The Good, the Bad & the Ugly
Barron’s sees housing market plunge ‘nearing an end’; ABC suggests recent bank failure evokes 'people stuffing their mattresses' like the Depression; Media ignore who Gramm actually criticized: them.

July 16, 2008
 

The Good
     A July 14 Barron’s cover story by Jonathan R. Laing made a compelling case that the malaise that has hit the housing market is nearing an end.

     Although some of the networks have been trotting out “noted market experts such as Pimco bond-fund manager Bill Gross and economist Mark Zandi of Moody’s Economy.com,” who see no end to the housing crisis in sight, Laing said their pessimism is overblown.

     “Sales of existing homes are showing tentative signs of increasing, while the plunge in prices likely is nearing an end,” said Laing. “Total inventories fell in May to 4.49 million existing homes for sale, or a 10.8-month supply at the current sales pace, down from an 11.2-month supply in April, according to the National Association of Realtors, in just one statistic emblematic of the nascent trend.”

     Laing cited David Blitzer, chairman of the S&P Index Committee, who pointed out the media aren’t seeking any positive news about housing, and that’s keeping people from realizing how close the end is.

    "Other than Larry Kudlow of CNBC, none of the journalists who interviewed me after the latest release seemed at all interested in any of the positive developments," Blitzer said. "They seemed focused on the bad year-over-year number."

     Laing cited other experts including Chip Case, a professor of Economics at Wellesley, who is also a co-founder of Fiserv/CSW, a real estate economics consulting firm; Jim Paulsen, chief investment strategist of Wells Fargo’s primary investment unit and Lawrence Yun, chief economist with the National Association of Realtors. They all see stabilization in the dramatic decline of home prices.
 

The Bad
     The failure of Indymac Bank (NYSE:IMB) signals a coming depression, according to doom-and-gloom reports from ABC’s July 14 “Good Morning America.”

     Correspondent Bianna Golodryga glumly predicted on the July 14 broadcast that “300 banks could fail within the next three years.”

     “So where should you put your money right now?” host Robin Roberts asked. “Because I know there are some images of people feeling like people are stuffing their mattresses like they did back in the Depression.”

     Mellody Hobson, president of Ariel Investments and an ABC contributor, reassured Roberts and told her that her money in the bank is safe and secure.

     “[H]ere’s what we also know, in the 75-year history of the [Federal Deposit Insurance Corporation (FDIC)], none of the people who have had their money in the banks with the insured amount have lost one penny,” Hobson said.

     “My money is in a bank and I do think the U.S. banking system is sound,” Hobson said. “This is not the first bank to fail in this country. It has happened from time to time and when it has happened, we’ve had swift action and the rest of the banking system has survived and thrived. I don’t think that it will be any different this time.”
 

The Ugly
     In their rush to accuse former Sen. Phil Gramm (R.-Texas) of calling Americans "whiners," the media have conveniently neglected to mention that Gramm, an economic advisor to Republican presidential candidate Sen. John McCain, was actually criticizing them during his interview with The Washington Times.

     "The media is a leading indicator of a downturn and it's a lagging indicator of an upturn because you got a human interest story of people losing their jobs," Gramm said. "Misery sells newspapers."

     The media have played a big role in drumming up negativity and pessimism about the economy. Gramm criticized the media for ignoring positive things that are happening. In fact, he boasted about America and its economy.

     "There are still a lot of good things happening in the American economy. We're more competitive internationally. We're in the midst of an export boom in manufacturing," he said.

     He also gave international perspective that a lot of media coverage has lacked.

     "We have been huge beneficiaries of the change which has occurred," Gramm said. "The losers have been countries like India and China and yet you just hear this constant whining, complaining about our loss of our competitiveness, America in decline. We've never been more dominant."

The Good, the Bad & the Ugly tracks the best and worst media coverage of business and economics. Readers are invited to submit suggestions or news tips to Staff Writer Jeff Poor at jpoor@mediaresearch.org.