But even as the current crisis unfolds, something else, in some corner we aren’t watching, will be gathering.
“By their nature, crises surprise us,” says Greg Ip, now of The Economist, formerly of The Wall Street Journal. “But we should still try to report on risks even if the risks we choose to investigate aren’t the source of the next crisis. They might still be dangerous, and our reporting on them can mitigate that danger.”
Ip has a good idea about how to encourage such reporting. Noting that Pulitzers are awarded for work done in the previous year, he suggests a prize for prescience that would look back even further.
Just because something is unregulated or deregulated doesn’t mean that journalists should stop paying attention. Regulation is good for journalists because it guarantees that someone other than self-interested players will be watching and, even better, will have the ability to pry loose records that we don’t. In the twenty-five years after the Reagan Revolution, journalists got so accustomed to deregulation that we didn’t look hard enough at all the issues and problems it obscured.
We used to joke in the newsroom that we didn’t need an antitrust reporter anymore because there was no such thing as antitrust. In fact, we might have done better to ask ourselves whether any of the ills that antitrust regulation was supposed to prevent were occurring. For instance, were more and more companies “getting too big to fail”?
Even where there was regulation, there wasn’t always enough attention paid when it was relaxed.
In an excellent piece in “The Reckoning,” the New York Times series I noted earlier, Stephen Labaton took a backward look at an sec decision to loosen requirements on how much capital the brokerage units of investment banks needed to protect against risk. The banks wanted the money cut loose in order to invest in “the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.” In return for loosening the rules and agreeing to use the banks’ computer models to monitor how risky investments were, the sec was supposed to get a stronger supervisory role and more insight into investments in mortgage-backed securities, although “the agency never took true advantage of that part of the bargain.”
In 2004, however, the press paid little attention to the meeting in which that decision was made. “The proceeding was sparsely attended,” wrote Labaton. “None of the major media outlets, including The New York Times, covered it.”
We probably should have shone the spotlight more brightly on de facto deregulation, such as cuts in spending for enforcement. And we certainly should have tried harder to keep tabs on industries created completely outside the regulatory framework.
Kudos, by the way, to Bloomberg News for filing suit in early November in federal court arguing that the Fed is required under the U.S. Freedom of Information Act to reveal more details about how it is spending the bailout money.
Some state watchdogs were able to step into the regulatory void during the past decade, as then New York Attorney General Elliot Spitzer did, uncovering unsavory practices by stock analysts and in the mutual-fund industry. And when they did pick up the regulatory slack, we remembered how wonderful it is for reporters (and for readers and investors) to have regulation.
I’ve had occasion to regret sunshine-meeting laws, forced to sit through some staggeringly dull committee meetings, when, in earlier times, I would have been outside the door joking and gossiping with other excluded reporters. But, by and large, sunshine laws are good for the press and the public—and so is regulation.
As someone who spent years watching airline bankruptcies, I can attest that the transition to deregulation has its own fun and excitement. But thoughtful regulation is good for industries, which sometimes are not the best judges of the consequence of certain practices. And it’s good for consumers and investors.
It’s as American as the Freedom of Information Act and the First Amendment.