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CNN RELIABLE SOURCES

The Media and the Meltdown

Aired September 21, 2008 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


(BEGIN VIDEO CLIP)
HOWARD KURTZ, HOST: The media and the meltdown. As Wall Street giants collapse, are news organizations scaring people about the stock market? Should they have warned us long ago that Washington was asleep at the switch? And are journalists holding the presidential candidates accountable in the crisis? "New York Times" columnist Paul Krugman joins our discussion.

Lovefest. Sean Hannity goes one-on-one with Sarah Palin, and well, he's no Charlie Gibson.

John McCain calls MSNBC's Mika Brzezinski an Obama supporter. Plus, "Saturday Night Live's" John McCain skit last night was written, in part, by Democrat Al Franken?

(END VIDEO CLIP)

KURTZ: The lipstick loving media finally got serious this week as a series of financial earthquakes practically swallowed the presidential campaign. With the demise of Wall Street institutions and the sale or bankruptcy of huge corporations and the massive federal bailouts, John McCain and Barack Obama couldn't talk about anything else. And journalists were forced to put aside the petty stuff and navigate the complex terrain of financial reporting.

But the debate still seemed to come down, as it so often does, to dueling sound bites that could be sliced and diced.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The fundamentals of our economy are strong.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: What economy are you talking about?

MCCAIN: The chairman of the SEC serves at the appointment of the president and, in my view, has betrayed the public trust. If I were president today, I would fire him.

OBAMA: You can fire the whole trickle-down, on-your-own, look- the-other-way crowd in Washington who has led us down this disastrous path.

(END VIDEO CLIP) KURTZ: But as companies, jobs and a chunk of people's life savings disappeared, the journalists and pundits were fixated on this question: which candidate would be helped?

(BEGIN VIDEO CLIP)

BRIT HUME, FOX NEWS ANCHOR: John McCain and Sarah Palin, alike, who's echoing him, are -- seem to be born again or born anew or something regulators. Almost as much so as Barack Obama promises to be. What's going on?

DAVID GERGEN, CNN POLITICAL ANALYST: Overall, I think you have to say that Barack Obama has gained from this more than John McCain has.

CHARLIE GIBSON, ABC NEWS ANCHOR: Both presidential candidates said they would fix things but neither had much to say about how.

(END VIDEO CLIP)

KURTZ: Joining us now to talk about the coverage of the financial crisis on the campaign, in Princeton, New Jersey, Paul Krugman, columnist for "The New York Times" and professor of economics and international affairs at Princeton University; in Seattle, Michael Medved, who hosts "The Michael Medved Show" on the Salem Radio Network; and here in Washington, Karen Tumulty, national political reporter for "TIME" magazine.

Paul Krugman, I was glad to see that you, as a professional economist, matched my analysis when you wrote in one of your columns, "Yikes." In ordinary times, it seems to me the media would be debating, "Isn't this a betrayal of the Bush administration's free- market principals? Obama/McCain, why are they going along with it?"

I almost have a sense that journalists are intimidated by the magnitude of this crisis. What do you think?

PAUL KRUGMAN, COLUMNIST, "THE NEW YORK TIMES": Well, sure. I mean, it's -- and actually, there is a risk here. I mean, some people are already talking -- calling this Paulson plan for the bailout the authorization for the use of financial force, you know, parallels with the Iraq war resolution. Because there is the sense, "Oh, my, God. We've got to do something." And not -- not at least not in the initial reaction, not a lot of critical scrutiny about whether it makes sense.

But, no. This is huge. This is -- 1930s parallels are in everybody's minds. The question is whether we've actually got a plan here.

KURTZ: Right. Michael Medved, another possibility, it seems to me, is journalists are hard-wired to cover conflict between Democrats and Republicans, and that has very much been muted as both parties seem inclined to go along with the administration bailout plan.

MICHAEL MEDVED, HOST, SALEM RADIO NETWORK'S "THE MICHAEL MEDVED SHOW": Yes, that's exactly right. And it seems to me that the candidate who will get advantage here, since that, of course, is what the media are obsessed with right now, is the one who will point out the fact that, at least at the moment, there seems to be unanimity between McCain and Obama and Secretary Paulson and President Bush, in terms of trying to work together.

When you hear people like Chuck Schumer, who has been very partisan and very anti-administration, coming forward and saying, "Look, we've all got to work together at a tie of crisis," that, it seems to me, is a mood that is unique and distinctive and worthwhile and worth covering.

KURTZ: Karen, Treasury Secretary Henry Paulson is all over the Sunday shows this morning, is on the cover of "Newsweek," if we could put that up, under the headline, "King Henry."

Now, you've been talking to senior administration officials on and off the record. Are they pushing the coverage almost in an apocalyptic direction, because that serves their purpose?

KAREN TUMULTY, NATIONAL POLITICAL REPORTER, "TIME" MAGAZINE: No, I think it's the opposite. I think that, in the interviews that we've had, certainly, there really -- they understand that they are out there with no regulatory framework in an area that most people in this country don't understand.

So, what I think they're really trying to do is get their own story out for their rationale, because they are doing some extraordinary things that go way beyond the balance of the kind of power the treasury secretary and the Fed chairman have ever exercised before.

