“The government, the financial industry and the American consumer—if they had only paid attention—would have gotten ample warning about this crisis from us, years in advance, when there was still time to evacuate and seek shelter from this storm.” Diana Henriques, New York Times business reporter, speech at The George Washington University, November 8, 2008These are grim times for the nation’s financial media. Not only must they witness the unraveling of their own business, they must at the same time fend off charges that they failed to cover adequately their central beat—finance—during the years prior to an implosion that is forcing millions of low-income strivers into undeserved poverty and the entire world into an economic winter. The quotes above give a fair summary of the institutional response of the mainstream business press to the charge that it slept on the job while lenders and Wall Street ran amok. And while the record will show this response is not entirely wrong, one can see how casual business-press readers might have a problem with the idea that final responsibility for failing to stop escalating dangers in the financial system has somehow shifted to them.
“But anybody who’s been paying attention has seen business journalists waving the red flag for several years.” —Chris Roush, “Unheeded Warnings,” American Journalism Review, December/January, 2009
“I’m kind of curious as to . . . why is it that people were shocked, given the volume of coverage.” —Nikhil Deogun, deputy managing editor, The Wall Street Journal, quoted in “Unheeded Warnings”
“For in an exact sense the present crisis in western democracy is a crisis of journalism.” —Walter Lippmann, Liberty and the News, 1920
Dang, Margaret, we blew it again.
It is understandable that the business press would want to defend its record. But it is equally understandable, I...
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Seems to me that most of the "business press" is/was so much in the "pocket"/thrall of the people and institutions they were supposed to "cover," and that mere stenography and/or "home-town boosterism" had/has become so common-place that the "press" didn't (want to) recognize there was a problem. The 'financial press' regarded itself very much as though they were cheerleaders for the business they were covering (and getting rich off of).
The TV 'journalists' especially, it seems to me, were as/more interested in getting the next hot stock tip from their inside sources than they were in seeing there were dead/rotting 'trees' in that forest they were supposed to be investigating for the benefit /information of their readers/viewers.
I was in the news biz once, and I remember when "covering" a beat meant reporting things that were inconvenient for the people one was covering. It'd be nice if that ethos were somehow to be recovered, but I am not optimistic .
Posted by Woody on Thu 14 May 2009 at 09:39 AM
Dean:
I hope you'll forgive me for saying so, but I think that in large measure, you're replicating the errors that you identify.
The biggest flaw with our business press is its excessive focus on Wall Street. There's a basic presumption that, since Wall Street sits at the heart of our financial system, the most important and essential stories are those that tie back to the Street. I think that's wrong. Moreover, I think that your article proves it.
Your survey builds this bias into its structure. It looks at nine publications: six in NYC, and one each in London, Los Angeles, and Washington. The sample was selected on the grounds that it constituted "a common-sense list of the nine most influential business press outlets." And that's precisely the problem. To a great extent, regulators, legislators, financial executives, and other business journalists operate on the presumption that if there's an important story, it will appear in some (or all) of these outlets. If it's not there, it's as if it were never reported at all.
But that's just not so. One of the signal revelations of the last decade is that the smaller business staffs of regional and local publications did a better job than the mammoth papers near the heart of the industry. Take a look, for example, at the SABEW awards. In 2007, SABEW honored the Arizona Daily Star for its reporting on First Magnus; the San Jose Mercury News for affinity lending; the Fort Myers News-Press on mortgage fraud; and the Charlotte Observer on Beazer Homes. (That last also scored a Polk.) Or look at the stand-out pieces you cite in your own article. The Pittsburgh City Paper. Southern Exposure. Or the 'exception that proves the rule,' the LA Times sensational reporting on Ameriquest. In every case, these were local stories. Reporters could see the real-world impacts of changes in the financial marketplace, and were spurred to figure out why they had taken place.
Ultimately, of course, the trail led all the way back to Wall Street. But back in New York City, this was difficult to see. When every expert a reporter calls proclaims her faith in CDOs, it's tough to find an angle. But when a reporter drives through a neighborhood of foreclosed homes, or sees a local bank fail, it's immediately apparent that something has gone badly wrong.
