As a service to the business-news trade, The Audit would like to offer a few observations about the current financial crisis that may prove helpful in coverage going forward. Our list of some inconvenient truths:
1. Your beat just blew up.
From a journalistic standpoint, what we are experiencing today is the equivalent of the city hall reporter arriving for work one day to find the mayor and city council being led out in handcuffs. If the business press were, say, a nuclear industry reporter, this is having most of the reactors on your beat melting down to China. What to tell the boss?
The business press purports to cover business and nothing so closely as it does Wall Street. This is the area business reporters claim to understand. This knowledge is what separates a business reporter from other kinds of reporters. It is why there is a business press. So the beat covered by many publications and thousands of reporters and editors has collapsed.
2. To say, “your beat just blew up” is not to assign blame. It isn’t the end of the discussion but only the beginning.
3. The crisis presents a moment for reflection. For the business press, there are only two options when considering what has happened here, neither particularly good. Either the business press institutionally provided appropriate arms-length scrutiny of the financial-services industry, including investigative work, opinion, analysis and rigorous beat reporting that provided decision-makers, including readers, with fair warnings of the coming collapse, and it was ignored, or it didn’t do the work in the first place. We know that the answer is some combination of the two. But, if we accept the foregoing logic, then best case for the business media is that what it writes doesn’t matter, in which case, why bother?
4. As journalists, we have to believe journalism matters. Therefore, there is a high probability here of journalistic failure.
5. The current generation of business reporters is probably the best-educated and most sophisticated ever. Everyone knows it entirely capable of providing the needed scrutiny and requisite skepticism, if properly directed. So it seems we have a leadership problem.
6. That said, it is undoubtedly true that the ranks of business journalism have been thinned of its most experienced hands due to the media’s financial troubles, and investigative reporting has become the domain of a surprisingly small elite. There has been a price paid for this. Again, this is an issue for business media leadership.
7. Business media outlets that claim to provide authoritative coverage of Wall Street during good times should be first in line for scrutiny now. These would include any publication with the words “wall” and “street” in its name, as well as anything named “deal,” “New York,” “business,” “investors,” and for that matter, “times” and “day.” Bloomberg also apparently boasts supremacy in coverage of the markets that just melted. Oh well. And Forbes and Fortune, you’re in this, too.
8. For any one near Wall Street, including journalists who cover it, the need for a bailout, whether it eventually passes or not, should be the source of some embarrassment. For U.S. taxpayers to be responsible for one nickel of any of this is a disgrace. I know this is known in the business media but it needs to really sink in, to be internalized. Taxpayers had nothing to do with any of this. My impressionistic take is that coverage and opinion reads more like “it’s a disgrace, but we have to save the economy” or even “it’s a disgrace, but taxpayers might not have to pay as much as it first appears.” No, there are no buts. This is a disgrace.
9. Criticism of the financial media is already harsh and is bound to get harsher. In many cases, though I hope not here, it will be unfair, driven by ignorance, opportunism, anti-business bias on the left, anti-journalism bias on the right, what have you. On the other hand, as the messy process of finger-pointing begins, it is worth remembering that the bailout is only part of the hardship ordinary people must bear for the financial-services industry’s excesses. The first part comes in the yet-to-be-measured equity loss, not to mention mental anguish, borne by most of the four million or so foreclosees. In essence, this is a wealth transfer from the bottom to the top. The third part is the extended recession we are likely to enter. The fourth part is by pension and mutual funds hurt by what was essentially Wall Street’s sale of billions of dollars worth of defective products. It will be hard for the business media, but much harder for their readers.
10. Journalism is something but it isn’t everything. The last eight to ten years has seen dramatic decrease in journalistic resources just as journalism’s responsibilities have increased. The retreat and disempowering of the Securities and Exchange Commission, the Office of Thrift Supervision, the Comptroller of the Currency, Fed bank examiners under Greenspan, the Commodity Futures Trading Commission, the Justice Department, and other key federal agencies, piled more and more responsibilities on the press—responsibilities, I would argue, it did not recognize and was not culturally prepared to shoulder.
There’s more, but that’s enough for now.
Is this article based on research? Did the writer go through the business press over the last two or three years and find an absence of smart analysis and warnings of an oncoming crisis? Or does he or she simply not recall any such coverage? I ask because we certainly issued such warnings at BusinessWeek (where I work). In fact, I grew tired of them. And Paul Krugman has been writing about this for years. From my perspective, this sad story is more like the boy who cried wolf.
What's the point of this article? To assign blame for the credit crisis on business reporters? If so, it's a ridiculous position to take. I've read plenty of hard-hitting stories at every stage of the housing/credit bubble over the past few years that warned of a coming collapse that could have a serious impact on the economy. Can the author provide specific examples of what he calls the "journalistic failure" of the business press?
Another case of quick blame-the-media criticism. The vast majority of business reporters are so parochial these days we have no opportunity to cover national economic trends.
How come CJR and other press critics didn't see this coming either, and why are they only reacting now?
