Welcome to the List, a comprehensive catalog of relevant stories produced by major business-news outlets on the lending industry and Wall Street during the run-up to the mortgage crisis.
Compiled by the staff of The Audit, the business-press section of the Columbia Journalism Review, the List is intended as a companion to “Power Problem,” a 6,400-word article in CJR’s May-June issue that asks the question of whether the business press, as many of its practitioners claim, provided the public with adequate warnings of the looming calamity—and answers in the negative. We also hope the List, now at 727 stories, will be used as a resource for further research both on the financial press in the run-up to the crisis and its role in the financial system, generally.
How to Read This List: We went into our story with a hunch: that the press, in fact, did not provide adequate warnings. To find out if that was true, we searched for stories that could reasonably be interpreted as significant warnings, with a particular eye for investigative stories into the heart of the problem—predatory lenders and their Wall Street backers (e.g. “Mortgaged Lives: Profiting From Fine Print With Wall Street’s Help,” NYT, 3/15/00). We took several steps, outlined below, to do so.
Warnings come in many forms, of course. In our search, we came across plenty of stories that were useful to readers in all sorts of ways, even if they weren’t investigations (e.g. “Blacks Are Much More Likely To Get Subprime Mortgages,” WSJ, 4/11/05; “Clouds sighted off CDO asset pool,” FT, 4/18/05) and added them. We also found stories that covered lending and Wall Street in depth, and may have been fine stories in other ways, but weren’t really warnings (e.g. “Battle Ready: In Morgan Stanley Rebellion, Purcell Puts Up Tough Fight…,” WSJ4/4/05). We included those, too, to give a sense of what Wall Street coverage during the period actually looked like. We also included bits of context to give a sense of what was happening on the finance beat at the time (e.g. “Spitzer Probes Sub-Prime Mortgages,” NYT, 4/29/05). As we went, we saw that stories fell into identifiable types (e.g. “consumer stories” about bad mortgages, “investor stories” about a housing bubble, etc.) and so placed them into seven categories.
An important point: While the List may seem long, keep in mind that the business press produced more than a half a million news items during this period, so in a sense the stories on the List are drops in a very large bucket. There are no non-lending and non-Wall Street stories on the List, nothing about iPods, the auto business, etc.
The Categories:: Mainly to make the List more readable, we broke stories into categories by type and assigned each type a color:
The headlines mostly speak for themselves, but we’ve sprinkled the List with a few excerpts from the stories and some comments from us as hints and guideposts. Readers should think of red stories as strong warnings and green stories, all shades, as warnings of one sort or another. Other stories provide context. Because something isn’t red or green doesn’t mean it’s bad. Admittedly, cramming seven hundred-plus stories into seven categories is a bit arbitrary—some could fit into several categories—but this helps with the big picture.
Bylines: This project deals with institutional questions, not individual performance. Even so, we’re happy to recognize good work when possible. If you see a byline, that means we think the piece provided information of some sort on brewing problems.
The List contains no links—yet: CJR plans to upgrade the List in various ways as money becomes available. If you’d like to chip in, please consider a donation to CJR, either via this link or by check to Columbia Journalism Review, c/o CJR, Fund for Journalism’s Future, 2950 Broadway, New York, NY 10027. Contributions are tax deductible. Or just subscribe.
Our Search:
We looked at nine business-news outlets:The Wall St. Journal, The New York Times, The Washington Post, the Los Angeles Times, the Financial Times, Bloomberg, Forbes, Fortune, and BusinessWeek. Searching on the Factiva database, we looked under various screens matching commonsense terms with major Wall Street institutions that ran into trouble and the lenders most closely associated with the subprime meltdown.
Institutions:
Wall Street: AIG, Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley. Lenders: Ameriquest, Citigroup, Countrywide, Fannie Mae, Freddie Mac, IndyMac, New Century, Washington Mutual.
Terms:
Wall Street: Mortgage backed securities; Securitization AND mortgage; Collateralized debt obligation(s); Derivatives. Lenders: Mortgage lending; Predatory AND lending; Subprime AND mortgages; Bubble AND housing.
Factiva searching is an inexact science and the number of word combinations and institutions is potentially endless. And there were plenty of technical problems, chief among them that the Los Angeles Times, Bloomberg, and the Financial Times aren’t on Factiva in meaningful ways. The FT’s online archive doesn’t go back before 2004, etc.
Probably the most important step in the search was to ask all the news organizations for help in finding their best work. All but The Washington Post (which expressed regrets) pitched in. We are grateful for the cooperation we received.
Finally, we came up with a list of reporters whom we had come to know as producing the best stuff and did a final cross check using their names.
Is the List airtight? No. Does it fairly present the best warning coverage about Wall Street and subprime lenders during the period? We believe it does.
The List Remains Open. We welcome corrections, suggestions, and/or candidates for inclusion. Please send them to editors@cjr.org. We also welcome your reaction to “Power Problem,” our analysis based on the List, either by email or in comments online.
