What Watchdog? How the Financial Press Has Failed the American Public
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So what’s going on?
DS: It’s not fully appreciated that there’s been a big power shift between the big media and the institutions that it covers in the last 20 years. When you think of the 1990s, finance was a really powerful industry, but so was media. In the mid-1990s, Dow Jones, which publishes the Wall Street Journal, was almost the same size of Morgan Stanley. Now Morgan Stanley is literally 30 times larger than the New York Times company.
This power shift is almost an intangible thing, but you cannot discount it as part of the story of the rising sense of empowerment and entitlement on Wall Street and an increasing sense of deference from the business press. Also, you can’t deny that the collapse of financial regulation in the early Bush administration plays a role. The press relies, not to a fully appreciated degree, on a financial regulatory system because that generates a lot of paperwork.
LG: Still, sometimes it feels like mainstream media doesn’t only fail to investigate Wall Street’s crimes--they actually helped facilitate them. Is the business press itself an accomplice?
DS: The biggest problem during this period was this narrowing definition of what constitutes a business story. There are fights over what journalism is, and you can divide journalism into two great competing schools. One is the access school, and the other is the accountability school.
In the lead-up to 2006, the accountability school was increasingly marginalized and in retreat, while the access school--doing the profile and getting the scoop on deals--became much more prominent. And so the big missed story--the accountability story--was the radicalization of the financial system, particularly in mortgage lending and discussions of subprime and predatory lending.
Meanwhile, when I went back and reread some of the coverage by really good reporters from really good magazines, the coverage of Wall Street, even if it was well intended, actually helped to exacerbate the crisis and add flames to the frenzy. Things like positive profiles of Wall Street executives made things worse and made the world worse. Unwittingly maybe, but so what?
LG: That reminds me of Vanity Fair’s glowing profile of Jamie Dimon recently.
So what about today? Even now that the radicalization of Wall Street is obvious, it still seems like mainstream media oscillates between blaming borrowers and banks.
DS: In another debate between schools of journalism, right now it’s a jump ball between the structuralists and the behavioralists. In the case of the mortgage crisis, behavioralists argue that people lost their ability to understand and manage debt, while structuralists believe that people don’t change, that markets change--and that the market changed.
Of course, structuralists are right and behavioralists really don’t have a leg to stand on. The structuralists aren’t only right, all the evidence is on their side.
But the cultural argument of behavioralists still has a lot of saliency, and for lazy reporters it’s easy because all you have to do is make the assertion about human nature, and that’s the end of the discussion.
LG: So, what’s the effect of having the behavioral-based articles in mass media?
DS: What it really does is that it shifts the gaze entirely off the institutions that these papers are supposed to be covering and onto an amorphous public that can’t fight back. Put it this way: If you blame Goldman Sachs, you will hear from Goldman Sachs. But if you blame the public, no one is going to call you. No one is there to stick up for the borrowers.