KURTZ: None of us has ever seen anything like this.

Paul Krugman, are the journalists holding the candidates accountable? For example, I've seen only a handful of outlets emphasizing that John McCain has a long history for pushing for banking and insurance deregulation before this week, when now he's talking about cracking down on greed and corruption on Wall Street.

KRUGMAN: Yes. I mean, this is the most sheep-in-wolf's-clothing thing we've ever seen. And I don't think he's being held to account. I mean, this is -- he's a Reagan baby politically. He's basically -- his whole political career has been part of this free-market, liberalized, deregulate. Phil Gramm is almost certainly still his real chief economic adviser, and Gramm is the kind of deregulation.

There's been a bit of a fuss, something I actually was alerted to, put up, and then people got. There's a McCain article -- allegedly written by him, of course by staff -- in which he's saying, "Well, let's deregulate health care the way we did with banking, and that will lead to great results." So no, this is -- he's really flailing. He's pretending to be somebody who he is not at all.

KURTZ: At the same time, Michael Medved, journalists love to demand details of candidates, and Barack Obama has made no proposal. He says he's still looking at the situation, whereas McCain, whether you agree or not, has come up with a plan for a government trust corporation, similar to the one that cleaned up the S&L mess of the '80s.

MEDVED: Well, that's true. And also the "Washington Post," which is no fan of the Republican Party generally, did an editorial where they went back and they looked at McCain's actual record.

And as a matter of fact, he does have a record of having spoken out about these matters going back at least four, five years, and then before then, in terms of calling for more responsible approaches by the regulatory authorities. He has been critical of the regulatory authorities, whereas there's no record on the part of Obama at all.

Look, the truth is, this has caught all candidates -- all candidates -- flat-footed, just as it seems to have caught many people, except I must say, I'd give some credit here to Professor Krugman, who has been ahead of the curve on this.

TUMULTY: One thing I might disagree about. Obama does, in fact, have a record of speaking out on this. In fact, he gave a very big speech -- I believe it was last March -- on Wall Street talking about, you know, what kind of crises we're living and, you know, giving at least a broad structure of how he would deal with it.

KURTZ: But Karen -- go ahead.

KRUGMAN: Obama has been a clear, you know, we need firmer regulation. McCain is still trying to make this, this is caused by government. This is caused by Fannie Mae and Freddie Mac, which is, you know, basically not right, and he's still -- he's still trying to have it both ways.

KURTZ: But politically, I should point out both candidates trying to tar each other. For example, Obama is running ads blaming McCain's former Washington lobbyist, his campaign, and Phil Gramm and Carly Fiorina.

And McCain is running ads saying Obama had an association with both Franklin Raines and Jim Johnson, who was his VP vetter for a while. Both of them, of course, were chief executives of Fannie Mae.

Paul Krugman, I want to read from a column that you wrote recently. It kind of plays right into what we're debating right now. You said, "Why do the McCain people think they can get away with this stuff?" This stuff being deception. "Well, they're probably counting on the common practice in the news media of being 'balanced' at all costs. If a politician says that black is white, the news report doesn't say that he's wrong, it reports that 'some Democrats say' that he's wrong. Or a grotesque line from one side is paired with a trivial misstatement from the other, conveying the impression that both sides are equally dirty."

If that's the case, why do you think that is? Why aren't journalists more willing to say one side or another? KRUGMAN: It's much safer. No. You try and make a statement of fact, particularly in what's supposed to be a news report, and people will jump on you. Especially they'll jump on you if you say that someone, a Republican lied, although it happens on the other side, too.

Whereas, if you -- if you phrase it, you know -- you're perfectly safe if you say one side says this and the other side says that. Nobody goes after you, and it's tremendous. I see a fair bit of it first-hand, even though I'm writing opinion pieces.

But it's a tremendous -- this goes back. This is not new, right? This goes back to the 2000 campaign where I actually think I wrote in one article that if George W. Bush said that -- said that the world was flat, the headline would read "Views Differ on Shape of Planet." This -- and it's actually crippling in this kind of thing where there are real substantive differences between the candidates and there are real issues at stake.

KURTZ: In the same vein, Michael Medved, a number of liberal columnists used to say nice things about John McCain who are now writing pieces about "Oh, we used to admire him, but..." For example, "TIME's" Joe Klein writing that "Almost every politician stretches the truth, but McCain is a running a uniquely dishonest campaign."

What do you make of these assessments?

MEDVED: Well, it does seem to me that that kind of assessment, particularly in view of what the Obama campaign has done in the last week, is terribly unfair and does indicate some media bias on the part of Joe Klein, whose bias is well known.

I mean, look...

KURTZ: He's a liberal columnist. Let's be clear on that.

MEDVED: Yes, exactly. That's the point. And the -- what the Obama campaign did this week, running Spanish-language ads, trying to associate McCain with Rush Limbaugh and taking a Rush Limbaugh quote from 1992. And Rush Limbaugh has never supported McCain, has been one of his most outspoken critics.

Now, I work in the world of talk radio, and Rush hates McCain. And to put the two of them on screen together is so vastly irresponsible. It would be -- there's almost no analogy that you could draw.

And, yet, it seems to me that the Obama campaign, maybe perhaps because these were Spanish language ads...

