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And the band played on: covering the economic crisis
As I calculated the investment loss since the steep decline in the markets began, and particularly since the collapse of Lehman Brothers in mid-September, some questions arose (in addition to: Will I ever be able to retire?).
–Did we in the media do our job in reporting on the run-up to the crisis?
–Now that an “official” recession has been declared in the U.S. and the depth of the crisis is becoming clearer around the world, are we in the media keeping things in perspective? Should we even be using words like “crisis” or “meltdown?”
On the first question, I can’t help thinking of Claude Rains’ “Casablanca” character Captain Renault, who was “shocked, shocked to find that gambling is going on” in Rick’s club. In hindsight, given the current state of the financial markets, wasn’t it obvious a problem was brewing?
Not necessarily. And it probably wouldn’t have been obvious to anyone reading online or print coverage or watching television news in the United States.
A look at a study by the Pew Center’s Project for Excellence in Journalism indicates that, in the United States, coverage of the economy was pretty much drowned out by coverage of the presidential election—at least until the two stories converged in mid-September. Indeed, as the Pew material shows, in the month preceding the week of Sept. 15, which saw the Lehman bankruptcy, the Merrill Lynch sale, the AIG bailout and large drops in share prices, the proportion of the news hole devoted to the economy reached a low for the year, filling only 4.8 percent of the time on television and radio and space in the print and online media. Since then, that focus has shifted, as the presidential campaign narrative became, again, “it’s the economy, stupid,” and as the presidential transition has focused on U.S. economic problems.
Reuters News Editor-in-Chief David Schlesinger is skeptical that financial journalists could have done much more to predict the depth of the crisis.
“Journalists do best when reporting what’s happening and giving the news context and analysis,” he said. “We also do well when we look backwards and discuss past events from the perspective of the present. We do least well when we prognosticate. While our reporting and commentary did discuss potential weak points in the economy, we did not — and nor frankly could we — accurately predict the calamitous events of this year.”
Schlesinger worries, though, that there was a certain inevitability to the crisis and that the media played a role.
“I do worry about the narrative lines of reporting that contributed to the crisis,” he said. “To take just one example, much of the crisis was caused by banks taking on excess risks in the pursuit of higher profits. Yet had a major bank president stepped back from that fray and declined to participate, the ‘grammar’ of our results reporting would surely have compared that bank’s results negatively against expectations and against its peers.
“That brave bank president would surely have lost at least his bonus and probably his job.The very fear of that kind of negative comparison helped spur things on — as Citibank’s ex-CEO Charles Prince said (while still in his job), ‘As long as the music is playing, you’ve got to get up and dance.’
“We in the media help play that music, probably exacerbating the highs on the way up and the lows on the way down.”
So did our reporting help change the tune that was being played? Did it raise questions about the factors that contributed to the crisis, including complex financial instruments, subprime mortgage lending and excessive risk?
To fully answer that would require a deeper analysis than we have room for in this space, but there is evidence that questioning notes were sounded.
As early as Aug. 18, 2003, a Reuters story quoted Fed governor Edward Gramlich citing the dangers of “predatory lending” in extending subprime credit. By 2006, the pace had accelerated. A Factiva search of Reuters News found 128 stories that mentioned the phrase “subprime mortgage” that year, including a number in which analysts predicted a deterioration in credit quality. The crescendo came in 2007, when there were more than 10,000 stories that referenced subprime mortgages and when Reuters.com built a special section to house material on the issue. That section developed into the current Crisis in Credit and Housing Market sections.
Still, the overall “music” was loud and infectious and it’s easy to understand why so many couldn’t stay off the dance floor.
Now that the crisis is here, some are accusing the media of deepening the problems. Richard Lambert, director general of the CBI, a U.K. employers group and a former editor of the Financial Times, said “careless headlines or injudicious reporting risk becoming self-fulfilling prophecies of a very serious nature.” He urged journalists to be especially vigilant in their fact-checking and called on the press to avoid such words as “panic,” “fear” and “chaos.”
He also suggested that journalists should cut bankers, regulators and politicians a little slack, since “precious few journalists gave any hint at all of what was about to come.”
The FT’s Lex column (Note: subscription required) accused Lambert of shooting the messenger and lamented that some would “seek to clamp down on the fourth estate…, hoping regulation will recreate a golden age when the business press was a tamer, more deferential beast” that “could be hushed up in times of financial turbulence.”
But those days are gone, as Lex put it. “The digital revolution, by lowering entry barriers and intensifying competition, has put paid to all that. It will not return.”
And good riddance. As a card-carrying lover of the First Amendment and the digital revolution, I’m happy those days are gone. But with our freedom comes a sometimes frightening responsibility, especially in troubled economic waters.
As Schlesinger says, “We have a responsibility to be careful, and most of our reporting has been very careful. But we too have played some discordant notes and we need to learn from that.”
What do you think? Did we in the media do our job in reporting on the financial crisis, both before the market collapse in September and since? Are we being careful enough not to sow panic and make things worse? How can our reporting help you weather the storm?
Please post your comments here.
I’ll be using this space regularly to explore issues arising from Reuters and other media coverage of the world and to have a discussion with you. Among the topics I plan to look at: the dangers and rewards of covering religion; the use of anonymous sources; the debate over shield laws for journalists, and much more. I’ll also be providing lots of space for you to have your say.
In the meantime, I’ll be watching that retirement account.
Dean Wright, Global Editor, Ethics, Innovation and News Standards