In a separate piece the same day, Dow Jones informed us:

Securities & Exchange Commission Chairman Arthur Levitt said that additional regulation of derivatives is not necessary ‘at this point.’

In response to reporters’ questions on today’s release of the General Accounting Office study of derivatives, Levitt said, ‘I’m not prepared to go out and call for more government regulation today.’ Levitt was speaking at a Investment Company Institute conference here.

And Levitt wasn’t the only government official making the round of industry conferences. Here is Dow Jones the following day:

Treasury Secretary Lloyd Bentsen said the federal government must not be ‘heavy-handed’ in dealing with derivatives.

‘The attention focused on these issues by appropriate committees of Congress and the GAO can also be constructive. However, I believe we need to be careful about interfering in markets in too heavy-handed a way.’

Bentsen’s remarks were contained in text of a speech he is giving before a National Association of Securities Dealers conference here.

Where was the press in all of this? Generally abdicating its imperative to shape the story—to sift through disparate pieces of information and put them in their places—and employing instead a false evenhandedness.

Let us explain.

Some articles merely summarized the report, avoiding the issue of significance entirely. But often reporters brought in opposing voices. That is standard, of course, and not a problem in and of itself. The problem is that reporters seemed at a loss over what weight to give opposition to the report. The result was that they gave it equal time—or more. And so the GAO, which had spent two years making itself an expert on derivatives, became just one voice among many, only to be gradually shouted down by a persistent opposition.

In reality, the GAO was the authority here, and unlike many of its opponents, didn’t have a horse in the race. Some opponents of the bill called the document politically biased in an effort to discredit it. But the problem with that accusation, which seems to have been aimed at Democrats, a few of whose members were at the forefront of the call for legislative action, is that—while solutions may have differed across party lines—concern over derivatives was not entirely limited to one party.

Besides, the GAO has earned considerable credibility over the years. Despite years of excessive government secrecy, they are one of the few government sources we can still count on for real information.

Nonetheless, here is the WSJ May 18, 1994:

The GAO report drops into a seething pool of vested interests, including regulators, legislators and dealers, all of whom have already offered their own, sometimes conflicting answers to three basic questions: What are derivatives? How risky are they? And what, if anything, should be done to regulate them?

There is far too little weighting of the various parties here. It is just plain wrong to equate all these “vested interests.” As if the Congress and private industry are two equivalent, equally self-serving parties. Even equating the industry and regulators is too simple, although the two groups were way too intertwined.

Manifesting that unhealthy connection, the industry and regulators continued to hammer away at the GAO. Here is Dow Jones, May 19:

Yesterday, the GAO released a long-awaited study of derivatives, which drew strong criticism from industry representatives. Market participants and regulators questioned the underlying premise of the report, which assumes that the increasingly close linkage among various financial markets, including derivatives, threatens widespread bank losses in the event of one failure.

Yet the banking system has withstood an assortment of crises in recent years, noted Steven Hellinger, director of research for the New York State Banking Department.

On May 19, the AP presented the problem as one of public perception:

Many fear these hybrid concoctions traded by banks and brokers could trigger a financial crisis, even though most are perfectly safe. But that’s not reassuring to those who remember how the banking industry slogged through the junk bond and commercial loan crisis, risking big sums of other people’s money.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.