By: Ryan Murphy
The phenomenon of suppressing information shaped by the social elite, is repressing the power of society, and is a social problem is exponentially growing as mass media becomes more intertwined in economics, politics, education, and advertising. Critical theory and Cultural theory attempt to explain and transform all systems that enslave human beings economically, politically, and psychologically. According to some theorists, types of hegemonic social structures may methodically root the subjugation of intellect and healthy dissent to authority.
An example of hegemonic social structures subjugating history to propagate the unregulated free market ideologies of capitalism, is the story of how the news media successfully suppressed whistle blower, Brooksley Born. Until the financial collapse of the panic of 2008, Brooksley Born was surprisingly not a common household name. On February 23, 2010, Frontline aired “The Warning,” a documentary that tells the striking story of the Chairperson of the Commodities Futures Trading Commission (CFTC), Brooksley Born. Born suggests in 1996, the regulation financial over-the-counter (OTC) derivatives should be brought to the public eye.
“A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as OTC derivatives could play a crucial role in a crisis much like the one now convulsing America,” said The Washington Post in a story covered in May of 2009. The Federal Reserve Chairman, Alan Greenspan had this to say about the derivatives market, “once in-a-century credit tsunami, had exposed a 'flaw' in my market-based ideology.” Greenspan’s market-based ideology was “the market will figure it out.” Greenspan testified there was no need for government oversight, because the derivatives market involved Wall Street “professionals” who could patrol themselves.
According to the Frontline documentary The Warning, Born said in 1997, “I was really terribly worried, Alan Greenspan explained to me there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.” Alan Greenspan deemed “the wizard” by economists, was elected Federal Reserve chairman by Ronald Reagan whose primary role as chairman is to regulate “busts and booms” of financial markets.
With men like Alan Greenspan, Robert Rubin as Clintons Financial Advisor, and Harvard Economist Larry Summers, all serving as the brainchildren of OTC derivatives, Time Magazine called them the “the committee to save the world.” As 3,000 corporate lobbyists in Washington were working hard to avoid regulated securities markets, “the committee to save the world” basically left Wall Street to regulate itself.
Brooksley Born threatens to go public with a “Concept Release” on the danger of OTC Derivatives, if agreements cannot be made on certain regulations of OTC derivatives. Only congress had the legal status to stop Born’s regulation ideologies, so on the same day of the publication of Born’s “Concept Release,” the “President’s Working Group” published their own information about Born and derivatives. Former Treasury Secretary Robert Rubin, Federal Reserve Chairman Alan Greenspan, and SEC Chairman Arthur Levitt, put out a press statement that said “we have grave concerns about Born’s regulatory actions and its possible consequences, we are prepared to pursue, as appropriate, legislation that will provide greater certainty toward the legal status of OTC Derivatives.” The next day, all media news networks immediately disperse a disinformation campaign to discredit Born.
After testifying before Congress 17 times, Born tried to counter the legal question by saying that regulation would apply only to new derivative contracts, and not to existing ones. After multiple attempts to try and negotiate an agreement of some kind of regulation toward derivatives, no mutual agreements were made by congress. So as last ditch effort, Born relentlessly reiterated her conviction that ignoring the risk of derivatives was dangerous, and continuing to do so would cause a financial collapse in the not so distant future. As the congressional meetings came to an end, a defeated Born was running out of options.
Six weeks later, after the congressional hearings in September of 1998, Long-Term Capital Management (LTCM), a huge hedge fund, had bet heavily on OTC derivatives and would have failed if it was not for the bailout of a group of banks. Brooksley testified to congress in response to the Capitol Management bailout, “this should serve as a wake-up call about the unknown risks in the over-the-counter derivatives market.” Her statement was ignored again, and deregulation of derivatives continued.
With the entire American Economy hanging in the balance with the collapse of (LTCM), news media networks failed to cover 12 different Wall Street banks all bailed out LTCM at $400 million dollars per bank, in fear of US economic collapse. The Bailout worked, and the financial panic of 1998 was deferred without a word from the press.
