Jon Stewart to Jim Cramer: We are capitalizing your adventure

Jon Stewart of the Daily Show schooled Mad Money host Jim Cramer of CNBC last night.

By the time Cramer came on the show, Stewart and Cramer had been feuding publicly for several days.  Cramer was trying cast himself as a humble financial professional who made mistakes, but who is trying to reform a broken system from within.

Stewart confronted Cramer with video clips of his own past admissions about the conduct as a hedge fund manager.

So, it was a stroke of sheer genius on the part of Stewart and the Daily Show writers to load up these clips from The Street showing Cramer the hedge fund manager confessing that when he held a short position, he would create some spurious activity to artificially drive down the price of that asset. "It doesn't take much money," old hedge fund Cramer says in the clip.

Cramer's taped statements are simple declarative sentences in the first person, but the Mad Money host still had the gall to lie to Stewart's face. Confronted with the video of his own confession, Cramer insisted that he'd never confessed, that he was merely being inarticulate in the clips.

These clips are in service of Jon Stewart's larger point, namely, that there exist "two markets"...the long-term investments of ordinary people and the short-term speculative trades of Wall Street. As Stewart tells Cramer, the former is underwriting the excesses of the latter. As a financial news network, Stewart says, CNBC should have been warning ordinary people about the threat of the second market--but instead, Cramer and his buddies cheered on the speculative frenzy.

"We are capitalizing your adventure," Stewart told Cramer:

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Pt. 2

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Jim Cramer

The full episode is available here, but the site keeps crashing, probably because of massive web traffic.

The Stewart-Cramer interview will be remembered as one of the great televised takedowns of our age. It's a cathartic TV confrontation in which Stewart gets to express our shared anger and resentment to an unrepentant co-conspirator in the financial collapse.

Cramer's probably never going to face a judge or an SEC investigator, or even a disappointed boss--what he did as a cynical cheerleader for the parasitic speculative class was probably legal and even protected speech. But at least Cramer has to sit up there and face the wrath of Jon Stewart in front of millions of viewers. Finally, someone is being held accountable.

The exchange reminded me of Joe Welch's legendary reproach to Joe McCarthy during the Army-McCarthy heartings of 1954:"You've done enough. Have you no sense of decency, sir, at long last? Have you left no sense of decency?"

Comments

[ballgame]

Cramer probably took the best approach he could take, but the disparity between what he claimed he was trying to do and what he was clearly saying in theStreet clips was just too glaring for even your average non-financial person to miss. It was uncomfortable to watch; I almost felt sorry for the guy.

Brilliant job as usual by Stewart.

[Uncle Kvetch]

Thank the lord for Jon Stewart. What does it say about our country when the closest thing we have to a present-day Izzy Stone is on a comedy network?

[Alon Levy]

Short selling simply means borrowing so that you can sell before you buy. If you own shares in a company, and you expect it to fall, you sell. If you don't own shares but still expect the company's stock to fall, you can short sell. It's no more speculative than selling stock, really. Short selling actually provides fewer profit opportunities, because even if the stock becomes worthless, you're only essentially doubling your money. Conversely, if the stock soars, you're liable to lose unlimited amounts of money. One of the many panics of the Gilded Age happened when a stock that everyone expected to fall gained instead; the short-sellers had to dump all their long stocks to fulfill their obligations to buy, causing the rest of the stock market to crash.

[Eric Jaffa]

I don't regard Jim Cramer as "an unrepentant co-conspirator in the financial collapse."

It was Bill Clinton who repealed Glass-Steagall, which was intended to avoid another Great Depression by reducing corporate concentration of financial services.

It was Henry Paulson who lobbied for a change in leverage rules to allow investment banks to take on greater risk.

It was George W. Bush who signed the 2005 Bankruptcy Bill which caused people to prioritize credit-card debt over paying their mortgages.

It was Barack Obama who told America that we need to give $700 billion to financial firms because we face the worst economic crisis since the Great Depression. Consumer confidence wouldn't have plummeted if he had said things aren't so bad that we need to hand $700 billion to corporations.

[Lindsay Beyerstein]

Complicit financial journalists like Cramer were to the economic collapse what reporters like Judy Miller were to the invasion of Iraq. Stewart's point was that Cramer knew full well that the big players were doing nefarious stuff, why Cramer himself confessed to having done such things, and yet the face Cramer presented to the public in CNBC was all shiny and happy and friendly like these 30% annual returns would continue forever. His job was to whip people into a buying frenzy, not to report the real news.

[Eric Jaffa]

If Jim Cramer could have run an expose which would have made the economy better today, what "nefarious stuff" would have been in that expose?

[Chris O.]

I thought it was pretty funny how Cramer was saying the problem was that all these CEOs were lying to him when he was trying to do his job, while at the same time telling bald-faced lies about the clips that Stewart was showing! Of course, as more and more of the clips piled up, Cramer just gave up the lie and had no defense whatsoever.

[Chris O.]

