“Mr. Howard made it clear to the mortgage broker that he could not read or write, but his loan application erroneously claimed he had had 16 years of education.” —Center for Responsible Lending report, “IndyMac: What Went Wrong?” June 30, 2008

“That was your homework—to watch Boiler Room.”—Lisa Taylor, Ameriquest loan agent, quoted in the Los Angeles Times, February 4, 2005

“It was unbelievable. We almost couldn’t produce enough to keep the appetite of the investors happy. More people wanted bonds than we could actually produce.” —Mike Francis, executive director, residential mortgage trading desk, Morgan Stanley, quoted in “The Giant Pool of Money,” This American Life, May 9, 2008

A PDF download of the original, complete “Boiler Room” story can be purchased from CJR by clicking here:
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The nation’s business press at this point must be feeling a bit like the London fire department during the Blitz, scrambling from one financial emergency to the next—a Wall Street pillar collapses here, a bank seized there—each calamity more complex and dangerous than the one before, day after day, week after week.

No sooner had the ink dried on inside-the-boardroom accounts of Bear Stearns’s collapse—in The Wall Street Journal, Fortune, even, for some reason, in comic-book form in Condé Nast Portfolio—when a new series of bank write-offs threatened the global financial system—Whoops, there goes Iceland! (See: Subprime Wave Sweeps Over Iceland, The Associated Press, April 7, 2008); venerable Lehman Brothers became a running emergency, and it was followed swiftly by crisis at Fannie Mae and Freddie Mac, the twin pillars of the U.S. mortgage market. In this environment, the second-largest bank failure in U.S. history—the discovery of IndyMac’s corpse in July—barely caused a ripple in the zeitgeist. In the face of global meltdown, what’s a few hysterical depositors running around Pasadena?

At this point, I think, business-press readers should be fairly well acquainted with the financial product known as the mortgage-backed security—its derivatives, insurance products on those derivatives, various methods of rating these instruments, the pros and cons of mark-to-market accounting, FAS 157, the role of short sellers in a post-industrial economy, etc. Put it this way: if you don’t know by now that you don’t have to actually own a collateralized debt obligation to hedge against it with a credit-default swap, well, it’s not the business press’s fault.

Talk about more than you want to know.

As a business-press critic, then, I have been reading with no small degree of sympathy as news organizations, which themselves are on thin financial ice, try to cope with a story that promises to surpass in scope, gravity, complexity, and social and economic consequences anything this generation of business reporters and editors has ever experienced.

But, as they say on the loan-workout desk over at Countrywide Financial, sympathy only goes so far, you know?

It seems to me that well into Year II of the Panic, the business press is in the process of making the same mistake it made in the run-up to the debacle: focusing on esoteric Wall Street concerns and ignoring the simplest, most basic, but most important one—the breathtaking corruption that overran the U.S. lending industry, including and especially the brand names, and the extent to which Wall Street drove that corruption. Let’s just call it a case of over-sophistication. Its persistence, however, will only impede journalists’ ability to cover this thing going forward.

In May, The Wall Street Journal published an account by reporter Kate Kelly of the final days of Bear Stearns. The three-day series, complete with pen-and-ink illustrations, was widely praised and was followed by others, notably Brian Burrough’s account in Vanity Fair that, controversially, raised questions of whether short-sellers, aided by overheated speculation on the financial network CNBC, may have had a hand in the firm’s collapse.

My aim isn’t to choose between the two—they’re both fine—but to note that both treated the global credit panic as a given, as though it were the result of some kind of natural disaster or a particularly nasty turn in the business cycle.

I believe my former colleagues, in rushing into such high-concept fare, have underplayed a good story. Sure, we have an idea that bad practices occurred, along with bad judgment, but do we really know the sweep of it all? Since it’s just us business reporters here—just us chickens—let me illustrate what I mean with a quiz. Match the allegation with the institution. Answers are at the end of the piece.


1. Handed out copies of the movie Boiler Room as a training tape

2. Partnered to sell its “PayOption Arms” with a brokerage owned by a five-time felon, whose convictions included gun-related charges

3. Forbade loan officers to check borrower income on certain loans

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.