CNN’s Ali Velshi presses the urgency of getting public funds into large banks and corporations.

During CNN’s No Bias with Campbell Brown on Nov 24, 2008, Ali Velshi (CNN’s Chief Business Correspondent) was introduced to give some analysis on the announcement that Larry Summers and Timothy Geithner would be economic advisors for the coming Obama administration.

Velshi starts the segment by pressing the urgency of getting Obama’s economic plan through Congress, saying, “They don’t have much time. They’ve got to get into this thing immediately and solve this problem.” Then during a discussion with Velshi, Campbell Brown says that some people didn’t think that there were enough strings attached to Troubled Asset Relief Program or TARP, such as, “management changes” to the institutions that received government money. Velshi Comments:

Sure, there’s still more to come on this, there’s a lot that has to be fixed. But what (Congressman) Barney Frank said last week with the automakers is that we learned from the $700 billion bail out. Some banks got money and did things that they weren’t suppose to with it, so now it’s a little more directed. Remember this is still the free market so companies have to have some freedom to change how they deploy the money. Citigroup didn’t deploy it well in the first place. So this is the struggle that we got do we go into an entirely controlled economy because we want to dictate how that money goes that might be the solution but it will be a bitter pill for people to swallow. That’s the decision that these guys have to make. Do they stimulate the economy or do they start directing it?

But what Barney Frank (D-Mass.) actually said, in a press conference on Nov. 21, 2008, was after a congressional hearing with the heads of General Motors, Ford, and Chrysler is that:

Congress can operate at one of two speeds either way too slow or much too fast. If we were to pass this [bail out for auto-makers] right away I could already write this story for tomorrow: in a rushed, barely examined, commitment of many more taxpayer dollars congress leapt into an abyss. The context is this, there is widespread dissatisfaction not just in the congress but in the country with what is perceived to be a failure of the recipients of those funds [of the $700 billion bail out] to carry out the intent that the congress had.

Although some of the same language from Frank crept into Velshi’s analysis his point is exactly the contrary. Frank is warning of the dangers of pushing legislation through too quickly. You would think that the Chief Business Correspondent would understand Frank’s point. Many countries including the US have rammed through economic legislation that was alleged to help but only turned out to be a giant give-away to big business in the form of deregulation, tax breaks, and subsidies. Within the segment Velshi also claims that companies should have some say in how they deploy money. But Ali should consider his next sentence where he admits that Citigroup, one of the companies needing another ‘bail out’, “didn’t deploy it [government issued money] well”. Not only does he contradict himself, and once again make the counter-argument to Frank’s with Frank’s words, but he is not even giving consideration to the very cause of the crisis: the unregulated securities market. The very problem with the credit crisis is that unregulated financial institutions turned Commodity Default Swaps into a gambling game and when real estate prices began to fall-they lost and lost big. Now lending institutions are squeamish about lending money, even to very large and well established institutions.

Velshi also never explains why companies “should have some say in how they deploy money”, or how bail-outs are contrary to a “free market.” And yet the anchors on CNN routinely treat him as some sort of economic wise man that will be able to clearly explain the economic crisis.

The next day, Nov. 25, Tom Foreman is hosting No Bias with Campbell Brown.

Tom Foreman: “Treasury Secretary Henry Paulson added to the bail out plan again another $200 billion to unfreeze consumer credit-what ever that means. Perhaps it’s a sign of hope. Maybe the bail out is being aimed at the average American wallet instead of the big pockets of those big money bankers.”

Then Ali Velshi is introduced to explain some details. Velshi shows this graphic:

what he calls “basically the deal that we’ve got going right now”, and explains that “they [government] were loaning money to banks… with the understanding that that money would trickle down into consumer loans…that isn’t what’s been happening all that well.”

Then Velshi adds a third method for the “government” to get funds to “you” in the graphic:

He then explains that a new $200 billion in aid to banks was announced today. Velshi, pointing to the “banks” on the graph says, “The government is sort of circumventing this”, and, “the trick here is that the government is lending money that is likely to be used for the purpose that is was intended. What happened is that when the government was giving money at the highest level it wasn’t filtering all the way down. So the issue here Tom is that maybe, maybe we’re getting closer to the individual, to getting money, consumer credit, for individuals.” Then Velshi notes that this is a crucial time of year. Foreman then clarifies: “So the real goal here is to have people out there considering doing their holiday shopping… to feel like maybe they can.” Towards the end of the segment Velshi does admit that he’s “not sure it’s the right plan.” According to Velshi’s graphic and explanation the only way government can “trickle down” money to you is through corporations and banks. Even the third leg that he added to the graphic is still an example of the government giving banks funds that is intended to benefit you. Velshi never explains other methods of stimulating the economy like public works projects which can be executed through public institutions, or price controls. These were major tenets of the New Deal that was passed in the 1930’s.

Later during the same show, in the debate segment Velshi talked about “if you can combine work that incentives for business to create new jobs…then you can perhaps dull some of this pain for a few years with some federal investment but in the end we are going into a different economy and this team [Obama’s economic team] is going to have to come up with a solution to that as well.”

The problem with Velshi’s explanation is that it’s highly unpopular. Some recent opinion surveys show that 62% of the country is supports government intervention into the economy, but 53% think that a government bail-out of the financial institutions would cause a hardship for taxpayers. There are much more popular incentives for business. Providing public services such as universal health care would also inject funds into the economy. Business will adapt to what ever system of economic stimulation is implemented, you don’t have to cater to them as Velshi is insisting.