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.
We went into the project with the working hunch that something was wrong. This stems from our belief in journalism itself. As journalists, we have to believe that what we do is not entirely ineffectual and that it has some impact on the outcome of events. Otherwise, why bother? Given that the system failure here is absolute, whatever journalism did do, as a matter of logic, was insufficient.
But a second idea going in was that this “debate” about business press performance is not really a matter of opinion at all. Either the work is there, or it isn’t. Facts have a way of obliterating assumptions.
Our approach was fairly straightforward. We picked a date range of January 1, 2000 through June 30, 2007, with the idea that the early date would capture the entire housing bubble and the later date marked the period right after two Bear Stearns hedge funds collapsed very publicly and all warnings were moot.
We then came up with a common-sense list of the nine most influential business press outlets: The Wall Street Journal, The New York Times, the Los Angeles Times, The Washington Post, Bloomberg News, Financial Times, Fortune, Business Week, and Forbes. CNBC and other television outlets were excluded both for practical and substantive reasons. With the help of some colleagues, we searched the Factiva database for the names of important institutions—Bear Stearns, Countrywide, etc.—and matched them with search terms that seemed appropriate, such as “predatory lending,” “mortgage lending,” “securitization,” “collateralized debt obligations,” and the like.