See David Jackson's series on mortgage fraud in the Chicago Tribune
Posted by Ray Gibson on Thu 7 May 2009 at 01:36 PM
Please consider the work of Marketwatch.com
Posted by Greg Robb on Thu 7 May 2009 at 01:48 PM
Impressive job, Dean, but I don't know about the premise. The place for big warnings way out ahead of the crash--1995 or 2002, say--was on the front page of the major dailies, and on the teevee. Anywhere else, it doesn't matter. Proof that the biz press did not do enough to warn us is built into the fact that the L.A. Times, WaPo, NYT and even the WSJ did not, ever, publish a story saying "holy mother of fuck, there's $30 trillion (or $60 trillion, or $400 trillion) in notional assets floating the over-the-counter derivatives market! One false move and the taxpayer is toast!" That story could have been written in 1997. It could have been written in 1994. It sure should have been written in 1998 after the LTCM fiasco. It was not.
The story did not get written because of the way main stream journalistic institutions--the only institutions that could have made a difference--see their mission. They are not predictive. They do not go out on a limb. They do not look at things systemically. They do not test the statements of Important and Powerful People against the most basic tenets of logic. They trust the experts. They call no one a liar.
And so we have . . . this. And so we have Iraq all to ourselves. And so we have a health care reform debate that forecloses the possibility of a single-payer system. And so we have myriad other impossible situations, absurd conditions, all considered "normal."
Posted by edward ericson jr. on Thu 7 May 2009 at 11:35 PM
if you thought this was bad where business reportage on the economic crisis in the USA was concerned, you should actually do a similar check on the Indian media. not only did we goof mega-major on reading the crisis, so did the finance minister of the country until as late as August 2008, when he kept insisting that the Indian economy was pretty much "insulated" from the crisis engulfing the rest of the developed world. He, like Nero, fiddled on while Rome burnt and insisted on quibbling on semantics, contending "there is no recession" (read as two negative quarters in succession) in India. Meantime, around him in the real world, vegetable and food prices sky rocketed, sector after sector crashed including real estate, construction, retail (and this took all the hype and hoopla and brouhaha that the government used to ram it through in segments including grocery, so far dominated by small vendors and an informal but highly effective and proven marketing system that has been serving the country by and large okay for years), manufacturing, IT, small and medium industries, the FMCG sector etc. Jobs vanished overnight, particularly in newer sectors. Then suddenly the epiphany moment came to the government in September after the US came out of the closet on the crisis. They admitted that not everything was all that okay (still no recession!). The FM was replaced although general elections were round the corner either way. And a tried and tested senior in the key ruling party, Congress, who is also external affairs minister took over. The FM was moved to the Home ministry.
Then, as early as March 2009, our commerce secretary announced that jobs would be back in the market by April 2009, making the recession itself a big joke. After all, a whole economy crashed like nine pins but our labour ministry has been insisting that overall, only five lakh or half million jobs have been lost in all this while. Now, our major business dailies such as the Economic Times (circulation second only to the WSJ) have been proclaiming, in the thick of a multi stage election process, that the turnaround is here. Deliverence, so to speak. The timing of reports is of course, expected to show the ruling Congress and its allies in flattering light.
It isn't jus the economuic crisis they goofed up on in this period. One of the coutnry's biggest IT firms collapsed completely thanks to fraud and embezzlment by its board of directors. Not a whisker of a suggestion in the run-up by financial dailies. In fact, the trend is that journos hype up select businesses, sectors and listed companies to boost their stock value, thus actively aiding newspaper owners with diverse stock interests to profit unfairly at teh expense of the ordinary investor!! Now, we're being told that "recession" is a psychological thing and that a suggestion of a turnaround ( you should read the grossly inaccurate adn data-less stories run to buttress this!!) will actually multiply believers and bring the economy back in the green!!
Posted by prabha on Fri 8 May 2009 at 01:26 PM
It's a very restricted list of publications, nevertheless retrospective analysis is worthwhile to see what indicators or analysis prompted those who showed some foresight. e.g. Roubini was prompted to consider a credit collapse by speeches Geithner made while at the NY Fed.
Or this, over 12 months before the credit crunch; nearly 2 years before the market crash:
http://www.atimes.com/atimes/Global_Economy/HA11Dj01.html
Asia Times Online,, Jan 11, 2006
Of debt, deflation and rotten apples
By Henry C K Liu
Deflation is a problem that looms over the horizon when the US debt bubble bursts to slow down the economy. ...
Central banks fear deflation more than inflation
Although Greenspan never openly acknowledges it, his great fear is not inflation, but deflation, which is toxic in a debt-driven economy. "Price stability" is a term that increasingly refers to anti-deflationary objectives, to keep prices up rather than down.