KURTZ: Right.

MEDVED: ... has sort of skated past without the suitable and appropriate criticism...

KURTZ: All right. Well... MEDVED: ... the kind of criticism McCain got for running those ads about sex education.

KURTZ: OK. Let's...

KRUGMAN: McCain is running ads with Franklin Raines next to Obama, and here it turns out he wasn't an adviser. I mean, this is a -- this is a direct association. It's a direct claim, which is simply false.

KURTZ: Well, he certainly wasn't much of an advisor.

And some news outlets, Michael Medved, did point out the problem with the Rush Limbaugh comparison in that ad.

But Karen, let me ask you about journalistic fact-checking and whether it matters. I mean, I and a number of reporters have gone around and around and around with Sarah Palin over the Bridge to Nowhere, pointing out, factually, that she did originally support it. And yet she keeps saying it.

Take a look.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: Thanks, but no thanks for that Bridge to Nowhere.

Thanks, but no thanks for that Bridge to Nowhere.

Thanks, but no thanks.

Thanks, but no thanks.

Thanks, but no thanks for that Bridge to Nowhere up in Alaska.

(END VIDEO CLIP)

KURTZ: It seems like we can't influence what they say.

TUMULTY: It is pretty remarkable because, you know -- and I think that has also become one of the hallmarks of this campaign. In fact, you know, I believe John McCain has gone so far as to suggest that the fact checkers themselves are biased.

So, you know, I think this is -- it's polarizing. People are getting in their corners, and they're not listening to each other.

KRUGMAN: Karen, have you noticed, it really has turned into "The Daily Show"? I mean, years ago, Rob Corddry was saying, "Well, you know, the facts have a well-known liberal bias." There we are.

KURTZ: Well, since you brought up comedy, Paul Krugman, let me play a skit from "Saturday Night Live" last night, and we'll explain why it's controversial. This is John McCain, or actually Darrell Hammond, recording some ads in the campaign. Let's watch. (BEGIN VIDEO CLIP)

BILL HADER, CAST MEMBER, NBC'S "SATURDAY NIGHT LIVE": Obama supports tax cuts for pedophiles.

DARRELL HAMMOND, CAST MEMBER, NBC'S "SATURDAY NIGHT LIVE": Does he?

KRISTIN WIIG, CAST MEMBER, NBC'S "SATURDAY NIGHT LIVE": Well, there's no way to identify all pedophiles. Percentages are if you cut taxes, it's going to benefit at least a couple of them.

HAMMOND: I'm John McCain. I approve this message.

(END VIDEO CLIP)

KURTZ: Michael Medved, Politico is reporting that Al Franklin, the Democratic nominee for Senate in Minnesota, had a hand in talking to his old pals at "SNL" about that skit. Does that bother you?

MEDVED: Yes, of course. I mean, he is an active candidate and an extremely shrill one.

And by the way, there's an ad being used against Al Franken in which I'm featured, where it shows Al Franken basically getting up and throwing a chair and going crazy during an interview that he had with me.

KURTZ: You're famous.

MEDVED: Well, I don't know. Infamous, if you're used in a Norm Coleman political ad. But that's great for me.

Because the point about all of this is that, at some point or another, if you're part of the "Saturday Night Live" crew, and now you're running for the United States Senate, it kind of takes away what "Saturday Night Live" has always said, is that we're going to play this up the middle. And I think to a great extent they have up until now.

KURTZ: Well, I think the skit itself is certainly fair comment, but the idea that Franken was involved does give me some pause.

Let me get a break here. And when we come back, you didn't think we were going to forget about Sarah Palin, did you? The governor sits down with a very friendly Sean Hannity. And with her husband rejecting a subpoena, why isn't there more coverage of Palin's refusal to cooperate in the so-called Trooper-gate investigation?

(COMMERCIAL BREAK)

KURTZ: When Charlie Gibson sat down with Sarah Palin, it was a much-anticipated showdown between journalist and VP candidate. When Sean Hannity sat down with the Alaska governor this week, it was a very different atmosphere. Take a look.

(BEGIN VIDEO CLIP)

SEAN HANNITY, CO-HOST, FOX NEWS CHANNEL'S "HANNITY & COLMES": Has Senator Obama been using what happened on Wall Street this week, is using it for political gain?

GOV. SARAH PALIN (R-AK), VICE-PRESIDENTIAL NOMINEE: Well, there's a danger in allowing some obsessive partisanship to get into the issue that we're talking about today.

HANNITY: Why does everyone benefit if the rich pays less or if everybody pays less in taxes?

How did you take on your own party specifically? And do you think you'd be able to do that as well in Washington?

Do you see media bias in this campaign?

(END VIDEO CLIP)

KURTZ: Paul Krugman, obviously, Hannity is going to do a friendly interview, but shouldn't he have asked a couple of tough questions, just to show he's not in the tank here?

KRUGMAN: Who's he going to fool? He is in the tank. So what are you going to do?

I mean, this has -- this has been a problem. We do have -- can I say this? FOX News is an arm of the conservative coalition, pretending to be a media organization.

