Regulators, readers ignored warnings from business press about housing
UNC-Chapel Hill journalism professor Chris Roush writes in the latest issue of American Journalism Review that the business media did a strong job in covering the problems in the housing market in the past decade, but few listened to the warnings.
Roush writes, “Here’s the issue that financial journalism faces: No one likes a nattering nabob of negativism, especially when the stock market is climbing and all of our 401(k) plans are tied to it. So we shut out what we don’t want to hear because it conflicts with what we’d like to happen.
“To be sure, the business media haven’t been perfect. Both Fortune and Forbes, for example, sang the praises of Merrill Lynch CEO John Thain in 2008, shortly before the company was forced to sell itself to Bank of America or risk going under. Forbes went so far as to say the financial house was in ‘damn good shape.’ And the personal finance magazines that tout the best stocks and mutual funds can be maddening because they rarely, if ever, outperform the market. Do they really think they â€“ or the so-called experts they’re interviewing â€“ know?
“But anybody who’s been paying attention has seen business journalists waving the red flag for several years. ‘The fact that housing was a bubble was printed millions of times,’ says Allan Sloan, a Fortune columnist and arguably the country’s preeminent business journalist. ‘This is one time that we did what we were supposed to do.’
“Don’t just take the business journalists’ word for it. Their effectiveness in naming the scoundrels is supported by academic research. In 2003, then-Harvard Business School professor Greg Miller studied more than 260 cases of accounting fraud. He determined that nearly a third of them were identified by the business media before the Securities and Exchange Commission or the company said they were targets of investigations.”
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