Before joining Conde Nast Portfolio, Jesse Eisinger had already compiled a record of skeptical reporting on and analysis of Wall Street as a reporter and as a columnist for the The Wall Street Journal.
His time at Portfolio has roughly coincided with the financial crisis, which has only increased the need for Eisinger’s arms-length approach.
In his first column for Portfolio, in March 2007, Eisinger called derivatives a “$300 trillion time bomb” and said “When it comes to the really big stuff—such as global market collapses—derivatives could turn from vaccine to contagion.”
The summer the storm broke, Eisinger blasted the credit-ratings firms, said we were likely in for a crash two months before investors caught on, and wrote a remarkable piece predicting the end of Wall Street, five months before Bear Stearns went under.
This year, he questioned Lehman Brothers’ books in March, has kept the heat on Treasury Secretary Paulson, and went digging into the advent of the credit-default swap, an instrument that has amplified and in large part caused the collapse.
At The Wall Street Journal, where he wrote for seven years, Eisinger started the weekly Long & Short column and the daily Ahead of the Tape column, which still runs daily on the front of the paper’s Money & Investing section.
Eisinger recently spoke with The Audit about the crisis and how the media have performed anticipating and covering it.
The Audit: It seems to me that in the business press, institutionally, there’s just not enough— not necessarily skepticism—but aggressive skepticism. Is it in short supply and why is that?
Jesse Eisinger: I do think it’s in short supply. Clearly it is.
I think that the people who have gravitated to business journalism didn’t get into journalism for the same reasons that people in political journalism tended to get into journalism, which was this sort of vestigial post-Watergate sense that we should be a check on power. I don’t think that people in financial journalism gravitated there because of that.
I sort of stumbled into financial journalism, having no knowledge of anything to do with finance or really the ability to distinguish between a stock and a bond. But I did have this sense that what I wanted to do was be a check on power in some sense and to hold people responsible for their decisions. And so, I just don’t see that as the modus operandi of the business press… questioning authority in a fundamental way. It’s not necessarily fired by a sense that we should right society’s wrongs.
That’s what motivates me—and I think that’s a little bit arrogant, so you’ve got to check yourself and be humble in that process. But the fundamental reason why we should be journalists is to hold people accountable and be checks on power. We have to have a questioning, skeptical, adversarial mindset.
TA: Is it harder to do that in business reporting?
JE: We lived in a period where the operating ethos was that business was efficient; that markets could solve our problems; that the imaginative people in our society was entrepreneurs, and it was very easy to be disdainful of government. There were critics of government from the left and the right, and we disdained government as sort of a cesspool of incompetence and corruption. It was very easy to write critical stories about government in that context.
It’s much harder to write critical stories of companies when we’re celebrating these people as innovative, as entrepreneurial, as groundbreaking. And they also appeared to be very successful, so it was very hard in the late 1990s to be skeptical about the tech bubble.
And then we had this next wave where hedge fund managers and private-equity firms and Wall Street banks were making so much money it just seemed like they knew what they were doing. The level of incompetence is even shocking to me and I was pretty skeptical about it. But these people at the heart of it, especially on Wall Street, were just incompetent.
TA: I notice that you use past tense. Do you think this is an epochal shift? That this is all over—the dominant narrative over the last twenty-five to thirty years that commerce was triumphant and that government was just in the way. Is that era at an end?
JE: This is one of the major questions we’re going to be addressing in our industry over the next several years. The death throes of this market ideology and what rises in its stead and whether the market forces can beat the forces of regulation, to use a word that has to mean a lot. Are they going to beat them back? Are they going to be successful? They were successful after Enron and WorldCom—business went on more or less as usual.