KURTZ: Well, on the other hand, Michael Medved, we played on the program last week Keith Olbermann doing an extremely friendly interview with Barack Obama. So are we now in a media world where partisans are kind of coddling their own candidates, particularly on networks like FOX and MSNBC?

MEDVED: Absolutely, and I think it's healthy, frankly. I mean, everybody knows where Sean Hannity is coming from. Sean does a daily talk show, as I do, and he does three hours a day of his opinion. So you know where he's coming from.

I think people increasingly know where Chris Matthews and Keith Olbermann are coming from on MSNBC. And what that creates is a wonderful opportunity for you guys on CNN to be the network that tries to play it up the middle.

KURTZ: Why do you say it's healthy?

MEDVED: Because it seems to me everybody has biases. Professor Krugman acknowledges his bias, as I acknowledge mine. And I think that it would have been a better interview if Charlie Gibson, with some of his questioning, had acknowledged that he was coming from a deliberately adversarial place in some of the questioning.

It's normal in the media for people to have values and biases and outlooks. Why not acknowledge them? KURTZ: All right. Well, I would just add that being adversarial or tough doesn't necessarily mean that you are biased. And I don't think anybody should accuse Charlie Gibson of that.

Karen Tumulty, we talked about -- before the break Sarah Palin no longer cooperating with this Alaska prosecutor's investigation into the so-called Trooper-gate scandal. This is her firing of her state public service commissioner, who -- some say the allegation is she basically wanted him to fire the trooper who was her former brother- in-law divorcing her sister.

Now her husband, Todd, is ignoring a subpoena. Why isn't this a bigger story?

TUMULTY: Well, I think you're beginning to see more stories being written about this. That they are doing -- the tactic here, I think -- and it's something you've seen time and again with these investigations, whether it's Democrats or Republicans -- is to run out the clock. Essentially, you know, to kick this past election day so that it's not -- it's not part of the -- part of the dialogue.

And I think, you know, again, it's -- it's a smart tactic on their part. And I think that, you know, the media is going to challenge it, but I don't think they're going to get very far.

KRUGMAN: OK. Can we just say this is -- you know, now the stonewalling itself becomes a story? I mean, here we have somebody who wants to take Dick Cheney's job, who is stonewalling an investigation before she's even gotten into national office. This is kind of amazing. I mean, what kind of omen is that for the future?

MEDVED: Yes, I think it's important to keep in context what this investigation is about. It's about a messy divorce that her sister had and the allegation that she -- and by the way, she began writing to the director of public safety about this trooper, who had been married to her sister, before she became governor, before she was a candidate for governor.

TUMULTY: But it was also...

KRUGMAN: Nonetheless...

TUMULTY: But it was also instigated by a Republican-led state legislature. So I think that this is -- it is an investigation that is, at its heart, about the use of state resources.

KURTZ: All right.

KRUGMAN: That's right. This is not -- this is about the divorce. It's not about her personal relations, as we know. Maybe this guy is really scum that got fired. That's not the point. The point is, is this an abuse of the power of office?

KURTZ: I've got to get one more issue in here, and maybe -- I'm sorry to cut you off, Michael, but maybe you can talk about this. We talked about the role of cable networks. Here's John McCain being interviewed on MSNBC's "Morning Joe" and kind of sticking it to Mika Brzezinski. Let's watch.

(BEGIN VIDEO CLIP)

MCCAIN: I still say to you, and I know you're a supporter of Senator Obama, if you would urge him -- if you would urge him to come and do town-hall meetings with me, as I've asked him to do time after time.

MIKA BRZEZINSKI, MSNBC: Supporter of Senator Obama.

JOE SCARBOROUGH, MSNBC: He's been listening to me, too much.

BRZEZINSKI: I'm not sure...

SCARBOROUGH: I've got to stop talking on that one. Yes.

BRZEZINSKI: ... I'd characterize myself as that. But that's OK.

(END VIDEO CLIP)

KURTZ: Michael?

MEDVED: I'm sorry. He was claiming that Brzezinski is a supporter of Obama? Isn't he?

KURTZ: That's what he's claiming.

MEDVED: Yes. I mean, in any event it seems to me that this issue of going forward and doing the town-hall meetings is -- is a good issue for McCain.

KURTZ: Yes, but...

MEDVED: It's surprising to me that Obama hasn't done it.

KURTZ: Ten seconds, Karen Tumulty. And McCain now has-- is being pretty aggressive with the press.

TUMULTY: He is and going after, as we saw very directly here, what he believes the motivations are. And again, I think this is a message that is going to play very -- it's going to resound very strongly with the Republican base.

KURTZ: And Mika points out that her brother works for the McCain campaign.

All right. Paul Krugman, Michael Medved, Karen Tumulty, thanks for joining us this morning.

Coming up in the second half of RELIABLE SOURCES, more on Wall Street's wild ride through the nation's top business journalists examining whether the media were out to lunch while the crisis was building and Washington looked the other way.

Plus, from Henry Kissinger to Colin Powell, five former secretaries of state weigh in on the media's performance in the presidential race.

(COMMERCIAL BREAK)

KURTZ: Should journalists exercise more restraint when Wall Street seems to be melting down? We'll tackle that in a moment. But first, here's Richard Lui at the CNN center in Atlanta with a check of the hour's top stories.

