Yet unregulated derivatives, including most recently credit derivatives, have been associated with financial disasters, including the bankruptcy of Orange County, California in 1984; the failure of Long-Term Capital in 1998; the problems at Enron culminating in 2001; and now the Big One. So it might be a good idea to cover them more consistently and less episodically.

Question what will happen when there are fundamental shifts in the rules of doing business, whether it’s Wall Street suddenly taking public tech companies with no track record or lenders giving up the concept of underwriting—i.e., looking at whether a borrower can make the payments—in favor of a belief that housing prices can go no place but up.

Don’t rely on self-interested experts. In the case of the unregulated collateralized debt obligations, derivatives, and swaps markets and the growing hedge-fund industry, most of the experts were also players. Though there are academics knowledgeable about these markets, too many reporters didn’t push for answers from anyone beyond the International Swaps and Derivatives Association, the rating agencies, or other self-interested participants.
Put me on this list, since my quest to know more started and stopped with the Bond Market Association.

When a huge new industry springs up, make sure you understand everything you can about it. It’s true that, with respect to the collateralized securities and derivatives markets and the hedge-fund industry, they were growing in the shadows, so it was harder to know what you didn’t know.
Grant describes his Interest Rate Observer as “focused pretty much single-mindedly on these mortgage contraptions.” But he says there “was not so much the general press could have known about. So much of the mortgage crisis was cooked up behind doors that were either closed by interested parties or doors that were closed except to the adepts and cognoscenti by virtue of the complexity of the structures.”

If AIG, whose business was assessing risk, couldn’t correctly calculate the risk of insuring in this market, says Grant, figuring it out in advance of a crisis may be “asking a lot of people who might have had an economics course on the way to a degree in journalism or social work.”

It’s not that the growth in these markets went unnoticed. There were multiple stories over the years remarking on their growth, the lack of regulation, and the possible risk. One Post story in 2000 noted that the market for over-the-counter derivatives had “grown 400 percent from a decade ago, 50 percent from five years ago.”

But most of us probably didn’t try as diligently as we should have to understand why they were growing and what the risks were. “To my mind, the beau ideal of a financial journalist would be modeled after the slouching and ill-dressed police lieutenant who kept saying, ‘Can you say that one more time? Because I’m not very smart,’ ” says Grant.

Look forward. It’s hard to do, especially when you’re still deep in the wreckage of the previous disaster. And it will be harder given the shrunken ranks of reporters and editors. One thing that might help is systematically discussing whether and how developments on one beat might relate to something happening on another beat. For example, in many newspapers, the real-estate section is considered separate from the main business section and more frequently viewed in terms of the local rather than the national economy. Maybe the real-estate reporters and the reporters covering national economic news should have been having lunch together, discussing what was happening at either end of the housing bubble.

The scramble over how to regulate financial markets is already under way. There will certainly be a major realignment. All players in the financial industry will be fighting tooth and nail to protect themselves as much as possible from regulation. That will include hedge funds, banks, and the rating agencies that decreed some of today’s toxic assets as reasonably safe. Huge sums of money are at stake and will be spent. That’s an obvious place to watch. The financial press should be all over that story, and should be putting teams of well-sourced reporters in place to cover the battle and the new regulatory agencies.

Martha M. Hamilton , CJR's Audit Arbiter, explores complaints about fairness, accuracy, and other issues arising from business-news stories. Send possible story ideas her way at the link on her name. A former reporter, editor, and columnist at The Washington Post, she is a writer and editor for