How Our Gutless Media Helped Trigger the Credit Crisis

By Trudy Lieberman, Columbia Journalism Review. Posted November 20, 2008.

Ronald Reagan was sitting in the White House, and the public was beginning to buy into the doctrine of no taxes and no regulation. Nader, meanwhile, was in trouble. No longer a media novelty, he was now the object of attacks by the business community, which considered him a real threat. In 1971, before he took a seat on the Supreme Court, Justice Lewis Powell wrote a memo to the U.S. Chamber of Commerce. "Perhaps the single most effective antagonist of American business is Ralph Nader who -- thanks largely to the media -- has become a legend in his own time and an idol of millions of Americans," Powell argued. "The overriding first need is for businessmen to recognize that the ultimate issue may be survival -- survival of what we call the free enterprise system." He urged "careful long-range planning" and action by business "over an indefinite period of years" to reverse what he saw as a dangerous trend. The Business Roundtable, an organization of ceos from the nation's bluest of blue-chip companies, grew out of Powell's memo and became a lobbying force on Capitol Hill, where staffers and their bosses had grown more inclined to listen to the ceo of Citibank than a Nader acolyte who had just released a study about Citibank's credit cards. Consumer advocates failed to persuade Congress to create a Cabinet-level consumer-protection agency, a modest $15 million operation, to represent consumers at the highest levels of government. To show that the agency would not be an expensive bureaucracy, only costing roughly five cents per American, supporters asked citizens to send in nickels, and hundreds of thousands did. But public support was no match for the Roundtable, whose PR agency placed hundreds of canned opinion pieces in the nation's newspapers. The idea of a consumer agency was defeated. The consumer movement had passed its high-water mark.

The press also grew weary. When the Federal Trade Commission tried to stop businesses from advertising to children, The Washington Post editorialized against the commission, saying that the country didn't need a national nanny. Michael Pertshuck confronted Post publisher Katharine Graham about this, who lectured him on the importance of business, including newspapers, making money, so that crusaders like Morton Mintz could do the kind of reporting they did. Smaller papers, too, became less willing to tolerate hard-hitting stories that stepped on the toes of their advertisers or that challenged the new perception that the heavy hand of government was an enemy. For me, the gig was over when the Free Press city editor said that readers were not interested in what the governor and the legislature were doing in Lansing, the state capital. Whether true or not, the message was clear: find something else to write about.

Business may have killed the consumer movement, but it did not declare war on consumers; there was money to be made from them -- lots of it, especially in financial services. The word "consumerism" replaced the derogatory term "consumerist," which business had used to describe Nader and other advocates. The idea was that armed with information, the little guy could now compete with the big boys. He could invest in stocks and bonds, manage his own pension plan, buy a house with an adjustable-rate mortgage, tap his home equity to send the kids to college, profit from a "free" credit card. It had an appeal. "What touches you personally will be more interesting than what is not personal," says Irwin Landau, who edited Consumer Reports for twenty-one years, until 1994. "It's much more interesting to find out how I can get a delicious and safe tomato for myself than how all tomatoes can be made delicious and safe."

Interest in consumerism stories peaked with the arrival of 401(k) plans and the shifting burden for financial security from employers to individuals, says Amy Dunkin, former personal-finance editor at BusinessWeek. "Employers stayed far away from giving guidance, and stories in the media became very advice oriented," she says. "You could repeat the same stories year after year. They were easy and cheap." Lucrative, too. The nineties were the glory days for personal-finance journalism fueled by financial services advertising.

Personal-finance reporting begot a story genre I call "how to get the best for you." A Money story in 1996 with this headline, "Your Ultimate Guide to a Super Credit-Card Deal," rated the top twenty-five card issuers and gave tips on "how to cut through the hype and zero in on the best deal for you." It's doubtful that all this money advice -- sometimes quoting "experts" who were in reality sellers of the new financial products -- made people wiser consumers. There is no perfect credit card; even if someone takes a magazine's advice and finds the one with the best rate, the card agreement says in the fine print that lenders can change the rate at any time, and they do. "Portions of the financial press picked up the theme that you, too, can be smart and make money playing with innovative financial instruments," says Elizabeth Warren, a credit and income expert who also teaches law at Harvard. "It was a sucker's game and the financial press gave it credibility."

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