What has happened to Japan for the past decade is a terrifying warning to Greenspan. The fundamental problems separating the US and Japanese economies are structurally different, yet the financial symptoms of economic imbalance are strikingly similar. Japan, with its huge trade surplus denominated mostly in US dollars, is the world's greatest creditor nation externally, but the world's greatest debtor nation internally. The United States, the world's greatest debtor nation externally, is the world's greatest sovereign creditor through dollar hegemony. What happened to Japan was that even with the world's largest holding of dollar reserves, the country was unable to ward off a protracted deflationary financial crisis caused structurally by exporting wealth for paper that is useless in Japan. The more dollars Japan earns, the more its domestic sovereign debt expands, along with the expansion of its foreign-exchange reserves, causing more sever domestic deflation...
...A look at the Japanese debt economy in the past decade will give some idea of what awaits the US debt economy when deflation hits. ...
...Yet near-zero interest rates only postpone, not eliminate, the need for banks to deal with problem loans, because, notwithstanding Milton Friedman's famous pronouncement that inflation is everywhere and anywhere a monetary phenomenon, deflation, the reverse of inflation, is not everywhere and anywhere just a monetary phenomenon. Deflation is a problem that cannot be cured by monetary measures alone, as Japan has found out and as the United States is about to. Global deflation can only be cured by reforming the international finance architecture to allow international trade to be replaced by domestic development as the engine for growth. Global trade under dollar hegemony drains domestic currency in the exporting economies with domestic currency sovereign debs to enable the central banks to accumulate dollar reserves. This causes domestic deflation. ...
...In March 1999, about a month after the adoption of the zero-interest-rate policy, major banks were recapitalized by injection of public funds. But the "convoy system" of bank mergers shelters the weakest banks at the expense of the strong....
...There is visible evidence that something similar will happen to the United States when deflation hits. Many US companies would in fact be walking dead in a deflationary environment even if interest rates were set at zero. The recent trend of mega-mergers reflects a drastic consolidation in key sectors. Deregulated markets favor size as a way to achieve market efficiency. Yet size has repeatedly demonstrated itself as a disadvantage in times of distress, as LTCM, Enron, GM and GE have demonstrated. ...
--------------------
Indeed it came to pass, and all were sore afraid.
But as a Marxist analysis I doubt it would be published in the US-UK business press, where the cult of Milton Friedman and the Chicago School had become common dogma which grossly inflated asset values for the rich to benefit from at the expense of those reliant on wages which have been held down by globalisation (competing with the sweat-shops of Asia).
Posted by harry_w on Fri 8 May 2009 at 02:01 PM
Although it is not an America publication, The Economist ran many articles about the housing bubble, the unregulated financial products and the level of leverage in banking. As a long time reader of The Economist, this crisis came as no surprise to me. For example:
"The global housing boom
Jun 16th 2005
From The Economist print edition
NEVER before have real house prices risen so fast, for so long, in so many countries... What if the housing boom now turns to bust?"
Posted by Beth on Fri 8 May 2009 at 02:39 PM
"with a particular eye for investigative stories into the heart of the problem—predatory lenders and their Wall Street backers"
Really? There was no role at all by government? Despite the fact that crises at Freddie and Fannie were triggers for the actual crash. Or the fact that their practices, and threatened government legislation, played a strong role in creating and encouraging the lending practices we have seen. No role by the fed, either.
None at all. That's a pretty amazing judgment. Unfortunately, it's amazing for bias, narrowness of vision - and frankly, stupidity.
Which is too bad. There's certainly lots of blame to go around, and all the work put in could have looked at ALL of the key factors, and been something much more worthwhile.
Before you criticize others for narrowness of vision, you might look to your own.
Posted by Joe Katzman on Thu 14 May 2009 at 12:52 PM
Perhaps the weirdest prescience came out of Canadian fantasy novelist Neal Stephenson. He co-authored a pretty awful novel called Interface (1994) arising out of the S&L crisis and speculation on what would happen if the US threatened to give Treasury Debt holders a haircut. Later, in his monumental 3-novel "Baroque Trilogy," he larded his 2,500-odd pages with some amazing economic commentary hearkening back to the 1690s London goldsmith's crisis. I caught some of the best quotes in a Dec 31, 2008 Housing Doom blog post.
Basically, this got me started worrying about Fannie Mae's QSPE's some time in 2003, and let me tell you the writing has been on the wall for a long time. FT's former Fannie guy Stephen Schurr was the best, and it's a tragedy he got moved from the GSE beat to hedge funds shortly after he correctly called the derivatives losses in Fannie's '03 10-K.
Posted by John McLeod on Tue 19 May 2009 at 07:39 PM
So I just read this article and scrolled through the audit. But the instruction on how to read this list provided me no insight on the logic used to conclude that journalism failed to do it's job between 2004 and 2006 as compared to the much better job it did from 2000 through 2003.
Anyone have some insight?
joseph.margolis@gmail.com
Posted by Joe Margolis on Wed 20 May 2009 at 11:27 PM
Thank you
Posted by WD on Thu 21 May 2009 at 09:19 PM