"Consumer confidence wouldn't have plummeted if he had said things aren't so bad that we need to hand $700 billion to corporations."

Really, Eric? You want a another cheerleader-in-chief like W? Because that statement really reminds me of warbloggers saying that the real problem in Iraq was that reporters were saying that bad things are happening, and if they just focused on the good we'd be fine. TARP stunk in more ways than one (though I eventually sorta-supported it as being better than nothing), but one of those ways was not Barack Obama telling us that things really suck right now.

[Left_Wing_Fox]

If Jim Cramer could have run an expose which would have made the economy better today, what "nefarious stuff" would have been in that expose?

The underwriting of Mortgage Backed Securities by unsecured and unregulated Credit Default Swaps?

The fact that the ratings companies were funded by those they rated?

The mere existence of a housing bubble and the dangers of ARMs in a low-interest rate environment?

Maddoff's Ponzi scheme?

That would not have stopped the bubble from bursting, but it would have allowed a slowdown to happen when the bubble was smaller, and would do less damage. Instead, the exuberance and nay-saying of cautionary reports kept the bubble inflating until it could not take anymore, and resulted in many more people being financially compromised by the collapse of the banking system.

[Alon Levy]

Eric: Chris said most of what I wanted to say. So I'll just talk about your point about "corporate concentration," which isn't quite right. Having a few consolidated banks does not cause depressions - on the contrary, it makes it easier to regulate banking. For an example of how things have gone in Canada, which more or less has five banks, see here (but take the boosterism with a grain of salt). The problem isn't that the banks were too big, but that they were too leveraged and unregulated.

[norbizness]

So was Stewart smacking Cramer down in real-time or only years later when it became bizarrely personal? In any event, thank goodness this threat to national security in rolled-up sleeves has been neutralized, and that the tens of hundreds of people who watch CNBC have been set free.

[doyle Saylor]

On a larger scale these sorts of miss information 'sources' are what makes it possible to 'privatize' things because they work 'better' that way. I would note some crucial aspects of this. Stewart is entertaining people not making someone accountable. Cramer is not sanctioned for the lies. Any more than Rush Limbaugh is. It's the regulatory environment that keeps this sort of thing in check. One might hope that as things get worse that pressure builds to control these on a non entertainment level.

[Lindsay Beyerstein]

CNBC is hugely influential, to the point of being a major force on Wall Street in its own right. Traders watch it all day on the floor.

CNBC figures prominently in Bryan Burrough's account of the Fall of Bear Sterns. I'm not sure Burrough is right about CNBC's role in collapse of Bear Sterns, but the article gives you a sense of huge influence CNBC has on day-to-day life on Wall Street.

The failure of CNBC is the failure of access journalism generally. Reporters have become convinced that they should be insiders. CNBC was the network that everyone watched because all the CEOs wanted to appear there, and all the CEOs wanted to go on CNBC because the vast majority of the interviewers were starfuckers, not journalists.

[Eric Jaffa]

Chris O. -

Saying that a politician shouldn't promote a crisis mentality isn't the same as saying he should be a cheerleader.

Alon Levy -

Was repealling Glass-Steagall, which allowed the creation of CitiGroup, a good thing?

[norbizness]

Then the Judith Miller/Pentagon analogy seems strained, is it "Pentagon : Judith Miller : lawmakers :: Corporate CEOs : CNBC : Wall Street traders," where the last link in the chain will only believe in the propaganda of the first party if it's filtered or passed through the intermediary?

[Lindsay Beyerstein]

I'm saying that CNBC stopped being a financial news network and started being a financial propaganda network. In the run-up to the Iraq war, the administration wanted to convince the public that Iraq had WMDs. During this period, most of the elite reporters were so enamored of their special access that they allowed themselves to be manipulated by Bush administration officials.

It wasn't just that the Bush administration officials were lying or using the NYT as a vehicle for hit pieces on their political enemies, though they did. The deeper issue, which set the NYT and the rest of the MSM up to disseminate lies and hits, was the media's fixation on access to insiders. They thought that what made their reporting truly elite was being closer to top officials than anyone else. What kind of journalists are allowed to get close to top officials? Journalists who write approvingly and pass on the insiders' messages faithfully.

[Eric Jaffa]

Left_Wing_Fox -

I appreciate your answer.

[bjk]

Stewart is such a sanctimonious prig. Let's say Cramer did sell futures to drive down the stock or index towards his strike -- if that were the case, then a long term investor can profit off that sort of thing by buying low. Stewart doesn't know what he's angry about or who to blame, but he finds this sort of cheap populism arousing.

[Lindsay Beyerstein]

Bjk, Cramer picked the fight with Stewart. He wanted to go on Stewart's show. It was a mutual public grudge match and Cramer got his ass handed to him. Cramer's a TV host, he knew what he was getting into when he agreed to go on Stewart's show. The event was billed as "The Brawl on Wall Street," for crying out loud.

