The media's role in the financial crisis


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The media's role in the financial crisis

  1. 1. Entrepreneurship Ref: 0008The Medias Role In The Financial CrisisBy Dan GillmorJanuary 23, 2009Our governments current operating principle seems to be bailing out people who were culpable in the financialmeltdown. If so, journalists are surely entitled to billions of dollars.Why? Journalists were grossly deficient when it came to covering the reckless behavior, sleaze and willfulignorance of fundamental economics, much of which was reasonably obvious to anyone who was paying attention,that inflated the housing and credit bubbles of the past decade. Their frequent cheerleading for bad practices -- andnear-total failure to warn us, repeatedly and relentlessly, of what was building -- made a bad situation worse.Journalists are notoriously thin-skinned, defensive about even legitimate criticism. But this lapse has been tooblatant even for reporters to miss. Two-thirds of financial journalists in a recent survey said the news media"dropped the ball" in the period before the crisis became apparent. (Still, almost none of them assigned the pressany responsibility for what has occurred.)Its not as if this is the first time a big issue has had too little discussion while there was still time to fix the problem.Journalism has repeatedly failed to warn the public about huge, visible risks. The medias complicity in the IraqWar-mongering and 1990s stock bubble were the most infamous recent examples until the financial bust camealong, but the willful blindness to reality was uncannily similar.To be fair, in these cases and in every other such foreseeable calamity, at least several journalists or newsorganizations stood out in retrospect for having seen what was coming. Almost alone among the Washington presscorps, the Knight Ridder (now McClatchy) newspaper groups Washington Bureau asked the right questions as theBush Administration herded the nation toward war. A few scattered stories in the media, including Fortunemagazine and The New York Times business section, wondered about the stock and housing price bubbles, not tomention the implications of new financial policies and instruments that made the credit expansion so dangerous.And some commentators (including bloggers who did serious, if widely ignored, reporting) were firmly on the case. For further information on this article and the coaching programs available please contact: Image Group International Asia Pacific Head Office Tel: (+61 3) 9820 4449 E: W: ©2009
  2. 2. But to say that the press was all over the housing/credit mess before it blew up, as the American JournalismReview argued recently, defies reality. The good journalism was overwhelmed by the happy-face, herd coverage,usually laced with quotes from people who stood to benefit from the bubbles continued inflation. We saw story afterstory about new cadres of home-loan borrowers, about people who "flipped" homes for big short-term profits, andabout the way home values kept rising in unprecedented ways. We saw few cautionary tales about what happenswhen bubbles burst, how families can and economies can face ruin. Its probably no coincidence that mostnewspapers have weekly real estate pages or sections, the main purpose of which is to collect advertising forproperty sales.And even when the reporting was solid, which was rare enough, news organizations didnt follow up in appropriateways. If we can foresee a catastrophe, its not enough to mention it once or twice and then move on.That common practice suggests an opportunity. When we can predict an inevitable calamity if we continue alongthe current path, we owe it to the public to do everything we can to encourage a change in that destructive behavior.In practice, this means activism. It means relentless campaigning to point out whats going wrong, and demandingcorrective action from those who can do something about it.So in Florida, Arizona and California, among other epicenters of the housing bubble, newspapers might have toldtheir readers -- including governmental officials -- the difficult truth. They could have explained, again and again,that the housing bubble would inevitably lead, at least locally, to personal financial disaster for many in their regions,not to mention fiscal woes for local and state governments. How many should have done this, given the medias atleast partial reliance on advertising from those who profited from the bubbles? Any that cared to do their jobs.Some plain-as-day woes dont present any financial conflicts. For example, the threat to New Orleans fromhurricane-created flooding was clear long before Katrina, and the New Orleans Times-Picayune did run a series ofarticles warning of what might happen years before the hurricane struck. What it didnt do was follow up in therelentless kind of way that might have spurred local, state and federal action to prevent or mitigate the inevitabledisaster.Californians are absurdly unprepared for the epic earthquake that everyone knows is coming. News organizationshave warned about it, but havent drilled home the message in sufficiently graphic ways of the havoc it will cause,and havent campaigned enough for pre-quake mitigation that would save lives and treasure.Californians are especially practiced at pretending not to see whats visible in front of them. The states fiscal crisisis far worse than most, in large part because the governor and state legislature -- with media winks and nods -- For further information on this article and the coaching programs available please contact: Image Group International Asia Pacific Head Office Tel: (+61 3) 9820 4449 E: W: ©2009
  3. 3. generated a torrent of new red ink, via borrowing, to cover new spending and earlier debts. The piper is nowdemanding his payment, and his price threatens to be ruinous. (Will this be our national fate in a few years?)Journalists have an opportunity, right now, to ask questions we need answered -- and they should be asking againand again, and again. Taxpayers (or rather our children and grandchildren, wholl pay for this) are forking over $700billion to bail out financial institutions, the first installment of trillions were collectively spending to try to saveAmerican capitalism itself. Yet we arent allowed to know how the money is being spent. This isnt merely opaque;its the blackest of boxes, and occasional queries from journalists arent helping to make it transparent. Congress isthe most culpable party in this case; as usual, lawmakers have dodged their responsibility, but an insistentjournalistic campaign wouldnt hurt and might actually help dislodge some facts.Once upon a time, news people went on campaigns when they saw the need. Sometimes this led to yellowjournalism, as when newspaper owners used their publications to stir up the populace in dangerous ways. At othertimes, however, old-fashioned press campaigns led to change for the better; back when editorial pages had moreinfluence in communities, a few courageous newspaper editors in the South campaigned for school integration, andmade an enormous difference.Journalistic activism -- precisely what we need despite most journalists disdain for the idea -- wont savenewspapers that are suffering from a perfect storm of dwindling leadership and advertising losses. But as OnlineJournalism Reviews Robert Niles recently wrote, journalists should "accept the responsibility to demand action"based on what they learn when they do their jobs right.The medias collective irresponsibility has ill-served its audience. If journalists want to keep the audience they have,never mind build credibility for the future, they need to become the right kind of activists. More than ever, we needwhat they do, when they do it well. For further information on this article and the coaching programs available please contact: Image Group International Asia Pacific Head Office Tel: (+61 3) 9820 4449 E: W: ©2009