Gary Weiss has an interesting post up at his Web site on the limited power of the press.

Someone emailed him a copy of a commentary he’d written for BusinessWeek back in 1998, where, in the wake of the LTCM near-catastrophe, Weiss called for restrictions on leverage.

Here’s what he wrote then:

It’s easy to lash out at LTCM and at hedge funds in general. And yes, new regulation is necessary—but not aimed randomly at the funds. Instead, regulators should focus on the high-octane “fuel” that powered LTCM directly into a brick wall. What is really to blame here is the excessive use of leverage, especially when investing in derivatives and currency. Whether such leverage be employed by a hedge fund or trading desks at a bank or securities firm, it is currently almost entirely unregulated.

And:


Such massive bets as LTCM placed can go cataclysmically bad. But they would be impossible if some limits were placed on leverage. Regulators need to ride herd by setting trigger points at which investors would be forced to disclose their leverage but not necessarily their investment strategies. Gauging precisely where to place the limits is the job of the Fed and other agencies.

These rules should apply to any investment vehicle doing business with U.S. financial institutions. This includes so-called offshore funds run by U.S. hedge funds and other trading firms.

Would that somebody had listened to Weiss at the time. He would have blown a gasket then had he known big boys like Goldman Sachs, Lehman Brothers, and the like would all employ leverage ratios even greater than the 25-to-1 he bemoaned here.

But the real interest for us is Weiss’s point about the press and the limits of what it can do, in which he riffs off some things Audit Managing Partner Dean Starkman has said—most importantly: The press doesn’t have much power if nobody in power listens. Why?

This commentary appeared in the largest business magazine, circulation 1 million. Nobody noticed at the time, or since. Even I forgot about it, and I wrote the dang thing…

It is the responsibility of government to adequately regulate the markets. Sure, we in the media can point the way, but, as Chris Byron once said, we’re just “seeing eye dogs” for the blind regulators. If they choose to fall off a cliff, because that is what Wall Street wants and they are too captured to do anything about it, there is nothing the media can do to stop it.

That’s exactly right. I will say, though, that the press does have the power to make an issue impossible for regulators and Congress to ignore. The Drumbeat—as perfected by the likes of Gretchen Morgenson—where reporters or columnists get an issue by the jaws and shake it to death.

You can never tell as a journalist what story is going to take off and what won’t. Sometimes you think you’ve got a sure hit and it fizzles. Other times you don’t think much about one and it gets buzzed about.

But one and done doesn’t work most of the time. If we think something’s important we’ve got to hammer it home, even if somebody else has already done a similar story.

It’s easier to not hear one tree falling in the forest than it is a hundred.

Weiss takes this on a bit here:

Journalism is not as powerful as some people think. Even if this had been a cover story, even if it had been a page one story in the Wall Street Journal or New York Times, even if everyone had gotten on the leverage bandwagon, in all likelihood the outcome would have been….. nothing.

Why? Because leverage was a potential problem at the time. It was a danger, and so it was until the bubble burst. And history proves, time and again, that our government does a crappy job of heading off looming threats, whether it be leverage or Al Qaeda.

But that’s no excuse not to try, as I know a tough investigator like Weiss would tell you. Otherwise, what’s the point?

And journalism and regulation are sort of symbiotic. One needs the other. In an era of hands-off, it was much harder for journalism to have an impact. We’re finally moving away from deregulation and toward more oversight.

I think that means good journalism can have more impact now than it has in recent years.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.