Much of what went wrong with business coverage had to do with the fact that news is separated into beats and pages that don't always make sense. Years ago, I told my friends that growing auto use in China and India was going to cause problems with gas prices here. But reporters weren't making the connection. Business pages were reporting that people in China and India were beginning to buy cars, but they weren't explaining what that meant for U.S. drivers. And maybe if reporters had explained that, then Americans might not have bought SUVs that they can't afford to fill up now and maybe people wouldn't have bought huge homes that gobble electricity, in the ex-urbs that require massive amounts of gas to commute to work. Also, if people had been told that a quarter of all Americans only earn $10 an hour, or less, maybe they wouldn't have bid up house prices hoping to flip them for hefty profits and earn wealth on passive income. The list goes on. Many reporters weren't capable of seeing these complex connections and reporting on them. Many editors weren't capable of assigning such stories. And people like me, who could write them, were finding an industry that didn't value our talents. So did journalism fail? Big time. And unfortunately, they might not get much of another chance to explain to readers why events happening on the other side of the world matter to them. Journalists got so involved in talking about journalism that they forgot to practice it. They forgot that what matters is explaining to readers why events will likely impact the reader's pocketbooks and make the reader care about reading the news. Ah, and then, the journalists began to lose the readers and blamed it it on everything but what they were doing - or failing to do. But in order to explain how and why world events are likely to affect a reader's pocketbook two to 10 years down the road, the media first needs reporters who understand the potential impact of events and can explain it. And it is precisely those reporters that newspapers are laying off or not hiring, after all, they cost more on health insurance premiums. But that's another pocketbook story that most readers won't get, until a crisis, which few people can even imagine right now, becomes that day's breaking news story. And even then, most reporters won't understand how the problem began and won't be able to offer critical context. Journalism is killing itself.
I worked at American Banker, the banking industry daily, between 2000 and 2002, when the more relaxed rules were just taking effect and many banks were buying insurance subsidiaries. The paper's sole focus was "how can your bank keep up with this exciting trend?" No critical attention was paid to the fundamental issues the trend presented. Despite the publication's immense human and financial resources. The whole paper was cheerleading for the industry. The reporters were not expected to take on serious questions, nor were they trained to. The editors could have but seldom bothered. And here were people well positioned to raise alarms. Since then I've gone on to work at small local papers with far, far fewer resources, yet are a whole lot more vigilant than the rich, well staffed AB.
My colleague Steve Baker beat me to it, so I will have to settle for heartily seconding pretty much everything he says.
Dean is out today, but in response to Stephen, Amy, and Michael, above: Yes, our piece is based on research. Dean has delved into what the business press missed in the subprime situation several times, notably in this essay from the current issue of CJR: http://www.cjr.org/essay/boiler_room.php?page=all
I take issue with your statement in #8: "Taxpayers had nothing to do with any of this."
America has been drunk on easy credit for a very long time. Countless articles have been written about the low savings rates, the maxed out credit cards, the buying and selling of homes to people who had no business being offered mortgages. These bad loans that proliferated and brought our financial system to its knees were built on easy credit, lax regulation. Essentially Washington was asleep at the wheel and the opportunists in the financial industry too advantage. Is that criminal? Generally no.
I'm all for home ownership if you can afford it but not everyone is entitled to owning their homes right when they desire one. Sad but true.
So, as I see it everyone, even the press, has their finger in this mud pie. No one is to blame 100 percent and no one is blameless 100 percent.
It is a shame, you bet and America's standing in the world is lower as a result. But America is also an innovative place, where we still have rule of law, rights and privileges that are the envy of the world. We've been down before and we figure out, even after self-inflicted wounds, how to get back on the right track. The great American horse-sense will prevail.
Perhaps where the press can be blamed is the fact that it has taken its eye off the ball. Business news departments have been slashed significantly, resources have been put into dubious assignments. Case in point is the entertainment sections of news outlets. Wall-to-wall coverage of Lindsey Lohan or Britney Spears sucks up all the oxygen in the atmosphere. Do I really care about who is leaving some Hollywood or New York nightspot and where they will shack up for the night? (makes me want to puke) We have, collectively as an industry and as a nation, been distracted by the periphery, the talk radio bloviators.
We all welcome the competition that the news business brings. We thrive on it and we have to realize that to get the story, and more importantly, get the access, at all costs has consequences. We get so caught up in gaining the access, pleasing the gatekeepers that we have lost some of our edge.
Take our medicine like the rest of the world. Own up to our shortcomings, adjust to the new realities and hit the ground running and stories hard. Business and financial journalism is a force for good. Just don't dumb it down.
You know what would be really bad? If no one covered an industry that violated labor laws frequently, or encouraged conflicts of interest, or failed to invest in the future. Perhaps this industry would include companies that kept buying properties and issuing excessive dividends as the market tanked. Perhaps this industry would be filled with people who had decided the job had become too hard, so they found ways to redefine what the customers wanted, even though the customers never wanted those things. Perhaps this industry would make glaring errors and refuse to change.
It would be absolutely awful if something like this ever happened.