(NEWSBREAK)

KURTZ: Everyone says this financial crisis could have been averted, but almost no one in the news business seems to be mad about it. Why is that? "Washington Post" columnist Steven Pearlstein and CNN's Ali Velshi join us next.

(COMMERCIAL BREAK)

KURTZ: It's been called a crisis, a meltdown, a train wreck, a plunge into the unknown that none of us has ever seen before. The media have practically run out of adjectives to describe the Wall Street turmoil: the collapse of Bear Stearns, the federal takeover of Fannie Mae and Freddie Mac, the bankruptcy of Lehman Brothers, the fire sale of Merrill Lynch, the federal bailout of the insurance giant AIG, the almost unimaginably large government rescue of the entire mortgage and money-market system.

And as stocks have gone on a roller-coaster ride, news organizations have tried to capture the craziness.

(BEGIN VIDEO CLIP)

KATIE COURIC, ANCHOR, CBS NEWS: The Dow fell by 4.4 percent today, more than 500 points, the worst one-day point drop since 9/11.

GIBSON: One-hundred-and-fifty-eight-year-old Lehman Brothers filed for bankruptcy. Stock giant Merrill Lynch was sold after just two days of discussions. It is all a bit dizzying.

BRIAN WILLIAMS, ANCHOR, NBC NEWS: Easily the biggest federal bailout in history.

(END VIDEO CLIP)

KURTZ: so how have journalists performed, now and in the run up to this huge financial mess? I spoke earlier with two of the top practitioners.

(BEGIN VIDEOTAPE)

KURTZ: Joining us now in New York, Ali Velshi, CNN senior business correspondent and host of YOUR MONEY.

And here in Washington, Steven Pearlstein, business columnist for the "Washington Post."

Ali, I don't minimize the magnitude of this in any way, but when you were in the air on Thursday, there was a banner under your face -- and obviously you don't write these things -- that said "Worst since the Depression."

Doesn't that kind of thing scare viewers?

ALI VELSHI, CNN CORRESPONDENT: Yes. I mean, there's a real fine line to walk here between giving people the context and the sense of how serious this is and making them understand, particularly in an election cycle, that they need to demand answers from people who are offering solutions to this and not causing a panic.

We certainly don't want to be responsible for people being panicky and doing things with their money that aren't the right thing to do. The issue here is making people understand it is serious.

KURTZ: Let's take a brief look at how television has covered this, courtesy of "The Daily Show."

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There was blood on the floor at the end of trading on Wall Street today.

UNIDENTIFIED MALE: A financial tsunami.

JIM CRAMER, HOST, CBNC'S "MAD MONEY": One of the ugliest days I have ever seen.

UNIDENTIFIED FEMALE: Nightmare on Wall Street.

UNIDENTIFIED MALE: The atomic bomb.

UNIDENTIFIED MALE: Almost Armageddon.

UNIDENTIFIED MALE: A nine on the Richter scale.

MARTHA MACCALLUM, FOX NEWS ANCHOR: Something of a financial hurricane hitting the United States today.

(END VIDEO CLIP)

KURTZ: Some pretty incredible words and adjectives there. Bloodbath, nightmare, tsunami -- Ali.

VELSHI: And it is kind of dangerous at times if you don't contain it, if you don't have the right context and if you look at some of the newspaper headlines and the way they've been treated. One of the things that keeps coming up is that this is the worst since the Depression, and people have that image. So we've started to use that as a reference point.

Let me tell you, the Depression, unemployment was 25 percent. It's six percent right now. Well over 1,000 banks closed. We've had 11 banks close.

KURTZ: Useful to keep that in mind. VELSHI: Yes.

KURTZ: Let me turn to Steve Pearlstein. "TIME" magazine cover story out this week: "How Wall Street sold out America."

Now, none of this was a secret. These exotic mortgage instruments that were sliced and diced to get out from under federal regulations. Fannie and Freddie taking on enormous risk. Why didn't the media make this more of an issue in the last few years?

STEVEN PEARLSTEIN, "WASHINGTON POST": Well, it's to be at fault (ph). And the business press tends to get in with the people that they cover. They get in the bubble that is Wall Street, just like political reporters get in the bubble that is the White House and the traveling press of the campaign. And they get in the bubble, and they don't see the obvious things.

In fact, some of us did see it a little in advance, or a year in advance, because things were just sort of crazy. But the people who saw it tended to be the people who were outside that bubble, the people like myself. I write about so many different things. I'm not in any bubble.

But the people who are the financial press, financial as opposed to business, financial as opposed to economic, they couldn't see it, because they talk every day to these guys -- they are mostly guys -- and they get into the rationale. These are not stupid people.

KURTZ: Right.

PEARLSTEIN: And they were not -- they were not totally pulling the wool over people's eyes, because they were really kidding themselves. I mean, they had to be kidding themselves in order to get this -- to do this.

KURTZ: The argument is always this time it is different.

PEARLSTEIN: Yes.

KURTZ: Even though it may have crashed last time, this time we've learned new ways to do it and we're smarter.

Ali, you know, here's something that bothers me about the coverage. We cover this like a hurricane.

VELSHI: Right.

KURTZ: It's like some Category 5 storm just moved in.

VELSHI: Right.

