The media and the financial crisis: Journalism failed
Columbia Journalism Review this month took the first steps toward transforming the ghost stories and urban legends of America's current recession into the formalized analysis of history. In "The List," a table of 727 stories from the business media, CJR tracks the history of the recession's coverage from its first rumbles and murmurs in 2000 to the cataclysms of 2007. In the process, the publication explores whether the media did, in fact, do everything that it could to protect its readers.
In its final analysis, the answer seems to be a resounding "no."
Part of the problem has been a sort of institutionalized Stockholm syndrome. Much of the financial media have been all too easily swayed by the arguments of the very people and institutions they were supposed to watch. In some ways, this is completely understandable. In the context of an $85 billion bailout, the hundreds of thousands of dollars AIG spent on corporate retreats amounted to pennies. When one looks at a trillion-dollar mess, a few hundred million in bonuses seems almost meaningless. Given those terms, the outraged screams of America's middle class seemed ignorant and shortsighted.
However, when one considers that the average American family lives on roughly $50,000 per year, a multimillion-dollar bonus isn't an accounting error; it's a judgment error. Moreover, when Wall Street's gargantuan salaries were fueled off a combination of taxpayer dollars and the ill-gotten gains of exotic financial instruments, it starts to seem like many of AIG's money men deserve not retreats and bonuses but fines and jail time.
More importantly, it starts to seem that insider knowledge about traditional ways of doing business becomes less a decoder than a blinder. To be fair, this failing isn't limited to the business press. As pundits were quick to point out, neither Treasury Secretary Tim Geithner nor President Obama really understood what so quickly became clear to Congress -- that if a company can't afford to pay its bonuses, it can't afford to give those bonuses. Period. End of story.
Another piece of the puzzle may be the question of audience. Prior to 2008, American business was far from a hot topic. Most people who regularly read articles about the finance industry were involved in it, whether as direct investors or as players. A few years ago, articles about exotic financial instruments may well have been used as a holistic sedative; even today, with the whole world watching Wall Street, such stories still cause spontaneous outbreaks of narcolepsy.
To a great extent, the American public put its faith in the hands of its high priests of finance. Many of us reasoned (correctly) that these issues were too complex for the average person and (incorrectly) that the professionals who handled them were likely to act in the best longterm interests of the larger community, not just their companies. Moreover, one of the unspoken tenets of capitalism is that success equates with morality. America sometimes rumbles about bloated fat cats, but we have a strong belief that rich people deserve to be rich -- that their superior intellect and favored status with God is borne out by their bloated bank accounts.
Of course, the past few months have laid some of these myths to rest. We now know that many of the financial industry's leaders weren't looking at longterm health (or even solvency), but were instead focused on quickly racking up sales and gaining bonuses. As Alan Greenspan admitted in October, even he failed to anticipate that longterm self-interest might not be a sufficient impetus to inspire banks to effectively self-regulate.
As more and more members of the general public feel obliged to watch the financial market, the question increasingly becomes who, exactly, they can look to. On the bright side, the freshly chastened news industry is now all too eager to find flaws with big banks. But it's worth asking if they have either the distance or the vocabulary to present these stories to the public; simply put, they may be too far inside the problem to adequately communicate it.
Unfortunately, they also are in the best position to tell the story. The key ultimately may lie in finding a way to marry the perspective and distance of financial neophytes with the information and context of professionals. Or, in other words, to present the financial news without becoming seduced by the financial profession. It remains to be seen if the media are, indeed, up to the task.
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Reader Comments (Page 1 of 1)
5-28-2009 @ 10:20PM
beachpaul said...
For every Bill Gates or Warren Buffet there are a million stories of startups that foundered. The truth of American Capitalism is that it mostly is and has been an inside game. Those who pull themselves up to mega riches in one generation are truly a minority. Most real family wealth is accumulated over generations, a small business being the starting point. CNBC and other financial talking heads are not journalists. They are like sportswriters at best. At their worst, they remind me of rock music critics, pointless.
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5-29-2009 @ 8:38AM
DankJemo said...
It sure has. Many journalists these days are nothing more then entertainers. They do it to be famous, and on TV, or so that people can know their names.
