The role of the press in the financial crisis

Peter Goodman, the business editor of the Huffington Post, writes about the role of the business media in the recent financial crisis.

Goodman writes, “The trouble was that a louder chorus repeatedly drowned out this probing reporting about the magnitude of the real estate bubble–a steady celebration of permanently rising home price, the fantasy that propelled a construction binge, a mortgage bonanza and no end of wealth that got created along the way. That chorus abetted and enabled the capture of the regulators who are supposed to be able to tune out such noise while dispassionately scrutinizing the numbers.

“This is not to exonerate the press or chastise the lazy reader, the reflexive posture for many a scribe whose words have failed to produce happy results. Though the press rarely has the power to dominate events and does not make policy, we are collectively responsible for the understanding that our audience takes away from our words. And it is a fair hit to assert that we are prone to being manipulated and getting swept up in the excitement of the times, rather then stopping to ask the critical, typically difficult-to-answer questions that public service journalism demands.

“This is not so much because we consciously decide to become cheerleaders, urging on bubbles that take shape on our watch, but rather because cheerleading is the product of the easiest options that present themselves on any given day. Rising prices, soaring stock markets and the wealth accruing to executives overseeing the festivities are verifiable facts, whereas warnings and worrying entail the indulgence of conjecture and speculation, and they might turn out to be wrong.

“It takes a special breed of reporter to do the digging and put faith in their convictions as they take on the dominant narrative of the moment–particularly when that narrative is championed by prize-winning economists celebrated as wise men, such as the former Federal Reserve Chairman Alan Greenspan and his successor, Ben Bernanke, who played leading roles in convincing the public that everything was fine.”

Read more here.