So yes, our "most influential business press outlets" failed miserably. But they failed, on the whole, for complex reasons. One factor was institutional arrogance, and the newspaper obsession with scoops. Had they built upon the myriad local stories that were doing a superb job of exposing the problems with the industry, they probably would have been positioned to report the Wall Street angle, which, after all, is what they do best. But they didn't break those stories, and in many cases, they weren't even reading them. After all, it's only 'common sense' that if it's not bylined in New York and doesn't tie back to Wall Street, it's not a real story, right? And that's the second factor. Reporters at major publications are seduced by access. That's their comparative advantage. They have sources at firms and regulatory agencies that local publications can't hope to replicate, and they spend much of their time competing with peer publications to be first to break a story. But if the story is itself largely unknown to those firms and agencies - and the looming mortgage crisis mostly was - they're unlikely to spot it. And finally, there's a question of audience. Our 'most influential business publications' are largely targeted at the financial industry, business leaders, and policy makers. Local and regional business sections, by contrast, are aimed at more local and regional audiences. If lots of readers are struggling to make their mortgage payments, then that's a good story. But few readers of the WSJ or NYT were struggling to pay the bills until the crisis really hit. Foreclosures were interesting to their readers mostly for their effects on the institutions in which they were invested or on which they relied. In other words, the story started when Bear collapsed - and not, years earlier, when the Joneses down the street got crammed into a subprime mortgage and ended up defaulting.
So if you want to indict our leading publications, go right ahead. But your presumption that if these nine publications missed the story, no one got it right, gets things exactly backwards. Our biggest publications did the worst job, on the whole, of providing suitably probing and skeptical coverage. But readers of numerous local and regional publications were served a wonderful array of stories that provided ample warning of brewing problems. And yes, there's a lesson there for all of us.
Posted by Cynic on Thu 14 May 2009 at 11:44 AM
The best coverage of the bubble being inflated over this past decade came from bloggers, like Barry Ritholtz over at The Big Picture. I've been reading his blog since 2004 and he pieced it together very early on. And the big dailies wonder why they're being driven out of business.
Posted by Florida on Thu 14 May 2009 at 11:53 AM
The press is OWNED by those that OWN our elected officials. Their job is to mold our thoughts around what they believe we should think. Outcome based journalism. The public is catching on...ever so slowly. There will be a point when every thing will just snap. Then all will have to decide which team they will be on.
Posted by robertsgt40 on Thu 14 May 2009 at 12:31 PM
"The business press exists within the Wall Street and corporate subculture and understandably must adopt its idioms and customs, the better to translate them for the rest of us."
What a load of crap.
Posted by LGS on Thu 14 May 2009 at 04:12 PM
Economist: US collapse driven by 'fraud'; Geithner covering up bank insolvency
Stephen C. Webster
Published: Saturday April 4, 2009
In an explosive interview on PBS' Bill Moyers Journal, William K. Black, a professor of economics and law with the University of Missouri, alleged that American banks and credit agencies conspired to create a system in which so-called "liars loans" could receive AAA ratings and zero oversight, amounting to a massive "fraud" at the epicenter of US finance.
But worse still, said Black, Timothy Geithner, President Barack Obama's Secretary of the Treasury, is currently engaged in a cover-up to keep the truth of America's financial insolvency from its citizens.
FULL ARTICLE HERE:
http://rawstory.com/news/2008/Economist_US_collapse_driven_by_fraud_0404.html
=================
More details here:
http://worldreports.org/news
Posted by CB_Brooklyn on Thu 14 May 2009 at 04:13 PM
Excellent work. I'll be spending a lot time using your findings.
Cynic's point is also good. Is it possible that the 9 "ppers of record" you focused on missed a story that the smaller papers were actually handing right to them?
Posted by Benedict@Large on Fri 15 May 2009 at 01:52 AM
You're onto something, Benedict. I'll post my link again here--published in the Hartford Advocate, fall of 1999--laying out CitiGroup's connections to (and the connections between) deregulation, subprime abuses, money laundering, over-the-counter derivatives, and the coming meltdown.
http://www.alternet.org/story/658/one_bank_under_god/
This story was admittedly not as rigorous as Mike Hudson's work, and was poorly edited. But it was the best I could do in a few week's reporting.
So none of this stuff was hard to see coming, even for someone, like me, whose "beat" was the Hartford city council and police department. It was, however, hard to get past editors--be they part-time, uninterested and narcoleptic as mine was at the time, or wired-in, skeptical of non-experts and institutionally timid as I believe were (and are) those helming the nine outlets Dean surveyed.
So I got my one shot off from a 60,000-circulation alt-weekly. For years after that I used the information therein to try to wangle a journalism fellowship to Columbia Business School, thinking I might step up, career-wise, into a position from which this kind of reporting might have some impact. I got wait-listed. The people who won those fellowships made their way back to mainstream dailies and mags, churning out the routine dispatches of cheer and froth upon which Dean's few dozen substantive corks did bob.
The problem is systemic, summed up by the idea (I can't find the quote; it's not original) that the more you pay a man not to know something, the more firmly and proudly he will declare his ignorance.