KURTZ: But where are the stories saying that the government didn't build the levees high enough? This didn't have to happen. It was a failure, to some extent, of federal regulation.

VELSHI: Yes. And those stories are coming out now, and they're coming a little bit too late. The fact is, this is the same discussion you and I had several months ago about where were people warning about the mortgage crisis. This is just an extension of all of that.

We -- there were some people covering them, but they weren't breaking news. You weren't seeing hundreds of thousands of people or millions of people being foreclosed upon. So it didn't have that urgency.

One of the things about the Dow in particular or stock markets is it gives you urgency. You can see that number in the corner of your screen urgently. Gas prices, you can see urgently. You can see them change every day. Thematic evolutions of stories don't seem to make it onto TV as easily as they do into some kind of journals, and that's part of the problem. Urgent is the Dow falling 508 points, 504 points in a day.

PEARLSTEIN: If you go back to the year 2003, 2004, there were -- we'll call them left-wing consumer advocacy groups who were complaining about what they called predatory lending. OK. Their attitude and their approach was that these big financial institutions were taking advantage of poor people, or people who were not very sophisticated, and giving them loans they couldn't afford.

And there was some reporting about that. There was some hearings about that. But it was always portrayed as this sort of big institutions against these poor people. And there's a tendency among, particularly, the business press, to sort of -- make that a caricature kind of issue. We'll give that a little treatment, because you know, poor people need to be in the business pages.

Rather -- but here's the thing. Rather then saying, wait a minute, if those are bad loans, that's not just bad for the poor people; that's bad for the banks.

KURTZ: Let me come back to Washington, Steve. Because you've sounded some of these warnings in your column. And you won a Pulitzer Prize for it. You've written about the corrupt nature of Wall Street. You call it a "slimy ethical culture."

What about the slimy culture of Washington? You had an administration that looked the other way as more of these regulations were evaded, and you had lawmakers in both parties that took big bucks from these financial institutions.

PEARLSTEIN: Well, they take big bucks. I shy away from making that -- well, they took big bucks and so they didn't do the right thing. They are very responsive to interest groups. That is how Washington works. And the problem is that these interest groups get into these tong (ph) wars over these small things.

KURTZ: Ali Velshi, I want to play for you just a brief clip from FOX's Bill O'Reilly the other night, and I'll explain why I am airing this on the other side.

(BEGIN VIDEO CLIP) BILL O'REILLY, HOST, FOX NEWS CHANNEL'S "THE O'REILLY FACTOR": Every American should be furious about the economic meltdown. It's not your fault, ladies and gentleman. Not my fault. OK? It's the federal government's fault.

(END VIDEO CLIP)

KURTZ: Now, O'Reilly seems to be one of the few people on TV who was mad about this. Where is the sense of outrage in journalism that we saw after the Enron scandal and the other accounting scandals of a half dozen years ago, as opposed to -- I mean, it seems like almost -- everyone was almost a little bit awed at watching this thing start to crumble.

VELSHI: You know, those of us who have been doing this thing for a while remember back to the scandals of 2000 and 2001. And the discovery we made, which seems to be -- have come recently to some of other people, is that we don't have much of a regulatory system, a financial regulatory system.

Our financial regulatory system today is much like our security infrastructure was before 9/11. We subsequently learned that there are, you know, more than a dozen organizations that don't really communicate with each other, that can't find trends.

And after digging deeper into this over the years, Howie, what we've found is that Washington is not sort of populated by heads of regulatory bodies who'd like to regulate more or better. There's been a real laissez-faire attitude.

So we've seen this for a while.

KURTZ: Let me get a last question to Steve Pearlstein. I wonder if this is like the Savings & Loan crisis of the 1988 campaign, where nobody talked about it. If there's a conspiracy of silence between the two parties, until everything blows up and we have to talk about it, then doesn't that leave the press in the position where there's no conflict and therefore we're less likely to cover it?

PEARLSTEIN: Right. I think there is that. And you know, some of us did this. And you know, you -- I expressed outrage. I was -- have been criticizing Alan Greenspan for more than a decade now. I'm the only one who doesn't think he's a saint, and I've been saying so for a long time.

But you get treated as though, "Oh, that's just Steve. He can't stand Alan Greenspan." Or "That's just Steve, he wants to regulate everything."

And you just get dismissed because as you say, or as Ali said, there's nothing going down fast.

KURTZ: Some of those sounding the warnings got marginalized. That's kind of the nature of the beast, I guess.

This is a story that is not going away. Steve Pearlstein, Ali Velshi, thanks very much for joining us.

(END VIDEOTAPE)

KURTZ: After the break, five former secretaries of state are not happy with the media's coverage of this campaign. We've got the videotape. Frank Sesno and Christiane Amanpour join us next.

(BEGIN VIDEO CLIP)

CHRISTIANE AMANPOUR, CNN CORRESPONDENT: These former secretaries have confronted it all.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WOLF BLITZER, CNN ANCHOR: I'm Wolf Blitzer in Washington. Coming up at the top of the hour on "LATE EDITION," can Washington really create a rescue plan for the economy? We'll ask two veteran observers of the worlds of government and finance.

Also, do the presidential candidates have concrete strategies to deal with this crisis? Two top campaign advisors weigh in.

