The public is blaming journalists for missing the financial crisis — for being “asleep at the wheel,” as the editor of the Financial Times, Lionel Barber, said at a lecture Tuesday.
That criticism is, at least in part, accurate, Barber said. In front of an audience of about 30, Barber discussed the merits of accusations that the financial press in the United Kingdom and in the United States had deliberately hidden the crisis because “bad news simply did not sell newspapers.”
“Was the press an accomplice or an innocent bystander at the scene of the crash?” Barber asked at the beginning of his talk.
Journalists in America have been more forthcoming than others in accepting blame, Barber said. For instance, he said, CNBC on-air editor Charles Gasparino has been quoted saying “We all failed.” Washington Post media reporter Howard Kurtz has said, “These are really difficult issues to convey to the popular public.”
But journalists were not the only ones at fault, Barber said: Regulators, too, failed to identify, manage and contain risks building up in the financial system. In fact, he said, only a few people noticed that imbalances in world trade had become unstable. The few that did warned the public, he added.
These people included Financial Times reporter Martin Wolf, who warned of the risks of global imbalances, and Warren Buffet of conglomerate holding company Berkshire Hathaway, who said in 2003 that derivatives were “financial weapons of mass destruction.” But despite these warnings, Barber said, the warnings of financial journalists were not given prominence in the media, likely in part because of the highly technical nature of the financial crisis.
In addition, the people who controlled the media outlets were more interested in stories that were not “opaque,” such as company earnings, Barber said.
In part out of fear of offending sources, Barber said, reporters shied away from pursing negative stories. Market reporting at that time was tilted toward market earnings rather than debts, he said, and coverage focused on good news such as rising housing prices and economic growth.
Meanwhile, the prevalent view among banking executives and regulators was that the more risks were dispersed, the fewer risks to the system — views propagated by Former Federal Reserve Chairman Alan Greenspan, whose guidance people followed as if he were the “oracle of Delphi,” Barber quipped. In this situation, the warnings were like a “voice in the wilderness.”
“We didn’t do a good enough job going against the grain,” he said.
Investing in training for reporters may help newspapers bolster their financial reporting, Barber said. He said the media should entertain a variety of views and “constantly challenge assumptions.”
Leon Linquist, 73, a retired Lutheran pastor who lives in New Haven, said he thought Barber’s assessment of the economic situation was fair, adding that he would have liked to hear about Barber’s prognosis for the future.
Greta Hotopp SOM ’02, a derivatives consultant, said she agreed with Barber about the need to train reporters.
“I think it’s no surprise that a lot of our media outlets are having a hard time because they haven’t brought anything to the table,” Hotopp said.
Barber, who was appointed editor of the Financial Times in 2005, began his journalism career in 1978 as a reporter for a Scottish daily newspaper, The Scotsman.