The suppression of the Brooksley Born story by the social elite and news media, resulted in over a dozen distinct deregulatory moves in 2007, and dozens over the last decade, which may have led to the financial panic of 2008. Deregulations of the derivatives market have caused the disappearance of Bear Stearns, Lehman Brothers, the digestion of Washington Mutual in the belly of J.P. Morgan, the absorption of Wachovia by Wells Fargo, AIG to be sent to the penalty box, and Merrill Lynch to become a subsidiary of Bank of America. Government Sponsored Enterprises (GSE’s) Fannie and Freddie, are now the new U.S. Department of Mortgages, and are currently holding the $624 trillion in the toxic OTC credit derivatives of primarily sub-prime mortgage loans.
Stuart Hall believes that the US media provides the terrain in which the meaning of information is shaped, and cultural studies is to be understood as the study that uses methods to raise the people’s consciousness of the media’s role in preserving the status quo. Similar to the beliefs of Karl Marx, Hall believes that when examining communication, power relations and social structures should be the focal point of research. Ignoring the unequal power distributions of mass media, virtually makes cultural studies irrelevant. Hall expresses extreme concern regarding the way in which information is produced and distributed by big network corporations like Time Warner, News Corp, Viacom, and General Electric. Hall argues that the control of information exercised by the big network corporations prevents many stories from being told, because the monopoly of these networks does not encourage new information to be released.
In the Brooksley Born case, Hall’s cultural studies theory would predicate that when her story was told to the public, it would be spun sympathetically in the interest of multinational corporations that were involved in the derivatives markets. In fact, Hall was right, Born’s OTC derivative regulation story was spun by news media to be bogus and extraneous pertaining to the subject of the well being of the United States economy. Media networks like GE, Walt Disney, AT&T were all involved in investments of OTC derivatives, which led to these networks participating in hegemonic encoding.
Subsequently, General Electric owns NBC, CNBC, MSNBC, A&E, and History and Biography channels. AT&T is the biggest cable provider owning U-Verse, and Comcast. And finally Walt Disney Company owns ABC, ESPN, A&E, History, and Biography Channels. Hall would agree that even though these giant media networks probably told the story of Brooksley Born, the probability of not covering her story or spinning to be sympathetic to their profit agenda, is likely. Hall’s ultimate issue with having to do with cultural studies, is not what information is presented but whose information it is.
Once the media heard the position of the highly credible Alan Greenspan, Larry Summers, and Robert Rubin, media networks took their side on the dominant ideological coding of the issue pertaining to not regulating OTC derivatives. The “Presidents Working Group” successfully framed opposition against Born, by utilizing the media process called ideological discourses of constraint to propagate limited ranges of alternatives in a thriving, self regulating market.
Born, stricken by what Hall would call “pessimism of the intellect,” was virtually discredited and silenced by the social elite. Hall would have been proud of Born’s ability to “articulate” and resist the “dominant code,” and push on to the best of her abilities to maintain what is left of her “optimism of the will.”
Generating popular support for the derivatives market by Wall Street cheerleaders and the social elite, was not hard to do considering the stock market was at an all time high. The derivatives market was a staggering $80 trillion dollar market by 1997. News media could participate in what hall called “ideological discourses of constraint” disguise the dangers of derivatives markets, by showing the positive numbers Wall Street was yielding and eliminating all oppositional variables to OTC derivatives.
Critical theory’s research into the macroscopic level of social institutions, relate to the story of (CFTC) Chairman Brooksley Born. Leading researchers into Critical theory, are Philosophers from the Frankfurt School like Karl Marx, Theodore Adorno, Horkheimer, and Herbert Marcuse. Marx’s Theory on what he called the “superstructure,” explains the control economic institutions have on shaping cultural institutions in society, and control the masses through the means of media manipulation. This control is achieved by systematically creating diversions to distract the masses with media entertainment, product advertisement, and news content. Media networks inundated with all these types of distractions tend to cover less public affairs pertaining to public interests.