Cramer brought this on himself by getting all huffy when Stewart made fun of him and Santelli.

He was due for a dressing down. A the guy's CNBC tagline was "In Cramer we Trust". This same guy has the nerve to go on the Daily Show and say, in effect, We all missed this, we should all share the blame.

No, Jim, you deserve extra blame. Are you the most blameworthy person in the whole economic crisis? No. Although you might be the only financial journalist who lacks the foresight not to pick a fight with Jon Stewart over their coverage of the economy this year. Other architects of the financial crisis know better than to put themselves in that position. So, Jim, you nominated yourself to be the stand-in.

[Alon Levy]

Was repealling Glass-Steagall, which allowed the creation of CitiGroup, a good thing?

It was clearly a bad thing. However, the reason it was bad is not that it allowed the creation of banks as large as CitiGroup, but that it allowed mergers between banks of different types, without increasing regulation. Size does not create depressions, or else HSBC would've destroyed the global economy a long time ago, and Canada would be in a permanent financial crisis.

During this period, most of the elite reporters were so enamored of their special access that they allowed themselves to be manipulated by Bush administration officials.

There's a real danger in confusing expertise with insider fads, and starting to denigrate expertise. That's what is going on when a comedian gets to tell an investor that short selling is evil. The comedian doesn't know what he's talking about, but nobody cares, because his audience is enamored with him, and thinks experts are bad if they say the wrong things. It's every bit as frustrating as the way so many right-wing pundits are creationists, or the way a couple of high-profile leftists believe in alternative medicine. Ben Stein concludes from Piltdown Man that evolution didn't happen; Tom Harkin concludes from big pharma's practices that scientific medicine is a sham; Jon Stewart concludes from the financial crisis that short selling is inherently evil.

[Lindsay Beyerstein]

Jon Stewart was making a more subtle argument than you give him credit for. He's not saying that short selling caused the entire crisis, nor that Cramer did. Stewart was saying to Jim Cramer: Look, you're an insider and you promoted yourself to the hilt as such. You substituted your name for "God" in your tagline. You're not dupe, Jim. You know how the system is manipulated, I know you do because you've bragged about doing it yourself. You know what leverage is, Jim. You know why it can be dangerous. Didn't it occur to you that these massive bets with borrowed money might go bad? Because we know you knew how dangerous leverage can be, you were a hedge fund manager, after all.

The hubris of Jim Cramer was to build himself up as an expert and then proceed to, very publicly, defend himself as just another hapless victim of unpredictable events. .

[ballgame]

However, the reason [the repeal of Glass-Steagall] was bad is not that it allowed the creation of banks as large as CitiGroup, but that it allowed mergers between banks of different types, without increasing regulation. Size does not create depressions …

Your wording fails to recognize that there is a connection between the "size" part and the "non-regulation" part, Alon. Or, as former IMF research director Simon Johnson explains:

[B]anks have too much power - they will capture, influence, or arbitrage their way around any regulatory structures so that the next bubble, whenever and wherever it appears, will be at least as damaging as the last.

We need to break or substantially reduce the political power of the banks in the U.S. and in all other countries where this is a pressing first-order issue.

I suppose you could argue that hundreds of little banks are as capable of engaging in this kind of chicanery as one or two dozen giant banks, but I think logic and the historical record argues against this. For example, according to this Federal Reserve report by Beverly Hirtle (pdf download), only five of the nearly 7,000 banks with assets of less than $1 billion used credit derivatives in 2006 … but ALL NINE of the banks with assets of more than $100 billion did so. (And there's a pretty direct correlation between asset size and likelihood of using credit derivatives for those banks with assets in between.)

(H/t this extremely chilling piece at iTulip)

Why the correlation between asset size and the propensity to use the somewhat Ponzi-esque credit derivatives? I'll give you one or two trillion guesses.

[dom youngross]

People who actually PAY a monthly service fee to watch TV, as with cable or satellite, are idiots to begin with. Who cares what such idiots have to say about Stewart or Cramer, or about what other likewise TV-paying idiots post here. With respect to investing and the economy, the only 'show' that needs to be watched is the one that goes on in the House of Representatives, via Google News. What comes out of the House is the ultimate insider's tip for investing short- or long-term.

[Lindsay Beyerstein]

I watch the Daily Show online, for free.

[Alon Levy]

Lindsay: you described it as "These clips are in service of Jon Stewart's larger point, namely, that there exist 'two markets'...the long-term investments of ordinary people and the short-term speculative trades of Wall Street. As Stewart tells Cramer, the former is underwriting the excesses of the latter."

Ballgame: no, logic and the historical record do not argue against this. Canada has a very centralized banking system, and far more regulation than the US. I think its banks are also politically weaker, but I'm not sure - the US has an unusually strong interest group system, especially corporate interest, but I don't know where Canada stacks up. Sweden also has a quite centralized system - Obama jokingly said "They have, like, five banks," explaining why fixing the banking crisis was easier in Sweden than it is in the US.