The average taxpayer, curious to know how and why an estimated $1,000 per household will be handed to the Savings & Loan industry, won’t get much help from the news media. Thus far, coverage of the S&L crisis has offered little analysis of how the multi-billion dollar boondoggle relates to broader economic questions and little attention has been paid to solutions put forward by national progressive leaders.
The S&L story only began regularly hitting the front pages in late 1989. To band-aid the hemorrhaging industry, the government began passing out multi-million dollar tax breaks and guarantees like candy on Halloween. The goal was to encourage other S&L executives, Wall Street tycoons and even giant industrial firms like Ford Motor Co. to take hundreds of failing S&Ls off the government’s hands at a lower cost than what the FSLIC insurance fund would pay to shut down the institutions. President Bush saw the S&L crisis as his first major challenge, and he sent Congress a $157 billion proposal to deal with it.
Commenting on Bush’s plan, which places the brunt of the burden on U.S. taxpayers, economic columnist Jane Bryant Quinn (Newsweek, 2/27/89) adopted a blame-the-victim stance. The American public, Quinn wrote, “is not so innocent. During the ’80s we’ve happily fattened our savings accounts on the high rates of interest paid by insolvent S&Ls…. Now we’re being asked to give some of those unearned profits back. Rough justice, I’d say.” More like rough analysis: Blaming consumers for maintaining savings accounts is rather absurd. Moreover, Quinn neglects to mention that low-income and minority families largely lack access to credit.
Most media have not pointed out that the S&L crisis is rooted in financial speculation that Reagan policies have encouraged. As a result of the economic malaise which began around 1973 and continues today in many basic industries, speculative outlets have served as vehicles for capital that could not be profitably invested in the productive economy. S&Ls and other financial institutions promised high returns, but overinvestment led inexorably to a crash.
This background is rarely mentioned in media accounts, which rely primarily on pro-deregulation mainstream economists, government officials and self-serving industry reps as sources.
Two noteworthy S&L proposals were put forward recently by progressive leaders, who began with the premise that if middle- and working-class people weren’t invited to the party, they shouldn’t have to clean up the mess. Instead, according to Ralph Nader and Jesse Jackson, funds to bail out the ailing S&Ls should come from the rich — who made plenty from interest on money market funds that brokered “hot money” to risky S&Ls — and from taxes on speculative activities like leveraged buyouts and stock purchases.
But these proposals were given short shrift by the media. Upon releasing his “Report to U.S. Taxpayers on the Savings & Loan Crisis”, Nader got nary a word on the three nightly network news shows, and no coverage in the Washington Post or New York Times.
When Jackson joined more than 100 civil rights, farm, labor, consumer, housing, community and women’s organizations — the “Financial Democracy Campaign” — in announcing an all-out attack on the S&L bailouts, the New York Times and Washington Post carried wire stories (3/3/89) with only six paragraphs of coverage. Devoid of serious analysis, a Post editorial (3/4/89) patronized, “The anti-establishment groups that spoke this week raised some of the right questions, even if they don’t have all of the right answers.”
The bias was blatant on TV news. Of 80 on-air sources asked by the three nightly news broadcasts for their views on S&Ls between mid-December and mid-February, three-fourths were government officials and one-fourth were financial industry spokespersons or private analysts. No public interest spokespersons were given an opportunity to comment on the problem. CNN offered marginally better coverage, with occasional appearances by Nader and Jonathan Brown of Nader’s Bank Watch group.
In general, populist or anti-corporate perspectives were submerged beneath a chorus of “expert” analysis which begins and ends with two crucial assumptions: 1) the taxpayers are going to foot the bill; and 2) the problem can be isolated and solved merely by throwing money around and tinkering with the regulatory apparatus. What else can we expect when the arsonists — free market economists, industry officials, government regulators and members of Congress — are the only ones asked how to put out the fire?