Essay: Why Does the Major News Media Treat The Federal Reserve Differently?

A recent article from Reuters on fears within the Economics profession of political encroachment on Fed action reads like a standard piece by the Media on the Central Bank. It starts with the assumption that the Fed is all knowing, and concludes that anyone trying to interfere with that process is wrong. This a remarkable anomaly from an industry that prides itself on its ability to speak truth to power. Traditionally in American politics, the more powerful a government official or body, the more critical and varied the media coverage, as can be seen by the turnout for a Presidential press conference vs one held by your local County Executive. But when it comes to the Fed, the relationship is turned upside down, and that’s remarkable for two reasons.

The first is the extent of the Fed’s power. If power is measured by the amount of influence exercised on the largest number of people, few organizations on earth rival America’s Federal Reserve.  Their ability to directly set short term rates and indirectly manipulate long ones, along with their impact on currency, stock and commodity markets means almost everyone in America, and countless others around the globe, are impacted by its actions. Contrast that power to an elected politician like the Mayor of New York, and you will quickly realize that the Fed’s reach goes beyond that of almost any other political figure in America. And so you might think the Media would pay at least as much attention to – and be as critical towards – the Fed as it would Mayor Bloomberg, but that is not the case. The disparity is made even more surprising by the fact that the Fed has almost no democratic ties to the people, nor is it constrained by our system of checks and balances. You would think if one ofAmerica’s most powerful institutions was also one of its least democratic it would get a high level of scrutiny from the Media, but anyone that watches the Fed Chairman’s quarterly press conferences can see that this is not the case.

The second part of the Media – Fed conundrum is the body’s track record. Going back 2 decades, the Fed has been wrong on nearly every major economic development. It failed to see the internet stock bubble, but then over-responded to its collapse with easy money which helped create a housing bubble – a bubble the Fed Chairman himself denied existed until its subsequent collapse. It told us “subprime problems are contained” just as they exploded, and then sent mixed signals by first bailing out Bear Sterns, then refusing to bail out Lehman, leading to the (as declared by the Fed) need to bail out everyone. Since the collapse, the Fed has constantly told us its actions would get the economy going, only to have to revise its forecast lower a year later and start promising the next “stimulus.” The only reason the Fed is debating QE3 today is because QE2 failed, and we could say the same thing about almost everything else the Fed tries to do to get the economy to escape velocity. Imagine an engineer whose biggest bridge collapses, or a doctor whose patients keep dying, or a regulator whose companies keep doing harmful things. The media would be all over them, pumping out one critical piece after another. But the opposite is true for the Federal Reserve. The more it fails to deliver results, the more the media apologizes. Ironically this backwards relationship also applies to the Fed’s failures as a regulator

In a 2009  interview that started with veteran 60 Minutes anchor Scott Pelley declaring “aside from the President he is the most powerful man working to save the economy” Ben Bernanke declared that the Fed was printing money . A year later, on the same program, to the same interviewer, the Fed chairman stated “one myth that’s out there is that what we are doing is printing money. We are not printing money.”  Regardless of ones opinion of the definition of printing, the fact is the Chairman of the Federal Reserve contradicted himself on national television. Given the size of the Fed’s balance sheet, one of those statements is a $3 Trillion lie. But 60 Minutes, a news program that prides itself on sticking cameras in people’s faces to point out their contradictions, decided to let Ben slide. As did pretty much everyone else in the major Media. The only person that saw fit to point out the contradiction was John Stewart on the Daily Show.

A couple years ago I published a critical cartoon on the Fed’s Quantitative Easing program on Youtube and it went viral. Many have asked me why I think my cartoon was successful. Aside from the unpredictable luck factor of any viral media, I think people liked my cartoon because it filled a gaping need for more critical reporting and analysis. I could end this piece by condemning the media when it comes to the Fed, but I prefer to end it with an invitation. For any aspiring journalists out there looking to make an impact, there is a great opportunity here. All you have to do is treat the Federal Reserve with the same critical eye you do any other part of the US Government and speak truth to power.

If any existing financial journalists disagree with my overall assessment, I would love to hear from them.

Omid Malekan




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