GE: we bring self-serving market manipulation to life

MSNBC ran a revealing exposé this morning albeit unintentionally. In so doing, they revealed how our inbred information system has become so self-referential that all credibility is shot and it becomes even more difficult than ever to figure out where the journalism stops and the paid advertising begins. (Or rather, it becomes increasingly difficult to figure out where the actual journalism takes place.)

In a “Morning Joe” discussion of the economy, GE’s former CEO Jack Welch was wheeled out to offer his views on the economy and, seeming to practice real journalism, Mika Brzezinski read to him from a New York Times article by Joe Nocera in which the author lamented the decline of General Electric and the ill that boded for the U.S. economy. (I am a fan of Mika Brzezinski to an almost unhealthy degree so it pains me to tell this story.  I can only assume this all made her as uncomfortable as it made me.) 

Welch, unflustered, almost as if he were prepared for the question, proceeded to provide a long explanation of why, although things were rough for GE in what is admittedly its worst crisis in 80 years, all would be well eventually. GE, in his estimation, was a good company with good management that made good products. “A great franchise.” He concluded by saying that his kids and his estate were a little concerned by the low stock price but he expected that to rebound. This comment was the only disclaimer that of course Welch still owned shares in GE and that his financial future was very much tied up in trying to buoy public attitudes toward the company. That the former CEO was also supportive of his handpicked successor also probably should have come as no surprise.

This exchange was then followed with an earnest give and take between Joe Scarborough and Mike Barnicle about how GE was the salt-of-the-earth among U.S. companies because it actually made things. Scarborough did, to his credit, mention again (very much in passing) that GE was the parent company of NBC. But casual, sotto voce disclaimers do not excuse the journalistic breach here. Welch should not be given the opportunity to plump for GE stock on any station much less one owned by GE. MSNBC should not be devoting segments to attempting to push up the share price of the stock in which many of its employees have substantial holdings. 

This raises a larger issue as we seek to fix the financial system: It is worth re-examining the independence and rigor of the supposedly independent voices upon whom the public depends for information, risk assessment, or other factors that weigh in investment decisions.

For example perceptions of the mortgage-backed securities market were gravely distorted by ratings agencies…agencies that were paid to offer views by the same people they rated, whose analytical techniques and personnel were suspect on many levels and who in the end, were sheep, reactive to external factors in ways that contributed to the precipitous fall of many financial institutions. Journalists missed the story on the risks associated with the rise of derivatives markets because there are just too few journalists who actually understand them and most of them worked for trade publications that were totally dependent on the banks making the markets for their revenue.

To pick just two examples: MSNBC and CNBC today rail against the state of the market. But where were most of their commentators when everyone believed trees grew to the sky? Making kissy-face with the fat cats is where. Other journalists failed to spot the bubble and structural flaws in the mortgage markets early. None held the government accountable for its oversight failures, instead reporting and accepting each syllable out of Alan Greenspan’s mouth as though it were a mystical communique from the gods. (I am sure it makes no difference that Greenspan is married to NBC’s Andrea Mitchell. She actually is a journalist of the highest standards. Still, the apparent conflict always troubled me.) Further many pundits, those rolled out to comment in the media or at influential conferences, were also un-transparently self-interested. (I’ve always thought that economic commentators such as big time academics and those at think tanks ought to disclose their investment positions as I know those positions have influenced the behavior of some prominent members of that group.) We currently view markets through deeply distorted filters. This is at best a market inefficiency that creates an arbitrage for insiders with an access to critical, undistilled facts. At worst, it is yet another symptom of a corruption and neglect within our financial system that is in need of major reform. 

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