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Business Media Ask Themselves: ‘Did We Blow It?’

BY Mariana Minaya  May 7, 2009 at 4:25 PM EDT

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When Comedy Central talk show host Jon Stewart recently took on Jim Cramer, host of CNBC’s “Mad Money,” for faulty financial predictions, the lens of scrutiny around the current economic crisis swung back on the media.

Cramer squirmed under Stewart’s fire for several minutes as the comedian indicted him and his network for not warning viewers about questionable business practices or soon-to-be-toppled Wall Street titans in the lead up to the financial meltdown.

By contrast, the discussion among members of the business media in Denver last month was not quite the stuff of prime-time, but the event raised many of the same questions as the Stewart v. Cramer affair. The Society of American Business Editors and Writers convened a panel of five business journalists and an academic to answer a central question: When it comes to coverage of the meltdown: Did 9,000 journalists blow it?

While Stewart may hold that the news media are at least partially culpable in allowing the meltdown take place, not everyone has the same take on pre-crisis business coverage. Every panelist at the SABEW conference could name reporters that produced articles warning about the dangers of the housing bubble, mortgage markets and executive compensation.

Consensus, however, proved harder to reach on questions like why such articles failed to raise on alarm on the coming crisis and whether those stories are enough to conclude the media fulfilled its role as a watchdog.

One possible culprit might be a lack of tough questions on television news — where reporters can fear losing access to top executives, said Allan Dodds Frank, a television journalist and president of the Overseas Press Club, at the forum.

“George Bush had harder shoes thrown at him than [the questions] they throw at the CEOs on CNBC,” Frank said. “So the whole effect of any probing questions has been diminished.”

And in some cases, journalists may have focused on the wrong questions, such as, “Is Citibank too big to fail?”

“Maybe we should have asked the question, is Citibank too big to succeed? Is it too big for anybody to understand how they’re lending?” Frank said. “It’s our business to try to make the complex simple, but we let them hide the ball on us too much.”

Even with the stories that did question the mortgage bubble, the vast scope of the business practices that led to the meltdown eluded the press, said Dean Starkman, who runs “The Audit,” an online critique of the business press for Columbia Journalism Review. He has recently published a piece analyzing more than 700 articles written between 2000 and 2007 that warned readers about an impending crisis.

“The stories written were necessary but not sufficient,” Starkman said in a phone interview after the panel. “People didn’t know lenders were running amok because they weren’t told, and they had no idea these out of control institutions were being funded by Wall Street. That’s why we’re so surprised today.”

Starkman concluded that, very simply, the business press failed to hold big institutions, like Wall Street, accountable. Though he concedes that some aspects of the buildup to the crisis were hard to fathom.

“I sort of sympathize with the business press in sense that anyone really knew how radicalized these corporations had become. Looking back, they were out of control,” Starkman said in a phone interview after the panel.

As the problems mounted, the connections became harder to make, and the story became harder to unravel. Personal finance columnist Jane Bryant Quinn admitted that though she wrote quality pieces about risky mortgage practices, “I didn’t think about following the daisy chain back. For example, I never heard of a credit default swap until all of a sudden it started hitting me in the head.”

Not only were business practices getting more complicated, but market forces had diminished the incentive to dig deeper, according to Frank.

“What happened is: as Wall Street got so complex, we couldn’t figure out what they were doing, and they saw no reason to tell us what they were doing, and the notion of public interest broadcasters [we] once had — because they were entitled to the public airways — went away with cable, even more so with the Internet, so you have the quick coverage driving the complicated analysis out of the marketplace,” Frank said.

Add to that the fact that analysis is difficult to show on television, he said.

“Try picturing or doing a graphic of a collateralized debt obligation square,” Frank said. “It’s a tough sell even if you have the appetite to do that story. It’s impossible.”

So as the job of financiers has become more specialized and more complex, the role of a journalist covering them must evolve as well — or regress, in a sense, Starkman said.

“As we reinvent the media and financial journalism, my thing is I think we have to not lose sight of basic journalistic values,” he said. When it comes to investigative reporting, “you need not only just isolated handfuls of reporters, but that investigative capability needs to be integrated into culture of newsrooms more, and in the hierarchy of the newsroom.”

That’s much easier said than done, Starkman admits. The recent problems plaguing financially-strapped newsrooms are well-known. Senior reporters and editors who command the heftiest salaries are often the first ones to take retirement buyouts as media organizations look for ways to trim staff.

The dangers of gutting regional papers are particularly troublesome for financial coverage, said Greg Miller, who teaches accounting at the University of Michigan’s Ross School of Business, at the Denver forum. Often the regional newspaper’s reporter is the most familiar with local companies identifies suspicious practices before the national press.

So, as the financial world gets harder to understand, there’s growing pressure for general business reporters to gain more specialized knowledge, coupled with the need to become familiar with regional characteristics.

“We have fewer reporters, and more things to be covered, and yet the things are more and more complicated,” Miller said. “I worry we’ll end up with five national business papers, and we lose the regional knowledge.”

Larry Ingrassia of The New York Times defended how the national media handled the story at the Denver forum, pointing out many reporters at news organizations who got the story right. So why didn’t anyone listen to them? Some blame human nature: tuning out warnings while the markets were doing well.

It could also be a matter of professional courtesy, said Bryant Quinn.

“It became very unfashionable to say we ought to regulate this, we ought to cap this, we ought to stop this,” she said. “It’s very unfashionable generally to start saying, as an extension of our business coverage, which is part of this regulation, ‘well, where is the Fed? Could they have done something about it?’”

While Stewart’s indignation focused on Cramer and CNBC, the sentiments have nevertheless prompted a great deal of soul-searching in the business media as reporters question what they need to do to help prevent the next financial disaster.