Editors and publishers, at least those at the level in Dean's survey, are very much paid not to know.
Posted by edward ericson jr. on Fri 15 May 2009 at 06:41 PM
STUPIDITY CANNOT BE CURED
Sir, you are flat-out wrong. Example: in 2001, Barron's bravely printed a hard-hitting feature on Mr. Bernard Madoff (heard of him?).
http://online.barrons.com/article/SB122973813073623485.html
Result: zero (0). Ignored.
Example: Ed Andrews, a solid NYT economics reporter, himself got caught up in the financial insanity.
http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?ref=magazine
Also, for nearly 10 years, the non-Democrats had warned about Fannie/Freddie over-leveraged. Shouted by Bwarney Fwrank (D-Harvard Law), whose then-boyfriend worked at Fannie.
There was plenty of warning. But no one listens to the cops.
BTW: your funder, The Nation Insitutute. Now, there's a broad-minded group.
Posted by Russ on Fri 15 May 2009 at 09:38 PM
Why must you conflate all business press - drag down the ones who got it right with the publications which failed? It is both lazy and harmful. There was some good reporting (see comment above, Barron's.)
Journalists cheering on their own destruction. Killing off readers one self-flogging at a time. Idiocracy here we come.
Posted by AJ Fish on Sat 16 May 2009 at 01:22 PM
Cynic has great points, but there's a good reason why this article focuses on the large, national newspapers (and Cynic touches on this point). Cynic mentions the award-winning work of smaller papers, and yet, I haven't heard of any of those articles, and I'm *in* the journalism biz. (I may have heard a little about Beazer, but "that doesn't affect my city.") If I haven't heard of them, I'm pretty sure most of my paper's readers -- at least those not part of the financial industry -- haven't heard of them either. There were reporters who wrote the truth before the Iraq war too. But if such articles don't get a nationwide forum somewhere, it's just yelling into the wind. That's why the failure of the large national publications was so important. (Same with TV news.)
Few of my paper's readers are going to care about Beazer, First Magnus or mortgage fraud in Florida. The big boys have to make it a national story.
Posted by F.M. on Sat 16 May 2009 at 01:35 PM
BTW: your funder, The Nation Insitutute. Now, there's a broad-minded group.
Accepting funding from such a "liberal--left" group (its own description) is risky to one's journalistic independence. The article will likely be cited by The Nation Institute in support of its own agenda of greater regulation of the financial system.
Did The Nation Institute have reason to believe the article would have the outcome it did, one congenial to its political ideology? -- "Read Mother Jones, or something, once in a while."
Would it be equally acceptable for a reporter to get funding from a conservative or Libertarian group for an article that reached a different conclusion?
in the interest of transparency, I'd like to see Mr. Starkman address these points.
Posted by Bradley J. Fikes on Sun 17 May 2009 at 10:29 AM
The business press is hardly culpable here. As Greenspan noted, any usual belief that people act in their own interests was sadly flawed. How is it that managers of very large enterprises could behave in so cynical a manner?
Why did very large shareholder interests fail to see this?
There's a culture gone wrong here and it ain't the failure of a few editors.
Posted by Norman Dopker on Sun 17 May 2009 at 08:10 PM
This seems pretty simple to me. The events of the last year or so have been the financial equivalent to a nuclear meltdown killing millions. So how would the papers have behaved if confronted with such a physical phenomena? Would they publish "one the one hand, on the other hand" articles? Would they do puff profiles of the reactor designers?
No, one would hope that they would run articles with huge banner headlines saying that millions were about to die unless something was done.
Did anyone in the financial press do that? No. So either THEY missed it, too, or they misjudged the severity of the upcoming event and downplayed it, or they saw it all coming and sat on their hands because the truth was too unpleasant for their readership, advertisers and management.
Pick one.
Posted by garhighway on Mon 18 May 2009 at 12:54 PM
I'm not in the biz press, government, or a blogger but just a76-year old former CEO of a non-financial company who had to start managing his own retirement fund when he realized in early 2007 that a disaster was imminent.
Peter Eavis was writing on TheStreet.com about the fraud that was Fanny Mae.
Yet my financial advisers seemed to honestly believe everything was fine. Gillian Tett at the Financial Times kept writing about the lack of risk premiums (not) attached to CDS product pricing, the size and lack of transparency, and the total lack of regulation.
Local radio was saturated with advertisements for what we now call liar loans. It was obvious to me that we were out of control.
The advisers and fund managers simply didn't want to see the facts as it would mean the end or life as they knew it. They managed to convince themselves and their clients that there was no crisis and so it continued to get worse.
