Journalists Need to Show Skepticism on the Mega-Bailout

Pulitzer winner and former New York Times reporter David Cay Johnston today posted an appeal for skepticism in the Romenesko journalism website.

Johnston writes:

In covering the proposed $700 billion bailout of Wall Street don't repeat the failed lapdog practices that so damaged our reputations in the rush to war in Iraq and the adoption of the Patriot Act. Don't assume that Congress must act instantly, as so many news stories state as if it was an immutable fact. Don't assume there is a case just because officials say there is.

The coverage of the Paulson plan focuses on the edges, on the details. The focus should be on the premise. And be skeptical of what gullible Congressional leaders, most of them up before the voters in a few weeks, say after being given a closed-door meeting on supposed horrors.

Johnston suggests some specific questions, including:

How does banning short selling of the stocks of 900 companies help the markets? (The markets are heavily biased toward the sell side, so why constrain the shorts, who often turn out to be right about stocks whose share prices has been artificially inflated.)

How is banning short selling of this growing list of companies show a commitment to "free markets," a stated goal of this and a long lost of previous administrations?

During this short selling ban, why are there no parallel controls on insiders getting out of their positions?

I would add to this list, as I suggested yesterday, why not simply reinstate the uptick rule rather than eliminate all shorting?

Coverage of the bailout has not been terrible, but Johnston is right -- more skepticism is needed, lest the media wind up complicit in yet another Iraq-style deception.

© 2008 Gary Weiss. All rights reserved.