Also, reporting and analysis that you can get only from the best political team on television. They're standing by live.

All that and a lot more on "LATE EDITION." Now back to Howard Kurtz and RELIABLE SOURCES -- Howie.

KURTZ: Thanks, Wolf.

Everybody's a media critic these days, and that includes no fewer than five former secretaries of state. In a conversation with CNN's Christiane Amanpour and Frank Sesno, the ex-officials talked about the role of the news business in this presidential campaign. And they were not always diplomatic.

(BEGIN VIDEO CLIP)

COLIN POWELL, FORMER SECRETARY OF STATE: Unfortunately, we're being driven increasingly to the little gotchas and the little celebrity aspects of political life. And you see the cable shows in the evening, and they thrive on it. They get market share on it. It's all about getting market share and who can be more outrageous than the other person. This doesn't serve the American people that well.

HENRY KISSINGER, FORMER SECRETARY OF STATE: I think they fit the 24-hour news cycle and the constant demands produce a necessity on the candidates of pretending they have an answer to every problem while the fact of the matter is that some of these problems will take a long time to resolve.

(END VIDEO CLIP) KURTZ: Joining us now to talk about how valid this criticism really is, in New York Christiane Amanpour, and here in Washington, Frank Sesno.

Christiane, when Colin Powell talks about the gotcha approach and cable shows, trying to be outrageous and Kissinger talks about the 24- hour news cycle, do they have a point?

AMANPOUR: Yes, Howard, they do have a point. And they've had a point for the last several years, basically.

From my perspective, I cover foreign affairs, international news events on the ground. And clearly, there is not a whole lot of talk about that in this campaign, not from the candidates or from the media, which is why these secretaries of states, former, decided that they would actually accept an invitation to come and talk in a substantial venue about it, because they are very concerned that these issues of great, great importance to the American people and to the world are not being talked about in the mass mainstream media.

KURTZ: But Frank, when they talk about the 24-hour news cycle, it's like talking about the weather. We ain't going back to three networks.

FRANK SESNO, CNN SPECIAL CORRESPONDENT: Ain't going back to three networks, which is what makes their job much more complicated. They know it. It's part of the landscape.

Now, they also use it. I mean, fair is fair here. I think a lot of their criticisms are correct.

But it's not just about the media. It's also about the way the candidates and secretaries of state themselves know that they're in a media world, and they'll try to boil things down so they make simple little sound bites. So, it's a kind of peculiar collusion here that really does squeeze out the complexity and the nuance, which is what diplomacy, after all, is all about.

KURTZ: All right. Let's look at some more from your taping. James Baker and Warren Christopher.

(BEGIN VIDEO CLIP)

JAMES BAKER, FORMER SECRETARY OF STATE: The point I'd like to make, and I've had a fair amount of experience in running presidential campaigns, there's nothing unusual about what is happening this year. This is the -- this is the complaint you get every time. We're not talking enough about the issues. We're dealing with these peripheral ideas and things.

WARREN CHRISTOPHER, FORMER SECRETARY OF STATE: We've come to perhaps a bit of a silly period where the two conventions, but I think we're now going to get a much more serious point of view as we go forward with the debates and the remaining seven weeks of the campaign.

(END VIDEO CLIP)

KURT: Christiane, the first presidential debate is Friday in Mississippi. Jim Lehrer will be moderating. I'm sure the questions will be very serious. The question I have is will the coverage about that debate and of the remaining weeks of the campaign, will they focus more on gaffes and mistakes and trivialities?

AMANPOUR: Well, I'm sure there will be some of that, but hopefully, now the substantive session of the campaign gets under way. The first debate is about foreign affairs. It's the foreign policy debate. So there's going to be no -- no choice but to debate that and to talk about it and report it. And of course, it's massively important.

I think one of the issues is, as your previous guests, Paul Krugman and Michael Medved there, were talking about, there's so much opinion now. And I think, really, to be very honest it's only CNN that could have had this sort of substantive secretaries debate on the air and put it, you know, in a good slot on the weekend, because there's so much opinion. And somehow we've got to get back to fact- based reporting.

KURTZ: Let's get one more opinion from the tape from Madeleine Albright.

(BEGIN VIDEO CLIP)

MADELEINE ALBRIGHT, FORMER SECRETARY OF STATE: I also do think, since I -- the media does play some role in this, in terms of asking the questions in the debates. And so I hope it's over more than whether somebody's wearing a flag pin or not. I do think that it's important for the media to ask the questions so that the debates can, in fact, show what is -- where the differences are.

(END VIDEO CLIP)

KURTZ: The media's problem is not the debates. It's lipstick on a pig. It's McCain's seven houses. It's Obama as Paris Hilton and all these other distractions that we seem to wallow in.

SESNO: I think that's true. But I also think that there's something very big that's happening now. Look at the markets. Look at the world. I think people get it, and people are going to demand answers.

My hope is that the shift will continue and the pressure will be on the media and the candidates to ante up and pony up.

But here's the concern. Every one of those secretaries of state -- Christiane knows it; you were there; we heard it together -- said it's time, for example, to engage with Iran now, no preconditions. That's what Barack Obama actually had said on the campaign, but he was attacked. And he was attacked because, you know, they felt that he was sort of soft on Iran or something like that.