Congress , with the exception of Senator Byron Dorgan, continued to accept the word of the money center banks and Easy Al that they shouldn't worry... and anyway they needed those contributions.
The arguments about why the major press outlets didn't come out with direct accusations is likely due to the potential cost of litigation. The crooks would have to sue to be able to continue their scams. The weak financial position most newspapers find themselves in no doubt contributed to their editorial softness.
The SEC and most of the Bush appointed regulators followed the happy talk scenario of the Bush administration.
Yet thanks to warnings from people like Peter Eavis and Gillian Tett, some of us got out in time.
Posted by Mike Smith on Thu 21 May 2009 at 12:37 AM
Bradley Fickes - can you point to anything in the study reported here that is false? misleading? dubious? Or are you just concerned that Starkman got his money from a place you don't like?
Do you think, say, Kevin Phillips would disagree with these findings? Or that, should he undertake to look at the press performance, he'd find somethign remarkably different?
What is your point other than to suggest that all the good folks at the WSJ etc. are doing a swell job?
Posted by JJ on Thu 21 May 2009 at 11:50 PM
While I've been a banker for 30+ years, I only entered the world of 'journalism' last after the bubble burst. It happened quite by accident when I sent an email to Joe Nocera at the NY Times, in reponse to one of his blog columns "When will banks give loans". He found my comments worthy of publication in his blog. My ego soared. I wrote some more. I had things to say, things to reveal. But the topics were complicated and I desperately wanted the average person to understand. So what I wrote was long and wordy and oftentimes clumsy. I was told that blogs had to be 800 words or less. That "no one" had the attention span to read "too many words". So I started my own blog, to share with the public both an inside view of what happened in banking and focusing on lax credit underwriting and those policies direct violations of Federal Regulations in Safety and Soundness. I cited the regs and provided the sites to the Federal Register.
I've done this now for less than a year. And honestly, I'm pretty much over it. I'm anonymous because I have to keep my job. And the very fact that I write publicly or even speak to a journalist is in direct violation of every bank's Code of Conduct and cause for immediate dismissal. Still, I try to point out the things that our Regulators can do, should do, failed to do and continue to fail to do.
I wrote to journalists everywhere. I posted articles on my site. And to tell you the truth, I believed that once they 'understood' what happened and what is happening, that they would jump on the bandwagon and cry foul on the front pages of their business sections. Even moreso, on the news stations every day.
I don't mean to minimize the tragedy of that poor little girl Kaylee. But one could not turn on a television set for ten minutes without being bombarded by an 'update' of the Kaylee story. And for the first time, I actually focused on news reporting on the financial issues. The media would bring on an expert, ask them a pre-fab question, let them speak for less than a minute, thank them for coming and cut to commercial. A snippet of meaningless drivel that I'm sorry to say is probably over the heads of the average person. I ask myself every day why the news (TV, radio and print) isn't lambasting the banks and our regulators and our leaders on the Hill and screaming it loudly and endlessly every single day. They make it sound like an error in 'good judgment' instead of violations of laws. They make people think that there were no regulations in place instead of the failure of our regulators to use their discretionary powers to halt these dispicable practices. They sing the praises of the newly instituted provisions for Economic Recovery instead of HARPING on the flaws and reasons why these things are merely ways to recapitalize the banks on the backs of every taxpayer today and for generations to come. The press, for example, is not focusing on what will happen to the value of the new 4%-5% mortgages that will turn into the next set of mortgage backed securities that will be sold to our pension plans, 401K plans, and mutual funds. Just wait until interest rates rise, as they surely will. These new MBS will drop in value, not because the loans in them are bad, but simply because that is the nature of the bond market in a rising interest environment. I could go on, and on.
I bucked the banking system my entire career. I spoke out against our failure to file a simple UCC filing when we made a business loan. I spoke out against credit scoring business loans and not verifying any information on those applications. I worked for Wachovia for a brief time and I saw first hand the corruption of their pick-a-pay mortgage loan. I saw the mortgage lenders paid more for steering borrowers into those higher rate loans. I left the bank.
But now I realize that the financial industries in America will continue to run amok. They will not change their evil ways. And our government will not impose the required rules or enforce the existing ones to end the reign of terror. And now I'm "part journalist" with my blog site. And I am discouraged by the journalists that perhaps take their little hit and run on to the next story.
It is only through sustained, repetitive and coordinated revelation on any one topic that journalists will effect change. And they just don't seem willing to put themselves out on the line.