In the Case of Brooksley Born, the Economic institution suppressing Born’s ideas on OTC derivatives to Congress and news media, was the Federal Reserve Central Bank of the United States (FED), and the Securities Exchange Committee (SEC). Chairman Alan Greenspan, with the help of his colleagues, tried to suppress regulatory idea’s pertaining to OTC derivatives and the credibility of Born’s accusations against OTC Derivatives by creating as much flak as possible. The idea that flak is created by government and powerful business institutions to uphold their reputation is derived from Herman and Chomsky’s Propoganda Model.
Naom Chomsky and Edward Herman came up with the idea that government and private corporations derive their profits from advertisers, which are commercial enterprises. These two teams of government and business oligarchs have a powerful relationship, when taking into consideration the government regulates media content through the FCC. The FCC regulates broadcast networks through licensing and federal regulatory laws. Herman and Chomsky outlined five (filters) influences that determine how information is released into the media.
The first filter is called Ownership. This is the filter that is determined by news and entertainment media, that tends to suppress any information that will negatively alter the private business ideology popularly held by the capitalistic system. Naturally, most businesses would only release information portraying them in a positive light to maintain maximal profits at any costs. With Born not receiving national media attention from the clashing of the titans between Born, the FED, the SEC, and congress between 1996 and 1999, solidifies that “ownership” filters were strategically utilized.
The second filter of Advertising suggests media organizations (networks) are dependent upon advertising, so media coverage of information that will upset client advertisers is virtually avoided to insure against the loss of any advertiser to the network. In the Case of OTC Derivatives, every major network was invested in the derivatives market one way or another. For example, instead of media networks taking up air time with the public affair coverage of the Brooksley Born case, they opted to satisfy high paying advertisers by showing top rated entertainment shows in its place.
Based on the idea that the majority of news is encoded and verified by credible government and business sources like government officials and lobbyist, “sourcing” is the third filter described by Herman and Chomski. An example of this is when Born tried to publish her “Concept Release,” media did not cover Born’s opinion on the danger of OTC derivatives, they covered the story of the politicians discrediting Born’s authority as CFTC Chairman to regulate derivatives. The “President’s Working Group” put out the word in the media and Capitol Hill, that Born’s reviews were not to be trusted and not to be taken seriously, because she runs a tiny agency (CFTC) that has no say. This is preposterous considering the primary reason the CFTC was created, was to oversee and regulate the derivatives market. Contrary to Born’s obvious legal authority to regulate OTC derivatives, the media took the side of the politicians and ran with discrediting Born.
When the government uses a Anti-Communist ideology, the fifth filter of Herman and Chomsky, the media propagates this ideology by covering stories in a way that show the public they need the governments opinion and support in important matters. This is an us-versus-them ideology that is used multiple times against Born. Born, representing the people’s money, was up against the credibility of the FED, the SEC, and congress who are the upmost authority in economic matters. If economic support of the legality toward OTC derivatives is favorably supported by the economic committee of the White House, then Brooksley Born hardly stands a chance in getting media coverage pertaining to her side of the story.
Any dissent toward the $86 trillion dollar Derivatives market that was leaked into the media, could have caused a huge downturn in the Stock Market and Greenspan knew it. Born knew, that if she was going to beat the propaganda campaign thwarted by the elite, she would have to publish her “Concept Release” on OTC derivatives immediately. The team of powerful elite oligarchs called the “President’s Working Group,” was made up of Alan Greenspan, Robert Rubin, Arthur Levitt, Larry Summers, and 90% of congress. They were successful in silencing Born.
The Frankfurt School thinkers were at the front lines of trying to understand how media ownership influenced content production, and in turn influenced society. When considering what went wrong in the Brooksley born case, critical theory plays an important role in determining, and understanding some of the hegemonic variables that were at fault leading to the Panic of 2008. This explains the constant struggle of what Hall calls the battle between the haves and the have-nots.
As of June 2010, Brooksley born was on the panel of the Financial Crisis Commission asked billionaire Warren Buffett, “Do you think the derivatives market is still a ticking time bomb for this market in the future?” Buffett responded, “Yes I do!” As of November 8, 2010 all derivatives in the US and around the world are not regulated, and the runaway freight train of debt of over $700 trillion has entered the abyss of a never ending black hole with absolutely no means to track it.
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