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Financial Meltdown: Journalists Ignored the Early and Obvious Signs

Columbia Journalism Review: Boiler Room. It seems to me that well into Year II of the Panic, the business press is in the process of making the same mistake it made in the run-up to the debacle: focusing on esoteric Wall Street concerns and ignoring the simplest, most basic, but most important one—the breathtaking corruption that overran the U.S. lending industry, including and especially the brand names, and the extent to which Wall Street drove that corruption. Let’s just call it a case of over-sophistication. Its persistence, however, will only impede journalists’ ability to cover this thing going forward.

True, as far as it goes. But the journalistic scandal, which will go forever unpunished — except, perhaps, to the degree that journalists will lose jobs in the economic carnage — is failing to go after the story that was in front of people’s noses as the bubble inflated — at a time when it might have done some good.

There were a few exceptions, as Dean Starkman notes in his CJR piece. But the overwhelming majority of coverage of housing during that period was of the cheerleading variety. It was uncritical and shabby work.

If our economy goes off a cliff, journalists won’t be the ones at fault. But they’ll have much to answer for anyway, because they utterly failed to do their jobs when it counted.

Previous postings on this topic are here, here.

0 Comments on “Financial Meltdown: Journalists Ignored the Early and Obvious Signs”

  1. #1 Seth Finkelstein
    on Sep 18th, 2008 at 5:07 pm

    Dan, while you are not wrong to inveigh against cheerleaders (after all, I fully understand the impulse), I suggest you might want to consider your position in a system which seems passionately dedicated to destroying any support for journalists who will do that story – because it’s boring, elitist, lecturing, etc – and creating conditions where only the cheerleaders survive – because they GET ATTENTION, are popular, AND CAN SELL ADVERTISING.

    I cannot stress this enough – there is an ENORMOUS amount of money to be made in financial hype. It’s one of the few areas that can actually be directly profitable on the Internet 🙁 A system which directly links journalism to attention, popularity, and SELLING CLICKS, will inevitably lead to cheerleading. BECAUSE THAT’S WHO WILL GET HEARD!

    Note I am not saying what we had was not atrocious. It’s been bad, awful, horrible, etc. BUT BLOG-EVANGELISM IS MAKING IT WORSE!!!

  2. #2 Jon Garfunkel
    on Sep 20th, 2008 at 11:51 am


    I agree with your larger point here, though it doesn’t specifically address Dan’s post or the Dean Starkman article he references. Indeed, it’s a sad irony that the corruption of the business press led Dave Winer to envision independent blogging as The Remedy (and to create RSS independent of IPTC/NewsML), and nowadays with a semi-professional outfit like TechCrunch doing the cheerleading/reporting, we’re back where we started.

    Indeed as well, there may well be some Lone Blogger out there who was writing Warning Signs by 2004-05 years, but it’s not my burden to produce him or her. I am aware that Berkeley economist Brad DeLong began blogging in 2005, but I couldn’t find any mention of “subprime” in his blog until 2007.

    But we digress.

    Dan, I don’t see how you draw that conclusion from Starkman’s article. He does cite examples of 2005-2008 where journalists *were* asking the hard questions (though it would be great if he could dig it up from the first part of the decade as well). Like many press critics, he cherry picks. He figures that the story was missed then, because it is news to many people now.

    Was Starkman looking for this? A March 18, 2000, NYT editorial: “Subprime lenders, good and bad, get their money from some of Wall Street’s finest. First Alliance’s money came from securities sold to investors by Lehman Brothers, and Lehman says it disclosed all relevant financial risks to these investors.”

    Granted, did the coverage in the business section about Lehman Brothers regularly remind readers of this liability? Perhaps not. Some research would bear that point. The Columbia Journalism Review, nominatively an academic publication, should demand of its contributors a greater level of due diligence.

    (but who am I to criticize the press critics?)

  3. #3 Seth Finkelstein
    on Sep 20th, 2008 at 2:19 pm

    Well, I was trying to address Dan’s post at a broader level – what systems promote critical thinking over cheerleading, and what systems reward cheerleaders and marginalize critical thinkers.

    Again, preaching that people should be independent tough-minded writers is not wrong. But Dan’s status as an A-lister is enmeshed in wide-ranging efforts to FURTHER reward the popular and profitable, versus the accurate and prudent (note anti-strawman this is not MSM == good, blogs == bad, but about making things worse than before, by encouraging baleful trends). So consideration of that problem is highly likely to be more effective than preaching (or maybe not … 🙁 )

  4. #4 Jon Garfunkel
    on Sep 20th, 2008 at 3:25 pm

    Seth — fair enough.


    There is one more lining here. You and I have spoke about how journalists, taxpayers, auditors & programmers can push companies to be more transparent about their practices. Re-reading Starkman’s 2005 article for the Washington Post:

    “Under a patchwork system of state regulation, companies are not required to disclose how frequently they deny claims, the reasons for doing so or how often they are sued by customers for failing to pay legitimate claims promptly.”

    Now that AIG is 80% owned by the United States Government, perhaps we can start pulling that data.


  5. #5 Delia
    on Sep 20th, 2008 at 10:21 pm

    Seth & Jon:

    So what would you want Dan to do? let’s assume he’d listen:), specifically, how would you want him to change so you would be more approving and less critical of what he says and does …


  6. #6 Jon Garfunkel
    on Sep 21st, 2008 at 5:56 am

    Delia– Well, it’s just common bloggery to pick up a news story which tangentially makes a point you’ve been making.

    From the credo “your readers know more than you,” it seems like Dan should still be asking: here’s the evidence, is this good? do people have any more evidence? can we draw conclusions on it? etc.

    On to reading the Sunday Times this last glorious morning of summer.

  7. #7 Seth Finkelstein
    on Sep 21st, 2008 at 9:57 pm

    Delia – unfortunately, I’m quite aware that if Dan (or anyone) gets too far from the acceptable shibboleths, he’ll get expelled from the A-list club. So I know it’s not a simple matter of speaking truth, because that’s not popular (there’s something of a recursive problem here). Would it do any good for me to make a list of the ponies I wish I had?

  8. #8 Delia
    on Sep 21st, 2008 at 11:28 pm

    Jon: hope you had a good day overall… (it’s getting much colder now, even down South)

    List the ponies, Seth! let’s hear it:)… D

  9. #9 Seth Finkelstein
    on Sep 24th, 2008 at 1:53 am

    Sigh … Ponies, ponies, come to me my little ponies …

    First, I should commend Dan for when he does posts dissecting the exploitative “You do all the work and we’ll take all the money, thank you very much”. I hope his growth along those lines continues.

    In outline, there’s Dan the former working journalist, and Dan the A-list blog-evangelist, and I wish there was more posting by the former and less from the latter.


    I wish the abuse and contortion of the word “conversation” would stop. A-listers rarely if ever listen to anyone, especially someone who isn’t another A-lister or of power. They can’t. They’re too busy.

    I wish he wouldn’t engage in the common A-list attention-getting practice of taking a reasonable article about troubles in journalism, and denouncing it because because it didn’t slavishly say the one true hope is to do exactly what blog-evangelists are selling.

    I wish he wouldn’t ever tell people being buried in mud that they just have to learn to find the pony (i.e. inversely, thought-leaders need to do some intellectual work to create social structures which promote accuracy over popularity).

    Enough ponies for the moment? Could I have one that flies while I’m at it?

  10. #10 Dan Gillmor
    on Sep 24th, 2008 at 5:45 pm

    The idea that a story here or there makes up for consistent cheerleading or ignoring the plainly looming catastrophe is just wrong.

    I’m working on a longer piece about this.