Yes, some of the world of finance is difficult to explain in laymans terms. But some of it, just is not. The American people want to know why interest rates on credit cards will not be controlled until 2010? If journalists asked this question through their respective media each and every day for a month, perhaps it would put pressure on the Hill to enact those protective rules earlier. If banks are allowed to reduce credit lines, and this act, in and of itself, makes the consumer's credit score decline then something needs to be changed in the way the credit line decrease is reported and factored in by the credit reporting agencies. But I hear NOTHING about this.
And the people of this country seem to have forgotten that our constitution begins with the words, "We, the people". We have become lazy and complacent. We seem to have lost the understanding that "we" are the biggest lobbying group this country has. But I guess we rather sit and read our email jokes than march into our Congressional leaders offices and demand immediate action.
Am I being too harsh. I don't think so.
Posted by Anonymous Banker on Sun 24 May 2009 at 12:25 AM
“But anybody who’s been paying attention has seen business journalists waving the red flag for several years.” —Chris Roush, “Unheeded Warnings,” American Journalism Review, December/January, 2009
BS! The mainstream media did not wave any red flags. In fact, they mocked and derided those who saw this coming and spoke about it, e.g. Peter Schiff, Roubini, etc.
It easy to say on hindsight that this crisis was obvious and everybody could have seen it.
Posted by ron_paulite on Sun 7 Jun 2009 at 03:07 PM
You keep saying "read"; no one reads. You should be talking about "watch," as in the US propaganda machine, although the major dailies are not exempt. Your article is quaint and entertaining.
Best,
SOB.
Posted by theobannion on Sun 7 Jun 2009 at 06:23 PM
Thanks for the Lippmann references. Reading his books during and after WW 1 made me understand how all thinking people took as certain that an international organization such as the League of Nations would be a no-brainer. When the Senate defeated the Treaty, Lippmann was shaken but instead of blaming the American public he looked at the media as the main culprit... even as he himself was part of it. Even Chomsky himself used a Lippmann phrase to title a book on propaganda.
Posted by George Fiala on Sun 7 Jun 2009 at 09:39 PM
oops, shouldn't have mentioned Chomsky. Now everybody will think I'm a Nation plant....
Posted by George Fiala on Sun 7 Jun 2009 at 09:42 PM
Hello Everyone,
Okay, I’m back from a stint in a rehab center for business-press over-readers. No telling how many brain cells I damaged on this.
Thanks for writing, even those who believe I suffer from incurable stupidity.
Woody, your remark on what it means to cover something–“reporting things that were inconvenient for the people one was covering”–is as good as any. Thanks.
Cynic, nice points, and not cynical at all. Yes, there was nice local coverage, and you point out some of the highlights. I’d only say this group of the biggest, most influential publications is the one that sets the national financial agenda and the one “the public,” writ large, relies on for its warnings. But I agree that local reporters seemed much more than their national counterparts to be in touch with bad practices and willing to call lenders on it. Too bad.
Benedict and Ed, I agree; there is something bothersome about the disconnect between the local and national press. Still, somehow a story doesn’t count until it’s validated by the nationals. One reason, I suppose, is that the institutions and their regulators sometimes feel they have to respond.
Florida, You’re not the only one to feel we don’t pay enough attention to blogs, but the point of this piece was to look at how the influentials used their influence.
AJ Fish, I worked as hard I could, honest. This is absolutely not cheering journalism’s destruction, but looking for ways for it to be better.
F.M., That’s how I feel.
Bradley J. Fikes/AJ Fish/Russ, I agree the philanthropic model for journalism isn’t ideal, but then what is? We get money from lots of sources, including Goldman Sachs. Weird? Yes. Do we have a choice? No. We try to navigate conflicts when they arise as best we can, though in this case, there wasn’t one, as far as I can tell. And yes, we’d take money from libertarians, and librarians, for that matter. But why would the right reach a different conclusion?
Norman Dopker, I agree, the failures here are wide and deep. But it’s not about editors’ culpability, as I say, but how to get better information about the financial system to the public.
Anonymous Banker, Keep the faith. Nothing is perfect, but journalism done right is a key element of accountability and reform. It works. I’ve seen it, and I think the story I wrote demonstrates it.
Ron_paulite, I’m not saying the crisis in all its dimensions was obvious. I don’t, however, think predatory lending was that subtle. And from there, it’s only a short step to Wall Street’s underwriting of the phenomenon.
George Fiala, I agree, Lippmann is an important thinker and someone I’m trying to learn more about. What I like about him is that he doesn't seem to have had particularly high expectations for either the press OR, for that matter, the public, but realized that, in a democracy, that’s what we’re stuck with.
Posted by Dean Starkman on Tue 16 Jun 2009 at 02:44 PM