sic]," Bowyer wrote. "In the long run, this will be a huge transfer of wealth to a corrupt bureaucratic and inefficient bureaucracy from the rest of us tax payers."

Bowyer and other free-market economists have criticized the many bailouts, but their perspective was rarely included in bailout stories.