Gretchen Morgenson is a leader of what might be called the accountability school of business journalism—a school with, in our view, all too few members. Luckily for readers, however, Morgenson has an usually prominent platform: As an assistant business and financial editor at the The New York Times, she writes both a weekly column and news and investigative stories under a regular byline.
Her skeptical and arms-length approach to financial institutions is by now well-known among regular business-press readers, and her work can be said to have set the public agenda on issues ranging from executive compensation to Countrywide Financial. One trait that sets her apart, we think, is that she grabs hold of an issue and doesn’t let go. We think drumbeat investigative coverage is an effective but underused journalistic tool.
A Times staffer since 1998, Morgenson won the Pulitzer Prize in 2002 for beat reporting for coverage of the dot-com crash. Previously, she wrote and edited for Forbes, Worth and, surprisingly, Vogue, for five years at the start of her career.
The Audit caught up to her this week:
The Audit: How do you think we did covering the run-up to the crisis before 2006? And take that as broadly as you want.
Gretchen Morgenson: I think one of the things that’s very difficult for financial reporters is that they can cover things that they can see and that are measured by [something], like the Dow Jones Industrial Average or home-price appreciation. They can cover that stuff fairly well because they see the daily close or month-to-month changes or the quarterly changes, earnings, etc.—things that are supposedly measurable, right? It’s the horse race, and that’s the kind of thing that everybody is pretty good at.
But I think that when it comes to the bond market, which is far more opaque—difficult to follow, difficult to track—but way more monumental and significant, then we kind of fall down on the job because it doesn’t have a daily market mechanism that we can measure “ooh, it’s up!” or “ooh, it’s down!”—that kind of thing.
So anything that involves fixed-income is just by its nature more difficult for people in our business to cover. And that is really what is central to this thing.
… I think people covered the house-price appreciation, the bubble, the boom—I think people covered that pretty well. There were a lot of stories about “this can’t go on,” everybody knew it was almost like the new dot.com. People at cocktail parties were talking about the value of their home. That’s a dead give away that it’s a mania.
So I think that was well-covered and certainly by real-estate reporters. But what I don’t think was well reported was the Wall Street-enabler aspect of it, and the role of securitization, and certainly the questionable practices. I don’t think people understood the degree to which mortgages were being given to people just as long as they were ambulatory or breathing. That was something I think that could have used a lot more coverage earlier on in the game.
TA: One of the questions I get from readers a lot is, How much responsibility does the press have? The press couldn’t have prevented this….
GM: No, no no no…. I get some of this from readers, but I end up emailing them the stories that they either never saw or forgot about. I think there’s a lot of that: “Oh, you’re so smart. Where were you?” There were some reporters doing pretty in-depth and questioning, probing work on this stuff, but I think it’s very easy to say that nobody was on the scene. The press can’t prevent these kinds of things. Yeah, they can expose the practices and that should have been done more assiduously. But it was this huge momentum that was fed by this demand from investors and this fee machine on Wall Street and among the mortgage brokers and bankers and lenders. So, I can’t imagine how reporters would stop that.
TA: When you find an issue or something that’s not right, you keep pounding on it. I’m thinking of Countrywide, executive compensation, going back years and years.
GM: This [mortgage crisis] was a very complicated story from the very beginning, not only because it was about bonds, which are more obscure and difficult to follow and track and mortgage, which are difficult to hedge and predict. But you had all these different players. You had subprime first, then you had Alt-A, then it infected prime, then you had the securitization and the different aspects of that that made this far more complicated than just a dot.com story where it was companies that were able to tap into the capital markets with no product, no earnings, no nothing. That was a pretty straightforward story.