The hacks must try harder

Have financial journalists had a good crisis? Some certainly made their names, like BBC business editor Robert Peston, an old-fashioned scoop-getter with good sources. In September 2007 he not only broke one of the biggest stories of the crunch—the Bank of England’s emergency support for Northern Rock—but arguably triggered Britain’s first bank run since 1866.

Others emerged as powerful commentators on financiers’ failings. In the US, a Rolling Stone article in July 2009 by political writer Matt Taibbi about Goldman Sachs started with a bang, likening the firm to a “giant vampire squid wrapped round the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” It was soon the most discussed article of the crisis in the US.

But these are only a few chinks of light: although journalists aren’t down in the basement with the bankers, they have hardly had a good crunch. It’s now commonly noted that the financial media in Britain and America didn’t see the crisis coming, while its journalists egged on the derivative pedlars and leveraged-loan wallahs. Many media organisations acted as relentless cheerleaders for the boom. Take US financial cable channel CNBC, known for its focus on daily stock price moves, cacophonous studio debates, and the slogan of its most famous presenter Jim Cramer: “there’s always a bull market somewhere.” Such boosterism came unstuck when Cramer was interviewed by television presenter and comedian Jon Stewart in March 2009. The CNBC host just let the blows fall, unable or unwilling to defend himself or his employers.

Other forces militated against a bearish media culture. Journalists had been encouraged to build relationships with bankers, creating a dependency for their diet of mergers, price moves and management rows. The noise suited the bankers, helping to tee up deals or move stock prices, but it institutionalised a culture in which editors ignored the big picture. Financial coverage is usually ghettoised in business sections and on news wires unseen by the public. Even if journalists had clear-eyed explanations of systemic problems, no one outside the financial world was reading them.

But to a great extent there weren’t any explanations, at least in the non-specialist press. Such mainstream news as did creep out over-emphasised daily market price moves with few attempts to push big stories onto the front pages. The public followed all this with barely half an eye, and emerged without any hint of what the financiers were up to.

But while the crisis exposed the average financial hack, it has allowed more in-depth writing to shine. Michael Lewis’s December 2008 cover story,“The End,” for Condé Nast Portfolio, racked up over 5m page views. Similarly former IMF chief economist Simon Johnson’s attack on financial oligopoly in May 2009 in the Atlantic, “The Quiet Coup,” changed the tone of debate about the future of regulation.

Britain had its bright spots, with the Financial Times columnist Martin Wolf highly influential on both sides of the Atlantic, and markets editor Gillian Tett (see main article) consistently insightful in her coverage of derivatives. In April she published one of the most successful of the crisis books—Fool’s Gold. The Times, edited, like the Daily Telegraph, by a former FT staffer, produced some striking coverage which helped it to win the Newspaper of the Year 2009 award.

But perhaps the best performer has been the blogosphere, which has arguably had a bigger impact on policy making than the mainstream media combined. While the FT’s Alphahville is the best of the few British blogs, it’s high-profile US economists like Paul Krugman and Nouriel Roubini who drive debate, while others, like Mark Thoma, have created influential clearing houses where the thoughts of hundreds of other top-flight economists are aggregated and debated. Current and former financial professionals, such as the anonymous Epicurean Dealmaker or the semi-anonymous Calculated Risk, have also provided analysis a cut above the newspaper business desks. Recently, an angrier streak has been seen, exemplified by the take-no-prisoners Zero Hedge, a blog written under the pseudonym “Tyler Durden”—the nihilistic character from the film Fight Club. Zero Hedge was instrumental in pushing problems with automated “high-frequency trading” onto the wider agenda, after which a variant known as “flash trading” is almost certain to be banned.

The blogs, then, do a great job of feeding avid financial news junkies, and easily beat the mainstream press for their understanding of macroeconomics or banking regulation. But navigating the blogosphere still needs critical faculties beyond most news consumers: there are many more bad blogs than good. So most will continue to rely on the mainstream media, be it the BBC or Rolling Stone. If financial journalists don’t provide the type of context and clarity that the public needs, we’ll likely see more vampire squids before too long.

Felix Salmon blogs for Reuters in New York