If a candidate -- and I'm not saying that Obama was right on that. I'm merely making a point that, if a candidate tries to climb into the nuance, the opponent will seize upon it -- It's not just the media; it's the opponent -- and will pound away and dumb it down.

KURTZ: What about that point, Christiane? We say we don't like overly scripted candidates, but when somebody offers a new thought or turns a phrase that enables the opposition to jump on them, we jump on them, as well. We penalize anything that might be described as nuance.

AMANPOUR: Yes. I mean, you do. You cover the media, and there are political reporters who cover the politicians. I cover the rest of the world, and it is slightly different. The tone and the nature of what I cover is slightly different.

But, also, I think that there is something really important: that the debates here in the United States are not really debates. I was watching the presidential debate in France over the French elections between Nicolas Sarkozy and the first woman candidate, Segolene Royale.

It was two and a half hours of the two candidates talking to each other and really debating the issue with a moderator sitting between them, simply throwing out the positions of what they should talk about. It was riveting.

And I'll tell you one thing. I found the young people in that audience at the university -- and Frank saw the same thing -- were riveted by these secretaries of state. They stood up. They gave standing ovations at the beginning and at the end.

KURTZ: OK.

AMANPOUR: It's a mistake to think that people don't want brain food, that people don't want the meat.

SESNO: Let me point this out. So what Christiane was saying, the kids and others started lining up at 5:30 in the morning to go in and see those folks, when the tickets were made available. People are interested in this. The audience is there.

KURTZ: Why doesn't -- we've got 20 seconds. Why doesn't cable news reflect that?

SESNO: Why doesn't cable -- because what Ali Velshi was saying. We go for the urgent. The urgent always overshadows the important. And that's what was significant about this hour, and I'm delighted CNN was there.

KURTZ: All right. Got to go. Frank Sesno, Christiane Amanpour, thanks for joining us.

And you can watch "The Next President: A World of Challenges." It airs today at 2 p.m. Eastern.

Still to come, a "Miami Herald" reporter gets very cozy with the official she's covering. Wait until you hear who's suing Tribune company zillionaire Sam Zell. And did she have to go there? A FOX News guest zeros in on part of Sarah Palin's anatomy. Our "Media Minute" is straight ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

KURTZ: Time now for the latest in the news business in our "Media Minute."

Chicago real estate mogul Sam Zell, who bought the Tribune company last year, has been cutting jobs at such papers as the "Chicago Tribune" and the "Los Angeles Times." And in meetings with the staff, he's been controversial and a bit profane. Here he is describing a complaint from one of his managers.

(BEGIN VIDEO CLIP)

SAM ZELL, CHAIRMAN, TRIBUNE COMPANY: (UNINTELLIGIBLE) Somebody told me what to do and I did it. Since then, nobody's told me what to do. Now, this (EXPLETIVE DELETED) makes $750,000!

(END VIDEO CLIP)

KURTZ (voice-over): This week some current and former "L.A. Times" staffers, including retired Washington bureau chief Jack Nelson, filed suit against Zell. That's right: they took the owner to court, saying that Zell's conduct has damaged the company and that he and his partners have enriched themselves in a purchase that the lawsuit calls a scam.

Zell said in a statement, "There a difference between questioning authority or challenging the 'business as usual' attitude and maligning the company in public. That's just bad judgment and does no one any good. It's a distraction that's unnecessary."

Tania Luzuriaga was the "Miami Herald's" education reporter. Alberto Carvalho was a top official in the Miami-Dade School District. And newly disclosed e-mails show they had a romantic relationship while she was covering him. In fact, we can't read some of them on the air.

The reporter wrote, "Will you be completely offended if I leap into your arms the next time I see you (place permitting)? Like in the movies, with arms and legs wrapped around you. Love, love, love you."

When Carvalho complained about not getting proper credit in one story, she wrote, "If it doesn't compromise us professionally, we ought to act in ways that help one another."

"Herald" editor Anders Gyllenhaal says the messages "violate some of the most basic rules of our profession."

Carvalho, who at first claimed the e-mails were doctored, has been named the Miami-Dade school superintendent, but his contract has been held up in the wake of the controversy.

Luzuriaga, now a "Boston Globe" reporter, has refused to comment.

(on camera) Perhaps she's not commenting, because she can't defend the indefensible.

(voice-over) Never know what a guest might say on live television, as "FOX & Friends" found out this week when Bloomberg News columnist Caroline Baum was talking about whether Sarah Palin could appeal to Hillary Clinton voters and used a crude street term for breasts.

CAROLINE BAUM, COLUMNIST, BLOOMBERG NEWS: I think the idea that she would appeal to Hillary Clinton voters, you know. The pro-choice versus not seems to be a much bigger issue than, you know, she has (EXPLETIVE DELETED) versus she, you know, has another body part that men have.

KURTZ: You can't say that on television. I wonder if she'll be invited back.

Well, that's it for this edition of RELIABLE SOURCES. I'm Howard Kurtz. Join us again next Sunday morning, 10 a.m. Eastern for another critical look at the media.

"LATE EDITION" with Wolf Blitzer begins right now.

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