—David Wessel, the WSJ’s economics editor, displayed admirable candor to a roomful of his financial press colleagues, I thought, in talking about the press’s performance before the crash.
“I can’t find one check on the financial system that succeeded,” said David Wessel, the economics editor of The Wall Street Journal. Not the rating agencies, not the vaunted risk management programs. “I think we failed, too,” he added, looking around the auditorium.
Where the press fits into the crash has been a big topic around here, as our regular readers know. As far as I’m aware, we’re still the only ones to study pre-crisis press coverage systematically, with our “Power Problem” story in CJR’s May/June issue, which sifted through thousands of Wall Street and lender-related stories published between 2000 and mid-2007 in the nine most influential business outlets (note: the link only goes to the first screen; write to email@example.com for a hardcopy). We also posted a color-coded spreadsheet of 730 stories—the good, the bad, the ugly—to give a flavor of what was and wasn’t written during the period when warnings would have made a difference. Chris Roush got the discussion started with the case for the defense. Damian Tambini of the London School of Economics published an important press study in the wake of the crash. I’d love to see other work on the subject.
A couple of quick points.
This isn’t about finger-pointing or, it goes without saying, media-bashing. It is about finding ways to close the knowledge gap between Wall Street and the broader public. I’m not talking about raising “financial literacy,” like how to avoid getting raked on your credit card, and the other usual nostrums. I’m talking about boosting the public’s general sophistication level about the players and the process.
My take in “Power Problem” was that the absence of investigative stories on bad banks and their Wall Street backers was the main reason everyone, including the press, was so caught off-guard. So there should be more of those. But I’d be interested in other approaches. Wessel deserves credit for understanding the stakes—“We’re not covering sports,” he says—and for bucking a view held by a surprising number of senior editorial figures who can find fault with the entire financial system but none with the financial press. (h/t Roush.)
—House of Cards author William D. Cohan zeroes in on a couple of important figures of the crisis who haven’t received nearly enough scrutiny: Warren Spector, the former co-president and head of the fixed-income division at Bear Stearns, and Dan Jester, former Goldman Sachs banker turned Treasury official.
—Finally, as long as we’re picking through the crisis rubble, economists are another group that hasn’t gotten the scrutiny they deserve for their role in providing intellectual support for a system that crashed. That’s why the Journal’s annual survey’s of top forecasters might provoke a doubletake. Still, these surveys are interesting and worth reading, if with a grain of salt. Some of the comments are interesting, too.