Last year, upon the 10th anniversary of the start of the war in Iraq, newspapers and magazines filled with soul-searching essays from journalists rethinking their advocacy of the invasion, documenting lessons learned and errors made. But a few months later, on the 5th anniversary of the fall of Lehman Brothers, the unofficial beginning of the financial crisis, virtually nobody wrestled with their failure to anticipate the Wall Street wrecking ball. Indeed, to date, no major news organization has apologized for missing the biggest economic story of the decade, and most business journalists defend their profession, arguing that they sounded the alarm about financial industry greed and the makings of a catastrophe. “The government, the financial industry and the American consumer—if they had only paid attention—would have gotten ample warning about the crisis from us,” said Diana Henriques of The New York Times in 2008. Neither she nor her colleagues have really looked back since.
As Dean Starkman, editor at the Columbia Journalism Review, writes in The Watchdog that Didn’t Bark, the media has investigated practically everyone involved in the financial crisis but themselves. It’s a critical omission, because journalism, when done right, can raise awareness of imminent failure or systemic abuse, and spur policymakers to reform. This was perhaps most apparent during the golden age of muckraking, an age Starkman reflects upon in his book, which attempts to place the modern business press in the context of 100 years of what he calls “accountability journalism.”
Sadly, this only magnifies how the business media habitually falls short when it counts most. The 19th century financial press outright ignored the routine panics of its era; the Wall Street Journal was caught flatfooted by the 1929 crash (a March 1928 editorial defended the rise of margin loans to retail stock buyers, a clear pyramid scheme, by arguing “the pyramid is the most stable form of all building with the broadest possible base”); the big papers dismissed the Savings & Loan crisis of the 1980s; CNBC was blindsided by the accounting fraud of the Enron era; and so on. The particular style of journalism practiced on the business pages “is condemned to be forever taken by surprise by events,” to borrow Starkman’s phrase.
Given all this, it’s hard to make a case for any particular circumstances that caused the blind spot during the most recent crisis, when that appears to be a permanent condition. Nevertheless, Starkman, a longtime Wall Street Journal reporter, armed with a wealth of historical knowledge and even hard data on seven-years worth of financial media stories in the run-up to the meltdown, gives it a try. He highlights three contributing factors: the CNBC-ization of the media, the financial distress in journalism around this time, and extreme deregulation robbing the press of a partner in government.
Of these three, the first holds the most water. Starkman is at his best when connecting changes in society to how they get reflected in the media. The rise of the 401(k) retirement plan gave many ordinary Americans a stake in the stock market, and business media ran with that by focusing their resources on granular details of individual companies and their market performance. In a sense, Starkman writes, CNBC, which took off in the late 1980s around the time of the rise to prominence of the 401(k), represents a return to the origins of business news, designed entirely for investors, with messenger boys delivering handbills directly to the trading floor. Of course, an investor focus would have been a good idea during the financial crisis, since so many of them got ripped off buying mortgage-backed securities that the issuers knew to be backed by garbage loans. The business press made a show of looking out for investors and “democratizing the news,” when in reality it set them up to be slaughtered by the big money boys on Wall Street because it never reported what lurked beneath the stock numbers, just on what CEOs and market analysts would tell them.
The transition from accountability journalism to access journalism defined news as whatever scrap of information official sources decided to supply. Reporting that way treats the stock market as a scoreboard and news as a tipsheet and it will never capture the true state of financial industry machinations and what they mean for the public. Instead of consistent investigations of fraudulent activities driving the housing bubble, we got celebrity-style executive-suite profiles (Starkman finds half a dozen bubble-era pieces on Lehman Brothers at different outlets that read like early drafts of one another). These profiles were “carefully negotiated,” Starkman notes, hinting at the corruption and self-censorship of the financial media, who had to keep their stories within certain boundaries to stay in the good graces of their sources, whom they relied upon for more access.
At other points, however, Starkman undercuts his own argument. He laments deregulation as eliminating some of the raw material investigative reporters use for stories, but acknowledges that “regulatory retreat only increases the responsibilities of the press.” He decries a lack of resources that squeezed out costly investigations (headcounts at papers like the Washington Post and Los Angeles Times dropped 50 percent in the 2000s), as well as the “Hamster Wheel” pace of newsgathering that rewards scoops instead of wide-ranging probes. But he also highlights a handful of reporters at tiny outlets who nailed key drivers of the crisis.
The hero of the book is Michael W. Hudson, who started investigating subprime lending in the early 1990s, for outlets like the Roanoke Times and the tiny Southern Exposure magazine. Hudson, whose 2010 book The Monster presents the most comprehensive study of mortgage origination fraud, accomplished this feat through simple, shoe-leather reporting, talking to hundreds of low- and middle-income borrowers abused by high-pressure sales techniques that stuck them with loans they couldn’t possibly repay. Hudson connected these rapacious consumer finance companies with their sources of funding—the money-center banks on Wall Street who used these loans as the source material for just-as-fraudulent securities and derivatives they sold around the world, greatly magnifying the damage when everything crashed.