These writers might as well be on the pay roll for these people, they rarely asked hard questions, they rarely forced accountability in the directions of the people who were responsible. I have a degree in Journalism, but I don't pursue a career in it simply because journalism's foundation has been corrupted.
No one touches the hard news stories anymore, during the thick of the "financial crisis" news for example, CNN was running any little fluff story, almost like they were trying to distract people from the real news of the day, which was the United States as a whole, being poor. People can ignore things like that, they can watch a different station. If I am watching CNN, or another news broadcasting station I want the news, I don't want to be entertained.
It's just a sign of the times. Sad times.
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5-29-2009 @ 11:39AM
Bruce Watson said...
Fair points, all. One of the biggest problems lies in how the country will adapt to internet news. At this point, sites like this one are able to offer a little perspective and a fair bit of analysis, but there isn't really an investigative apparatus in place. While newspapers fall apart and we wait for online news to develop, there is a definite information vacuum. It will be interesting to see what, if anything, fills it.
Thanks for dropping in!
5-29-2009 @ 2:29PM
Ruggy said...
Journalism didn't so much fail as disappear.
What we see in the mainstream media are not journalists, but infotainers.
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5-29-2009 @ 10:49PM
sg said...
When are people going to realize that there's a CIA-run propaganda system in the United States?
Iran-Contra's 'Lost Chapter' By Robert Parry (A Special Report) June 30, 2008 - http://www.consortiumnews.com/2008/062908.html
The Mighty Wurlitzer / Operation Mockingbird were set up by a Wisner. AIG, which as been stealing us blind, has that man's son on the board.
In 1977, famed Watergate journalist Carl Bernstein revealed that over 400 US journalists had been employed by the CIA. These ranged from freelancers who were paid for regular debriefings, to actual CIA officers who worked under deep cover. Nearly every major US news organization has had spooks on the payroll, usually with the cooperation of top management. (Original source: The book "The CIAs Greatest Hits" by Mark Zepezauer
Can you connect the dots?
Let me give you a little hint of how bad news coverage is:
"Active Thermitic Material Discovered in Dust from the 9/11 World Trade Center Catastrophe" (Click the green "DOWNLOAD" button.)
http://www.bentham-open.org/pages/content.php?TOCPJ/2009/00000002/00000001/7TOCPJ.SGM
This type of explosive produces steel- and iron-liquifying temperatures like those seen on 9/11/01 and which are evidenced by the enormous amount of iron-rich spheres that are in the WTC dust (They are characteristic of the dust according to a report created for Deutsche Bank )
The US Government's science is based on logical fallacies and bare assertions concerning crucial aspects of the physical evidence. As their conclusions are not based on tests of crucial evidence, their research cannot be replicated and thus trusted. They claim to have done no simulations of the Twin Towers. Even their simulation of WTC7 has never been run by an independent party. Their work should not be blindly trusted--that's not the way of science.
http://www.google.com/profiles/shane.geiger
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5-30-2009 @ 10:06AM
Ben said...
Interesting article, bringing up very valid points. Bruce, I especially can appreciate your post-article comment regarding internet news and waiting for the public and the industry to come around -- however, a bigger point that you make is that while *news* is potentially a commodity business, *journalism* never will be. We will always need informed and intelligent individuals to piece together the difficult stories and opinion articles, which the current crisis seems to highlight.
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5-31-2009 @ 10:05AM
Alan Lester said...
I agree that increasing shareholder wealth should be a top priority of Boards of Directors and senior management. However, this should only be a long-term goal.
Many journalists don't understand finance and only report what they are told that will sell the news. We also know that many in congress don't understand either accounting or finance. This is a less than ideal alliance when congress decides what it thinks is best for the country and the journalists write what they think is wrong and the solution when neither have either the education nor experience.
That is like me deciding to rebuild an engine and tell others how it is going to be done. I have neither the education nor experience.
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7-02-2009 @ 10:17PM
R.T. Tihista said...
I read on a blog recently that the Chicago Sun Times had a monkey doing its stock picks and that the monkey's four year winning streak had ended last year. Yet the monkey dude still beat some of the top rated stock pickers. A four year winning streak? I wrote to the Sun Times and asked them if this story was true and if so, how can I access the monkey's wisdom. Does anyone know anything about this story? I'd love to find out whether or not it's true.
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