Skimming the Surface

Will the financial reform bill lead to more bailouts? You won't find out in today's NYT story

The front page of today’s New York Times features an article on the state of play on financial reform that is responsible, sober, and straightforward. It is also a perfect example of how he-said, she-said journalism can fail to inform readers.

The nugget of news in the story is that on Monday, GOP senators voted as a group to block debate on a Democratic bill that would overhaul the financial regulation system. With the two parties having staked out their respective positions, they’re engaged in a messaging contest, as they seek to steer the final bill—and most observers seem to think something called a “reform bill” will eventually be passed—toward their preferred outcomes.

Given that set of facts, it’s perhaps not surprising that the first third of the story is given over to chronicling the parties’ message campaigns. The sentences in the first half of the article offer almost a parody of “he-said, she-said” style: “Republicans said…,” “Both sides say…,” “Democrats charged…,” “Democratic leaders said…,” “Democrats said…” Then we encounter specific quotes from President Obama, Chris Dodd, the architect of the Democratic legislation, and Mitch McConnell, the Republican senate leader.

All of this is fine as far as it goes, if not especially illuminating. Both sides should get their say in the press, and the choices that the parties make about what messages to send are themselves a sort of information.

But this model breaks down when there’s an actual factual dispute between the two parties. Consider this passage, a little more than halfway through the story:

In the days ahead, the fight in the Senate seems likely to hinge on a question raised forcefully in recent days by Mr. McConnell: Does the legislation still contain loopholes that could allow future taxpayer-financed bailouts of failed financial institutions?

Democrats say the bill is written specifically to prevent such bailouts, and have accused Republicans of blatantly misrepresenting the measure.

But Republicans insist government bailouts are still possible. They pointed to language, for instance, in a chapter on liquidating failed banks that established a “strong presumption” of losses for creditors and shareholders. Some Republicans say those losses should be mandatory.

Hmm. If the financial regulation fight, which “has huge ramifications for the economy and for… this year’s midterms elections,” is going to “hinge on [this] question,” wouldn’t it be great to provide some sense of which side has the better of the argument?

There are a couple ways the Times might have done this. It could have called up some independent experts to evaluate what the bill does. Or it might have conducted its own close reading of the bill and found that just pages after that “strong presumption” language is another section, headlined “Mandatory Terms and Conditions for all Orderly Liquidation Actions,” which directs the FDIC to “ensure that the shareholders of a covered financial company do not receive payment until after all other claims and the Fund are fully paid,” and to “ensure that unsecured creditors bear losses in accordance with the priority of claim provisions in section 210”—which, in turn, stipulates that claims by the federal government have top priority, after the receiver’s administrative expenses, on a failing bank’s assets.

Alternately, the Times could have just piggybacked on the efforts of other outlets that have done this legwork. (Campaign Desk has dinged the Times before for outsourcing its fact-checking responsibilities, but better to outsource them than neglect them entirely.) And because this particular message war has been playing out for about two weeks, it’s been refereed repeatedly. Six days ago, scrutinized a somewhat stronger version of the Republican claim—McConnell’s assertion that the measure would “institutionalize” bailouts—and found it wanting, writing that “claims that this bill makes taxpayer-funded bailouts a permanent fixture are misleading, to say the least.” Around the same time, had evaluated a similar claim from McConnell—that the bill “guarantees future bailouts of Wall Street banks”—and deemed it “false.”

And a day later, PolitiFact turned its attention to Reid’s response that the bill “will end taxpayer bailouts” and declared it “barely true”—essentially, because the law does not bind future Congresses, and because even if the measure does not prop up failing banks, it may not set aside enough funds to adequately unwind them.

None of this, unfortunately, makes it into today’s NYT story. It’s not hard to understand why—it takes a healthy chunk of space to sort all that out, and the truth and falsehood of competing claims shifts as the claims themselves are modulated. (The GOP position presented in today’s Times, that “government bailouts are still possible,” is far more measured than McConnell’s earlier language; per PolitiFact, it may even be accurate—though it’s doubtful this problem can be solved by adding “super-duper-mandatory” language to the bill.)

But there’s a real cost to allowing these assertions into print unchecked and unscrutinized. Precisely because this is an important point, considerable journalistic energy has gone into adjudicating this dispute, yielding the conclusion that the Senate Democrats are overpromising and the GOP leadership is mostly full of it. If the Times were to come to a different, credible conclusion, great—that’s a gain for readers’ understanding of the issue. But by reprising the he-said, she-said without so much as hinting that there might actually be an answer, the story undercuts all that effort to find out what the truth is—and in the process, suggests that all answers are equivalent. We need coverage that’s better than that.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Greg Marx is an associate editor at CJR. Follow him on Twitter @gregamarx.