What Jon Stewart needs is Jon Stewart. He could use a droll comedian to temper his ferocity and correct him when he’s wrong, as he was about the financial media, particularly CNBC and its excitable analyst Jim Cramer. They didn’t cover up the story of financial shenanigans. They didn’t even know it existed.
Cohen then makes a bunch of noise about how Hank Greenberg didn’t get out of AIG and he’s so smart so ”NYAH”! Then he emits this steaming turd:
Now we get back to Stewart. The gravamen of his charge is that the financial media, particularly CNBC and Cramer, knew all the time what was happening and was, in effect, shilling for the industry. “Listen, you knew what the bankers were doing, yet were touting it for months and months,” he told Cramer in probably the most celebrated showdown since the Earps and Doc Holliday met the Clantons and others at the O.K. Corral.
The acclaim visited on Stewart for spanking Cramer tells you something. In the first place — and by way of a minor concession — he’s got a small point. CNBC has often been a cheerleader for the zeitgeist — up when the market’s up, down when it’s down. This is true of the business media in general.
But the role that Cramer and other financial journalists played was incidental. There was not much they could do, anyway. They do not have subpoena power. They cannot barge into AIG and demand to see the books, and even if they could, they would not have known what they were looking at. The financial instruments that Wall Street firms were both peddling and buying are the functional equivalent of particle physics. To this day, no one knows their true worth.
Particle physics? Are you fucking kidding me? There are formulas that will tell you the value of a swap to the penny. No one knows the true worth of the swaps because nobody wants to know. They’re scared shitless.
Oh, and AIG is a public company. Shareholders can, in fact, see the books.
When Warren Buffett bought Gen Re, the large re-insurer, five years ago, he presciently made the decision to reduce their exposure to credit default swaps. It took them four years to reduce the number of contracts from 23,218 to just 197 at the end of 2006.
“We lost over $400 million on contracts that were supposedly ’safe and properly priced’ and we did it in a leisurely way in a benign market,” says Mr. Buffett. “If we had to unwind it today [Jan. 2008] in one month, who knows what would have happened?” (The Wall Street Journal)
If you are a bank or regulated entity, and you have mortgage-backed securities that have been written by a AAA monocline company, you can carry that debt on your books as AAA. But as the companies get downgraded, you have to write down the potential loss.
This unwinding was common knowledge on the street. If Warren Buffett was doing it, do you suppose it would have been reasonable for CNBC to ask AIG and others why they weren’t unwinding their swaps?