On November 3, the Journal advanced the ball with a fine story on a consultant/Yale professor whose risk models failed to protect AIG from a colossal system failure. But a look at the key paragraph—known as the nutgraph—reveals that the story asks questions that are already answered. The emphasis is mine:

A close look at AIG’s risk-management operations, and the rapid-fire chain of events that crippled the firm, raises questions about the run-up to the financial crisis: Did firms like AIG plunge into lucrative but perilous new markets without thoroughly understanding the pitfalls? Had the sheer complexity of the financial products made it all but impossible to fully calculate the risk? And did firms put too much faith in computer models to assess dangers?

The answers are obvious—aren’t they?—just as they were the moment they were written.

I don’t mean to belittle this excellent story, but I believe comparisons with the earlier entrants are instructive. It is good to probe the rubble of an already failed financial experiment. It is better to reveal—expose, bring to light—the indirect transfer of public funds—money needed for food stamps, unemployment benefits, Medicaid—to Wall Street investment banks engineered by current and former executives of one of the beneficiaries, all in the face of fierce opposition from the most powerful firm on Wall Street. (And to think that readers get it for free on the Internet, without so much as a thank you.)

A five-part series by Bloomberg at the end of last year, while uneven, and, it must be said, not beautifully written, exemplified the wire service’s sense of urgency and mission.

One story found the thirty-something bankers and lawyers who met after hours at Deutche Bank to create the standardized contract that allowed for subprime securitization:

Those meetings of the “group of five,’” as the traders called themselves, became a turning point in the history of Wall Street and the global economy.

Another explored the corruption of mortgage-industry culture with a profile of a mortgage boiler-room operator who with the profits underwrote an action movie starring his fiancee in which a $1.2 million Ferrari Enzo is crashed into a concrete barrier. The story says Wall Street funded it all, including this detail:

Sadek [the boiler room operator] says that with the support of Citigroup, which funded the loans, he pioneered lending to homebuyers with credit scores of less than 450. Citigroup spokesman Stephen Cohen said the bank doesn’t comment on its relationships with clients.

Another revisited ratings-firm collusion:

Rating Subprime Investment Grade Made `Joke’ of Credit Experts

The series, which won a Loeb Award, ended with long, jumbled account that tries to tie it all together—from the boiler rooms to the I-banks, to the raters, to a broke Icelandic city that invested in junk CDOs to, yes, a six-year-old girl who lost her bike during a foreclosure in Dorchester, Massachusetts.

Savannah got her first bicycle for her birthday in August, pink with streamers dangling from the handlebars. She decorated the present from her grandmother with stickers of Dora the Explorer, her favorite animated character. When sheriff’s deputies emptied the house and changed the locks, they left Savannah’s bike behind.

Schmaltzy? Sure. Does the story work? Not entirely. But does it have heart? Yes, it does.
Another story, more than a year old, asked a central question: How much of the defective securities did Goldman sell on global markets while the future Treasury secretary was running it?

Notice the language in the headline (my emphasis):

Paulson’s Focus on `Excesses’ Shows Goldman Gorged

Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that “yesterday’s excesses” aren’t repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.

Paulson, 61, doesn’t mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.

Dean Starkman writes and edits The Audit. He is CJR's Kingsford Capital Fellow.