NPR Leads on SEC

Picking its spots, public radio continues to shine in credit crisis

A Credit to the Chicago Public Radio show This American Life and NPR’s new podcast Planet Money for an incisive and —dare we say it—entertaining piece on the Securities and Exchange Commission’s disgraceful performance in the credit crisis.

Media criticism of current SEC Chairman Christopher Cox has been spotty since the crisis began. But the This American Life piece is part of a needed refocusing by the press on the regulatory lapses that enabled this crisis. It was early in a second wave of media stories on the SEC and its accessibility and clear-headedness is laudable, all the more so for not dumbing down the issue.

The near collapse of Bear Stearns brought the SEC to the notice of the press as early as this spring. After one or two somewhat demure pieces, The Wall Street Journal let loose an excellent article in June. The New York Times also took a hard look at the SEC in April, and other critics chimed in, as well.

Then came a mid-summer lull. But after the SEC’s actions in July and August to crack down on “naked” short selling, and then in September to ban short selling on hundreds of stocks, the press redoubled its efforts on the hapless watchdog with a new, more forceful wave of SEC analysis. Increasingly, business reporters have begun to wonder in earnest why the SEC has been virtually absent—except for rattling shorts’ cages—while Wall Street, the commission’s purview, has been crumbling to its foundations (such as they are).

That’s where This American Life comes in with its September 12 segment “Now You SEC Me, Now You Don’t,” which NPR re-released as a Planet Money podcast on September 17. Reporter Alex Blumberg cut to the chase right away:

The chairman of the SEC, the Securities and Exchange Commission, is often referred to as ‘Wall Street’s Top Cop.’ And this past year, the year in which the global financial system seemed perpetually on the verge of collapse, collapse due in large part to complex, unprecedented and, as we now know, extremely risky financial products created and sold on Wall Street, you might expect to be hearing a lot from Wall Street’s main enforcer. But Christopher Cox, the current chairman of the SEC, has been notably absent from any public housecleaning.

In this way, the piece does what so many fail to do: place both Wall Street and absent regulators at the heart of the credit crisis—without mincing words.

The piece describes how the SEC left its regulatory mandate unfulfilled, and when Cox finally did get around to, um, addressing the crisis, he seemed not to understand the source of the problem, focusing on naked short sellers instead.

Following Cox off into the eelgrass, Blumberg explains short selling to us, then naked short selling. (A primer: short sellers borrow stocks and sell them, hoping to replace them later when the share price has declined. Naked short sellers short a stock without actually borrowing it. It’s wrong, but hardly the reason for the crisis.) And here is where the piece really starts to take off: former SEC officials speaking openly—and not all that kindly—about the policies of their one-time employer.

Jim Coffman, who used to run investigations in the SEC enforcement division, patiently explains short selling in layman’s terms. Here he is in an exchange with Blumberg:

Coffman: It would be no different in many respects than selling a car that you don’t own. You get the money, you put it in your pocket, and you don’t deliver the car…. In some circumstances that would be considered—that is, selling an item you don’t own would be considered—a criminal activity. That’s not true in the stock market.

Blumberg [laughing]: And why is that not true in the stock market?

Coffman: Ah… to ah, to paraphrase a presidential candidate: That’s not in my pay grade.

What follows is a brief on the historical origins of naked short selling, which involves wheelbarrows. But, more importantly, Blumberg goes on to put naked short selling in context, as a “fringe activity.”

Former SEC chief accountant Lynn Turner:

It seemed to be strange that the SEC would be taking this particular path to trying to deal with the subprime crisis, when there obviously were other, bigger issues out there…

This is a clear analysis, presented with a light touch. It is a useful starting point for someone wanting to wade into the deluge of financial-press coverage—or a raft for someone who has tried to wade through but feels like they are being swept off their feet.

And it was on the leading edge of a torrent of commentary and reporting.

Bloomberg’s Jonathan Weil excoriated Cox and the SEC September 18, the same day Portfolio published a lengthy look at the situation. And the same day, not inconsequentially, McCain said that he would dump Cox were it in his power.

Given the cover of a presidential candidate’s fire, combined with yet another series of SEC proclamations on short selling, the coverage escalated wildly.

NPR’s All Things Considered stepped into the fray September 19—albeit with less vitriol toward Cox—as did BusinessWeek. The Financial Times noted Cox criticism September 21, and again the next day. Bloomberg, with even greater energy, took on the SEC September 22. The Associated Press followed on September 24.

And there are many others.

All of which is to say that This American Life and Planet Money have company. In fact, they didn’t even take the most rigorous look at the SEC’s failings—read Jesse Westbrook and Robert Schmidt’s excellent Bloomberg piece for that—but their segment stands out for a couple of reasons.

For one, the story was one of the first in the most recent wave of coverage, and came before John McCain’s shot over the bow brought the issue to such prominence. This clarity of vision points to a strength not just in this segment, but in Planet Money podcasts more generally. Because NPR is not one of the financial-press mainstays, it doesn’t need to break the bank to give us detail after detail about the financial meltdown and bailout. That frees it up to look at larger issues like the SEC’s failures. (To give another example, Planet Money focused on the power shift the bailout could entail several days before such an article appeared on the front page of The New York Times.)

This brings us to our second point. In addition to thinking big, This American Life and NPR offer analysis that everyone can understand, even if they don’t know what a credit-default swap is. The SEC piece even uses humor, a quality that rarely graces the business news.

With the leap to the front pages, business news suddenly has a much broader audience. In fact, the business press might even consider this difficult time an opportunity to bring more readers into the fold. But financial journalism is bit intimidating for neophytes—especially these days, when many articles require a glossary of terms.

What This American Life and Planet Money provide is business news for smart, but not necessarily initiated, listeners. This isn’t to say Chicago Public Radio and NPR are offering Business News for Dummies. Their strength is accessible coverage that is worth listening to even if you have been following the business press.

We loved This American Life and NPR News’s Giant Pool of Money episode several months ago, and the same folks are behind this new coverage. The average Planet Money podcast is less produced, but what the podcasts lack in panache, they make up for in substance.

Like that piece on the power shift a bailout could entail. Or a discussion with a major banking lobbyist on what his clients want most from a bailout. Or an interview with a prominent economist who describes alternatives to the bailout.

This American Life plans another financial episode this weekend. We predict it will be worth a listen.

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