The latest issue of The Columbia Journalism Review is anchored by Dean Starkman's analysis of the ways in which the business press has focused on the elite dimensions of the crisis and done a poor job explaining the ground level lending problems that led to the disaster:
[O]ne suspects cultural problems. There does seem to be a tendency in big financial newsrooms to zoom in on esoteric stories on the margins—backdated stock options comes to mind—and ignore the big, dumb, honking ones at the heart of the financial system. In the current case, an entire industry's business model—“selling” consumer debt—is problematic on its face. And was subprime lending ever not the domain of sleazeballs?[...]Worse, from a tedium standpoint, the failure to assemble an easily gettable record has perpetuated a particularly sterile argument over who's to blame. David Brooks, George Will, and other cultural conservatives—let's call them behavioralists—have felt free to blame the unraveling of the financial system on some sort of spontaneous mass deterioration of public morals. Structuralists like myself, meanwhile, argue that people didn't change, the marketplace did. Most journalists, I would argue, retreat to the mushy middle: the there-is-plenty-of-blame-to-go-around school, a theory of more generalized cultural decay that includes undisciplined lenders as well as irresponsible borrowers.The trouble with this debate is that all the evidence is on my side. All they have is lazy musings about Woodstock and tattoos. This argument should be over by now, and I honestly believe if these cultural commentators (and everyone else) had better information, it would be.And by the way, the Bush administration and the Federal Reserve agree with me—not with Brooks or Richard Cohen and his stupid tattoo theory of debt (Cohen linked the two in a Washington Post column mailed in on July 22). New rule changes approved by the Federal Reserve Board in July are targeted entirely at abusive lending practices—better disclosure in ads, good-faith estimates of fees, curtailing prepayment penalties, etc.—and the changes take no steps to crack down on borrower misconduct (which, by the way, did occur, but as the Fed rules recognize, is not what crashed the system).
