Why only a seven, then? To me, the likelihood that the practice (even if Merrill had completed the deal) was widespread seems low. More likely, the story is fighting the last war, the Enron scandal. Plus, in the end, this is an accounting story that, even if it were true, aimed at the margins of the crisis. We are learning that the predatory practices and boiler-room mortgage operations that could impoverish hundreds of thousands of middle- to lower-middle-income strivers—many of whom will lose homes they already owned before letting mortgage snakes in the door—is largely a creation of Wall Street. The subprime story is bad enough, all by itself.

The error was a reporting and editing screw-up, without a doubt. The story was based on a “person close to the situation” who turned out to be wrong. The fact that the story relied on a single source is problematic. Two sources are better. The paper took a risk. But, then, sometimes a single source really is that close to the situation. There’s no rule. I’m confident that the author, Susan Pulliam, an experienced and distinguished reporter, and others involved, tried hard to get it right, and just didn’t. In the end, it was an honest mistake, albeit a bad one.

To leave it there, though, seems wrong. Reporters and editors don’t operate in a vacuum. Journal staffers, I would argue, have been operating lately in a vacuum cleaner, an Oreck of uncertainty and generalized chaos, almost entirely of senior management’s making.

The subprime story broke, I’d say, on March 2, a Friday afternoon, when New Century Financial Corp., one the new breed of subprime giants, slipped an announcement onto the wire that Wall Street had cut off its credit and that federal prosecutors had opened a criminal probe of its accounting and the trading of its stock.

At the time, remember, the Journal was in the middle of an unnecessarily protracted and, apparently, bitter contest to succeed Managing Editor Paul Steiger. In March, a new editing team on the Money & Investing section, which had the main responsibility for subprime, was announced but didn’t take over until later.
In mid-April, Marcus Brauchli was named to succeed Steiger and began to reshuffle the main newsroom. So, they were busy.

Two few weeks later, Rupert hits the fan. News Corp. announced its bid for the Journal’s parent, Dow Jones & Co., touching off a tumultuous summer of front-and-back stabbing among senior managers and editors, and creating fear, loathing and uncertainty for everyone else.

That went on until the end of July, when Dow Jones’s controlling Bancroft family agreed to the News Corp. deal. Meanwhile, the subprime story is about to engulf the financial world in mid-August.

The trouble with being the Journal is that there are certain stories you have to own. Subprime is one. I’d argue, subprime is the Big One.

Add to mix the long-term story: the Journal’s parent has been in a decade-long decline, underperforming even its media peers.

The talent train at the Journal has for years generally headed in one direction: outbound.

Now, The Audit has learned, Polk-Award winning Michael Hudson, who was reporting on subprime back when most business reporters thought it meant a tough steak at Smith &Wollensky, has left the Journal to write a book, among other projects. Too bad.

All of these factors have not created a lively, carefree atmosphere, put it that way. Tense organizations press.

Well, maybe now things will calm down. Whoops! There goes the C.E.O.

These, Audit readers, are institutional issues. Creating a stable environment for journalism, having the right people in the right place at the right time, allowing them freedom to maneuver, that’s what senior management is supposed to do.

As for the correction, read it yourself; it’s short enough.

Corrections & Amplifications:

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014).

Follow Dean on Twitter: @deanstarkman.