I won’t dispute that media coverage can make a difference in the timing of big events. Bear probably did go down a little faster once the media shone a bright light on its problems. But what’s the alternative? The managements of Bear and Lehman were using insane leverage to make very risky bets with other people’s money. Executives drew huge bonuses based on the illusion of profitability, and the rest of us are now stuck with the bill for their excesses. How much bigger would that bill have been if the media had ignored the story?

I can’t buy your argument that by pumping the story the media turned what would have been an orderly unwind into a breakdown. It seems to me that it’s the other way around. Societies that don’t tolerate dissent and don’t have a free press are the ones that hide their problems until they’re too big to fix (the USSR was good at this). I don’t know if we’re going to be able to pull ourselves out of the economic mess we’re in, but if we do it will be in part because people like Faber, Roubini, our own Mr. Ritholtz, and others asked some hard questions and raised public awareness before a few scoundrels in the financial sector drove us over a cliff. I think the public can handle the truth and needs to hear it even if they overreact on occasion. I understand your concern about people using the media to spread false rumors, but in the cases of Bear and Lehman the rumors were true. If you smell smoke and are starting to sweat it’s OK to ask management if the building is on fire.

I also appreciate the generally intelligent discussions on this site. It’s nice to post to a board where debates don’t devolve into petty name calling after a few posts. Thanks for your considered remarks.

Exactly Darrell. Thank you. The general public is not capable of deciphering fear mongering from hard facts. therefore, they should just turn off CNBC. It goes in the other direction too. No wonder Hickey calls it “BubbleVision”.

A Modern Day Run on the Banks: Echoes of the depression
I hear what you are saying about Faber but the difference is that, in this case, he was directly questioning the confidence that the system had in an I-Bank. In the end, the entire banking system is a confidence game (the reason for the implementation of FDIC insurance in the first place). Once this confidence is gone, the downward spiral is unstoppable (unless the governemnt intervenes…which they eventually had to do). So yes, the media does have the power to take down a company whose business is based on confidence simply by questioning its viability in the most public of forums: TV/CNBC. If you were a trading partner with Bear Sterns on that day. (ie. a buyer of commerical paper) and heard that one of your competitors had decided that Bear was too risky to deal with, would you ask: What do they know that I don’t? Lets be safe not sorry. Stop dealing with them.

I won’t argue that Bear Sterns, Lehman et al didn’t get what they deserved but they got it more quickly, at the expense of more jobs, at the expense of tax payer dollarsand at the expense of investment portfolios because the media was irresponsibly promoting a story to sell ad time. By pumping the story, it becamereal and they introduced the system to a breakdown as opposed to an orderly unwind.

Thanks. Like the lively debate. Can always count on Ritholtz fans to be on their game.

BTW, I really like the redesign.

Arl– You’re fishing for data that confirms your thesis. How many times has Gasparino said something negative about a company that didn’t go out of business? Faber has been gloomy and bearish about lots of things for years, yet you think he suddenly acquired the power to take down Bear Sterns with a single question? If so I’d expect to see a long trail companies destroyed by “Faber bombs” over the years. I’d also expect gold to be trading at $3K per oz. and the dollar to be worthless. That may happen, but it won’t be because of anything anyone says to the media. They don’t control events, they just report what happened yesterday. You should turn off the TV. When you start believing what’s said there matters it means they’ve got too much of your mind share.

Self-fullfilling prophecies are one of the root causes of this meltdown. The lack of confidence in the system caused a run on the banks (mostly I-banks) and the freezing of the credit markets. Yes, deep problems were imbedded in the system but the media was irresponsible in their dissemination of the information.

Come on man, get serious. Defending the media in this crisis while still a practicing member of it. Your mug is all over CNBC on a regular basis. Talk about a conflict of interest!

CNBC has one job and one job only: Drive ratings for NBC and the parent company. Are there enough potential viewers out there who are true students of finance who would be drawn to a straightforward presentation of business news without the hype? I think not (Just take a look at Bloombergs ratings). CNBC makes its money on mom and pop, casual investors who will be drawn to the entertainment and fear mongering that runs rampant throughout CNBC under the banner of a serious news channel. At least Fox business doesn’t pretend to be anything other than a joke.

Headlines and programs like those titled “Is your money safe?” or “Wall Street Crisis” are designed to get viewers to tune in. The result, panic in the streets.

More serious however is the rampant rumor spreading. Want a specific example? Faber leading off his conversation with Alan Schwartz with a question about partners ceasing to trade with Bear Sterns. Thanks Mark, you just put us out of business.

Don’t get me started on Gasparino. Just listen to his Lehman voicemail excerpt that is making the rounds. To summarize for those not wanting to waste their time looking for it, it goes something like this: “Call me back or you will be sorry.” Now Charlie, what possible threat could you actually follow thru on. Oh yeah, you have the ear of the finacial world and can drop not so subtle hints about the demise of individual organizations in order to seal their fate. Using this bully pulpit, he furthers his own career. Sounds a bit like another guy we know…Spitzer.

Anyway, thanks for letting me rant. Love the new site and despite all the venom spewed above, you are one of the good guys. Great insights and relentless coverage. Thanks Barry.

After all these years of rdg your exc blog, and now switching to your new site, I’ve signed up to congratulate you and thank you for your great work.

And also point out there is no shortage of people who seriously believe this Blame the Bears idiocy. Shoot the messenger is as old as history and is especially alive and well in our great country. My concern is that with the increasing levels of stress in the ongoing shock and economic readjustment a lot of really bad behavior is going to come out on the street.

Only 1.2 pages views? Well I like your new Cafe…especially long post on dues paying time. It is time we start consuming within our means. But with a large number of Americans believing and saying “the American Way of Life is non-negotiable” I predict that many of these same Americans insist that our leaders use ANY MEANS NECESSARY to preserve the status quo.

You are at the top of my blog roll, and your work is a great lead in to my WSJ, NYT, FT, Economists, Barrons, etc daily reading. I’ll sign up for your F – IQ service.

Totally excellent work!

Wow. Dude. How do you ever know who won American Idol? Chill, man. You only need to do three things to keep informed: Fox TV, Rush on the radio, and the WSJ Op-Ed in the john.

Otherwise, you risk being un-American. A word to the wise.