Lack of editorial vision: Media outlets are organized around beats and bureaus, and reporters guard their territories jealously. News managers suffer from the same affliction and are not universally known for their management prowess. No one was working the “systemic risk” beat, because there was none. The left hand of government didn’t know what the right hand was doing, and newsrooms were no different.
Lack of technical expertise and historical perspective: Only a handful of financial journalists truly understand the workings of financial institutions, markets, and the complex derivative instruments that caused the financial system to unravel. Even those few failed to make the connections between credit default swaps (CDS), collateralized debt obligations (CDO), and subprime mortgage-backed securities (MBS) until this deadly alphabet soup had already poisoned the system. Fewer still have been around long enough to recognize the parallels between this crisis and earlier ones. Just as the housing boom was driven by the notion that home prices could only go up, the energy mania of the early 1980’s was based on the assumption that oil prices would rise forever.
Impaired Objectivity. Many journalists forgot that they’re supposed to speak truth to power. The tradeoff between the competing needs for access and arms-length scrutiny got way out of whack. Financial journalists might well ponder the mostly flattering coverage of Alan Greenspan. Only recently are we informed that the “Maestro” thwarted virtually every attempt to regulate risky derivative instruments and subprime lending.
The media’s ineffectual pre-crash coverage should now inspire some serious soul-searching for a new sense of journalistic mission. In selecting prize-winners this year, judges could take a good first step in that direction by rewarding foresight and courageous investigations, not 20-20 hindsight.
Stephen P. Pizzo and a team from the National Mortgage News won the George Polk and Gerald Loeb awards for their coverage of the savings and loan episode. He is a co-author of “Inside Job: The Looting of America’s Savings and Loans.” Phillip L. Zweig won the same awards for his 1982 American Banker series on the imprudent lending practices of Oklahoma’s Penn Square Bank and is the author of “Belly Up: The Collapse of the Penn Square Bank.”