Eric Laursen writes Wednesday for The Huffington Post about how the sports media’s lack of critical coverage of Lance Armstrong until recently compares with the business media’s coverage of the economic crisis of the past five years.
Laursen writes, “In a not dissimilar manner did the business press tout the story of the ‘new economy’ and turn hacks like Enron CEO Ken Lay into ‘maverick’ symbols of American success.
“Rather than learn their lesson, the business press fell into the same trap less than a decade later. Prominent reporters largely bought the line that there either was no housing bubble, or that (take your pick!) detecting the existence of one was too hard and therefore shouldn’t be attempted. They failed to comprehend the dangerous levels of risk being spread by complex mortgage-backed securities, preferring to believe what their most highly-placed sources told them: that spreading risk around the investor universe would somehow lower the level of risk for everyone. In fact, it created a contagion.
“Perhaps the most delicious example of this refusal to grapple with reality was a column that the bestselling and much-lauded Michael Lewis wrote for Bloomberg.com in January 2007, reporting from the annual World Economic Forum junket in Davos, Switzerland. Scoffing at the idea that the markets may be mispricing some forms of risk, or that financial derivatives might have inherent dangers, Lewis blandly concluded, “The most striking thing about the growing derivatives markets is the stability that has come with them.”
“Lewis was just coming off the success of his inspirational football book, The Blind Side. Rather than being taken down a peg as a result of his embarrassing Bloomberg column, however, he parlayed the subsequent crash of the housing markets and much of Wall Street into another inspirational bestseller, The Big Short, which celebrated a group of short-sellers who had managed to profit from the disaster. The book also helped Lewis to cover his own tracks, implying strongly at every turn that predicting a crash took sheer genius of the kind only his subjects possessed. In fact, plenty of economists — Dean Baker at the Center for Economic and Policy Research, for one — had been warning for years and as loudly as possible about the overextended housing market. The business press, perhaps for the reasons Carr enumerates, simply weren’t listening.”
Read more here.