Why did financial journalists miss the big story?

Wednesday, 22nd April 2009

Budget Day is an apt time to look back at how many of Fleet Street's finest - and their Wall Street counterparts - failed to spot the economic storm clouds. The editor of the FT owns up:

Most reporters working in this so-called “shadow banking system” found it hard to interest their superiors who controlled space and who were more interested in broadcasting the “good news” story of rising property prices and economic growth.

He also links to Danny Schechter's "J'accuse" in the British Journalism Review. As Schechter puts it:

Not only were there few investigations of sub-prime predatory practices between 2002 and 2007, media companies took billions – that’s right, billions – in advertising revenue from dodgy lenders and credit card companies. We had gone from telling to selling.
One of the key sources of revenue for newspapers is real-estate advertising in weekend supplements and classified sections. The newspaper industry became, in some communities, the marketing arm of the real-estate industry. In some cities you actually had newspapers getting a piece of the action of sales through the ads they generated – they were actually part of the corruption. So of course there was little real scrutiny of what was actually happening in the neighbourhoods where mortgage fraud was pervasive, where people who couldn’t afford to buy houses were buying them with bogus mortgages. Some newspapers were making money on the sales of these homes.
While coverage in Europe may have been better once the crisis erupted, there had been little reporting on, or questioning of, the large investments by European and Asian banks in sub-prime securities, many based on shoddy and discriminatory lending practices.