Hudson explained just one major example of the fraud that corroded the system (Starkman is a bit too focused on origination, Hudson’s beat, as the Rosetta stone of the crisis). But if nothing else, Hudson’s work proves that accountability reporting was possible even at cash-strapped journals in a deregulated environment. The indifference to the looming catastrophe, the inability to connect the dots and point fingers at those responsible represented a conscious choice by the topline business press. To underline this, Hudson spent a year and a half at the Wall Street Journal, right at the precipice of the crisis in 2006-07, and owing to office politics and associated factors well-detailed in Starkman’s book, produced few of the hard-hitting investigative pieces that defined his earlier career. It’s telling that Hudson’s direct supervisor at the Journal was Jon Hilsenrath, perhaps the ultimate access reporter, known as practically an extra member of the Federal Reserve Board of Governors because of all the scoops he gets from the central bank.
Starkman hints at, but doesn’t engage with, a more fruitful area of inquiry; the mind-meld between reporters and the subjects they cover. It’s not just that incentives to gain access confound tough questioning of the industry; it’s that journalists see industry titans as social peers, despite the extreme disparity in wealth between a CEO and a beat reporter. Starkman acidly notes Andrew Ross Sorkin’s book party for his financial crisis narrative Too Big to Fail was attended by practically every big bank CEO in the country. “I am tremendously grateful that they came out to support me,” Sorkin later says.
Those with specialized knowledge of financial markets invariably take on the perspective of Wall Street, viewing events through that narrow lens rather than with the broader public interest in mind. The book even furnishes a small example, detailing how in the 1990s, “predatory lending” was replaced in news stories by “subprime lending.” Predatory focuses on the conduct of the lender; subprime on the borrower. That softened the industry’s responsibility to deal in good faith. And when articles described such lending as “risky,” readers were cued to attribute that to the shakiness of the borrowers rather than the impropriety of the lenders.
This has always been the case; The Watchdog that Didn’t Bark is peppered with historical examples of newspapermen bought by railroad and oil barons, reporters who received so many insider-trading tips they never collected their salary, and publishers with sympathies toward the preservation of the status quo.
The book might have benefited from some modern-day investigation into these practices; in other words, a story about the disappearance of watchdog journalism could have been helped by more watchdog journalism. But while pay-to-play exists—The New York Times’ Dealbook and Politico’s Morning Money proudly display mega-bank advertising atop their pages—I suspect the myopic viewpoint of the business press is more tribal at this point. Gillian Tett, another hero of the book, describes it as “social silences,” a combination of ideology and groupthink that creates unspoken barriers for what can and cannot get coverage. Only outsiders to this culture of conformity can shine a true spotlight on any misconduct, a truism that hasn’t changed for a century (muckrakers like Ida Tarbell and Lincoln Steffens had to ply their trade in McClure’s, a general-interest monthly, not the business press).
It’s for this reason that Starkman disappoints when talking about online journalism. While he praises blogs like Naked Capitalism and the reporting at places like the Huffington Post, he believes such outlets have not filled the gap created by mass layoffs at the major dailies. In fact, Starkman mostly views digital media as a tool for corporate raiders to downsize traditional outlets, and he does not believe the business models of independent digital media support investigative journalism.
This ignores a fairly rich body of work, including reporting on the financial crisis and its aftermath, that came directly from the online world. For example, those individuals who broke the story of foreclosure fraud—the mass use of forged and fabricated documents to rush homeowners through the eviction process—did not work at traditional media outlets but were foreclosure victims, who uncovered discrepancies with their own documents and started their own websites, like Foreclosure Hamlet and 4closurefraud.org, to get the word out when the media wouldn’t return their calls. In another era, these people would be either investigative sources or invisible, depending on the discretion of the media, but Internet publishing tools allowed them to tell their story anyway.
While the Internet “presents severe structural barriers to accountability reporting,” as Starkman writes, it also presents potential breakthroughs. Instead of long-form journalism that bundles months of reporting into one shot, there’s value in incremental, iterative reporting that releases each detail as it’s gathered, breaks down complex material into digestible chunks and furthers the narrative for months, even years. This is the tradition I come out of, and I think it does an able job, even if it’s not the Great Story, which Starkman holds up as the epitome of investigative journalism. There’s nothing inherent in word count that confers superiority.
If we want to know what happened in the aftermath of a crash, the elites of the media universe can perform that task well. But if we’re going to catch the next instance of financial malfeasance in real time, the warning may come from someone sitting at their laptop. Starkman makes the argument that people rely on traditional media, and he’s right. But his entire book identifies the dangers of that reliance.