Seeing the trees, but not the forest

Martha Hamilton writes in the January/February issue of Columbia Journalism Review that business journalists covered some of the issues causing the financial meltdown, but missed the big picture.

Hamilton writes, “But even in hindsight, I think it would have taken a miracle for business journalists to have foreseen the current crisis in its magnitude and depth. Beat reporters saw the pieces of it, and columnists who took a broader view warned about the buildup of risk. But even those who predicted disaster, I think it’s fair to say, didn’t know how widespread it would become or how unprecedented the government’s reaction would be. A New York Times editorial warning in September 2006 that ‘in a market so vast and dynamic, everyone knows that if mortgage defaults should rise, damage could reverberate throughout the financial system,’ probably didn’t leave many readers thinking seriously that two years later we might be talking about a second Great Depression.

“Nonetheless, there are certainly lessons to be learned about how to change some structural and cultural biases that might have gotten in the way—including the segregated silos we sometimes fall into in our beats, and a bias against speculative “this trend could be dangerousâ€? stories. It’s not as sexy to prevent disasters as it is to cover them, but maybe we should rethink that, and learn to view warnings and prevention as one of the most important parts of our jobs.

“One of the biggest obstacles to understanding, however, was out of our control: it was the decision to let major financial markets full of new types of housing-related investments expand with little or no federal oversight. No regulation means no transparency. Reporters and investors alike were kept from seeing what was going on behind the curtain.”

Read more here.