What makes this development especially maddening is that subprime lending and Wall Street’s CDO production at this point were only just getting started. Subprime mortgages in 2002 were $200 billion, 6.9 percent of all mortgages. By 2006 they were $600 billion and 20 percent of the market. Add poorly documented “Alt-A” mortgages and the 2006 figures rise to $958 billion and 32 percent. CDO production went from next to nothing in 2000 to half a trillion in 2006.

Behind those numbers were the boiler rooms, underwritten by the Wall Street masters of the universe depicted on business magazine covers. Yes, we must beware of hindsight-ism. But let us acknowledge that today, at least, we know that the lending industry from 2004 through 2006 was not just pushing it. It had become unhinged—institutionally corrupt, rotten, like a fish, from the head. I argued last fall (“Boiler Room,” Columbia Journalism Review, September/October 2008) that post-crash reporting has given short shrift to the breathtaking corruption that overran the mortgage business—document tampering, forgery, verbal and written misrepresentations, changing of terms at closing, nondisclosure of fees, rates, and penalties, and a boiler-room culture reminiscent of the notorious small-stock swindles of the nineties.

Now the muck is finally bubbling to the surface as the Justice Department and several states gear up to prosecute “dozens” of leaders (“Financial Fraud is Focus of Attack by Prosecutors,” NYT, 3/12/09) and journalists latch onto the story in all its lurid glory. Business Week’s excellent Mara Der Hovanesian reports, for instance, that Wall Street demand for mortgages became so frenzied that female wholesale buyers were “expected” to trade sex for them with male retail brokers, according to “dozens” of brokers and wholesale buyers (“Sex, Lies, and Mortgage Deals,” 11/13/08). But:

The abuses went far beyond sexual dalliances. Court documents and interviews with scores of industry players suggest that wholesalers also offered bribes to fellow employees, fabricated documents, and coached brokers on how to break the rules. And they weren’t alone. Brokers, who work directly with borrowers, altered and shredded documents. Underwriters, the bank employees who actually approve mortgage loans, also skirted boundaries, demanding secret payments from wholesalers to green-light loans they knew to be fraudulent. Some employees who reported misdeeds were harassed or fired. Federal and state prosecutors are picking through the industry’s wreckage in search of criminal activity.

There’s a Coen brothers movie in this. Yet sadly, as corruption heated up, business-news coverage generally downshifted into what I call service and consumer pieces: warning about the bubble and pointing to patently defective types of mortgage products. Indeed, business-news outlets, to their credit, seemed to fall over themselves to be first (bubble talk appears, surprisingly, as early as the fall of 2001) and/or loudest about calling the end of the bubble: “Is a Housing Bubble About to Burst . . . ?” (BW, 7/14/04), for example, or “Boom vs. Bust: The housing-price run-up can’t last . . .” (WSJ, 6/14/04).

I don’t mean to disparage bubble stories: these were real warnings. Fortune might well win the prize, if there were one, for bubble-bursting with “Is the Housing Boom Over?”—4,539 words by Shawn Tully, in September 2004; a year later, in October 2005, Tully answered himself with another five-thousand-plus words, “‘I’m Tom Barrack* and I’m getting out,’” about a real-estate investor. Meanwhile, the press was also warning consumers not to agree to a mortgage product containing terms that no well-regulated system would allow. “The Ever More Graspable, And Risky, American Dream” (NYT, 6/24/04). “armed and Dangerous? Adjustable-rate mortgages are pulling in new home buyers—but the risks are high” (BW, 4/12/04).

Indeed, the Journal kept after the issue and essentially called these mortgages bad on their face: “For These Mortgages, Downside Comes Later,” 10/5/04; “The Prepayment Trap: Lenders Put Penalties On Popular Mortgages,” 3/10/05; “Mortgage Lenders Loosen Standards,” 7/27/05.

It should be said these usually ran on D1, not A1, and so gave the impression of low-priority bleats from the back of the paper. Even so, there they were, and, so, yes, regulators and lawmakers did have information they could have used had they wanted to. So shame on them. These are valuable stories. But to get the public involved you need more. You need stories of institutionalized corruption. There’s no way around it.

I would suggest that in approaching the mortgage story as a consumer or investment story, the business press was trying to fight the Battle of Tarawa with a Swiss Army Knife. What was missing—and needed—were more stories like the one that ran on February 4, 2005 in the Los Angeles Times by Mike Hudson and Scott Reckard: “Workers Say Lender Ran ‘Boiler Rooms.’ ”

Dean Starkman , CJR's Kingsford Capital Fellow, runs The Audit, CJR.org's business desk. Megan McGinley, a CJR intern, and Elinore Longobardi, an Audit staff writer, provided research. This story and the two following were supported with a grant from the Investigative Fund of The Nation Institute, for which we are deeply grateful.