Always ask the dumb question

David Carr of the New York Times writes for Monday’s paper that there were a few business journalists, like Alex Blumberg and Adam Davidson of public radio, asking the dumb question of why banks were lending money to people who couldn’t repay the loans before the market crashed.

Carr writes, Blumberg “decided to do the story for ‘This American Life,’ a show that has a reputation for discussing things like summer camp and inner demons.

“‘I told him, I don’t know how you’re going to do a story about mortgage securitization for ‘This American Life,’ but good luck,’ Mr. Davidson said. But by December of last year, both Mr. Davidson and the broader markets were beginning to have their doubts about whether the fallout from subprime lending had actually been contained.

“The more they talked, the more Mr. Davidson realized the education was going both ways. They eventually came up with a one-hour collaboration between NPR News and ‘This American Life’ called ‘The Giant Pool of Money’ that was broadcast last May and became a much downloaded primer on all the mayhem that followed. (You can find it at thislife.org/Radio_Episode.aspx?sched=1242)

“Mr. Blumberg and Mr. Davidson were hardly the only ones asking questions. Nearly 19 months ago, under the headline ‘Mortgages May Be Messier Than You Think,’ my colleague Gretchen Morgenson wrote, ‘as is often the case, only after fiery markets burn out do we see the risks that buyers ignore and sellers play down.’

“As the assumptions that had blown air into the bubble began to dissipate, many mainstream reports became increasingly skeptical in their reporting and blogs like Calculated Risk offered increasingly alarming insights.”

Read more here.