22 May 2009

Assessing How The National Business Press "Covered" the Financial Crisis

The short answer is "pretty poorly." You can find a systematic assessment here at the Columbia Journalism Review.

"It struck us that it is impossible to avoid trying to assess the business press’s performance in the run-up to the meltdown. The business press is the sole means by which normal citizens would know of goings-on in the lending industry and on Wall Street. It is the vital connection between the public on one side and regulators and financial institutions on the other. It is the only instrument capable of catalyzing the virtuous cycle of reform that emerges when dangers and abuses come under the public gaze. If readers screwed up, so be it. But if it is the business press, readers are going to have to insist on identifying weak points, cultural problems, skewed priorities, and areas in which the business press’s institutional interests might be out of alignment with those of the broader public. If members of the public must go elsewhere for warnings, they need to know that, too.

It is true that few sectors of journalism, with the possible exception of the Washington press corps, are as infected with the extreme form of know-it-all-ism as the business press, which wields the complexities of its subject area like a cudgel against non-cognoscenti. But readers should not shrink from asking relevant questions merely because they don’t know the precise mechanics of a credit default swap and don’t read Fortune as closely as they might, say, the Torah.

The fact is, you don’t need to be a media critic or a quant to assess whether proper warnings were provided. What’s more, I suspect most rank-and-file reporters would welcome scrutiny, as long as it’s fair. And so we undertook a project with a simple goal: to assess whether the business press, as it claims, provided the public with fair warning of looming dangers during the years when it could have made a difference.

I’m going to provide a sneak preview of our findings: the answer is no. The record shows that the press published its hardest-hitting investigations of lenders and Wall Street between 2000–2003, for reasons I will attempt to explain below, then lapsed into useful-but-not-sufficient consumer- and investor-oriented stories during the critical years of 2004–2006. Missing are investigative stories that confront directly powerful institutions about basic business practices while those institutions were still powerful. This is not a detail. This is the watchdog that didn’t bark.

To the contrary, the record is clogged with feature stories about banks (“Countrywide Writes Mortgages for the Masses,” WSJ, 12/21/04) and Wall Street firms (“Distinct Culture at Bear Stearns Helps It Surmount a Grim Market,” The New York Times, 3/28/03) that covered the central players in this drama but wrote about anything but abusive lending and how it was funded. Far from warnings, the message here was: “All clear.”

Finally, the press scrambled in late 2006 and especially early 2007 as the consequences of the institutionalized corruption of the financial system became apparent to one and all.

So the idea that the press did all it could, and the public just missed it, is not just untenable. It is also untrue."

There are (at least) a couple of points that I think are worth noting. First, as the CJR piece makes clear the press is trying pretty vigorously to shift blame for their own failure to note the impending collapse onto readers who allegedly neglected to pay sufficient attention. This is sort of like blaming poor people (via the Community Reinvestment Act and ACORN) for the sub prime mortgage boondoggle that bankers and mortgage companies created. In short, it is preposterous. Te point is not that the folks at Bloomburg or the Wall Street Journal or wherever were themselves out peddling securitized debt obligations. No, it is just that they failed abysmally to say much about those who were engaged in such practices. The converse point is that while they'd now like to blame their readers, they are unwilling to challenge the powerful financial institutions on which they rely and report. Hence the name of the article - "Power Problem." Having failed to do that, the press failed in its central task. Ooops!

Here we seem to have an analogy to the Washington Press Corps, which, because it relies on government sources for information, can only be so critical. I recommend Tim Cook's terrific book Governing With the News: The News Media as a Political Institution, 2nd Edition (Chicago, 2005). The business press relies on connections in the finance industry and surely no reporter or outlet would ant to be cut off from access to information by - gasp! - criticizing corrupt or venal or duplicitous practices.

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