THINK!: Brauchli: Newspapers Warned Readers of Economic Crisis (E&P)

Wednesday 1 October 2008

Brauchli: Newspapers Warned Readers of Economic Crisis (E&P)

We can all find examples of news reporting, and opinion, but opinion always covering itself and never taking a doomsday posotion (that I can recall in the IHT). Gretchen M. and Paul Krugman always struck me as being way too cautious about this issue. Anyway, I leave it to you to judge.

Sending signals is not the same as making explicit and urgent warnings.

Brauchli: Newspapers Warned Readers of Economic Crisis By Joe Strupp Published: October 01, 2008 3:27 PM ET
NEW YORK Don’t tell Marcus Brauchli that U.S. newspapers haven't been properly warning about the current financial crisis for years.

Brauchli, executive editor of The Washington Post and former managing editor and longtime veteran of The Wall Street Journal, says coverage of the coming tide of economic woes, stemming largely from the mortgage and credit crisis, dates back more than a decade.

"There was a lot of coverage over many years about the underlying problems in the financial system and the economy," said Brauchli, who joined the Post just weeks ago after more than two decades at the Journal -- including a year in the top editor's post. "If you go back and look at the big American newspapers, you will see it, going back to 1996 when Alan Greenspan coined the phrase 'irrational exuberance.'"

Brauchli's comments come as several major financial institutions have either been taken over or filed for bankruptcy -- along with Monday's 777-point Dow Jones drop. Some observers have pointed to news outlets and asked if they properly covered the coming problems, while others wondered how much was predictable.

"There were good stories throughout, good stories about the risks," Brauchli added. "The truth is, there was always skeptical coverage by the major newspapers. The Washington Post, the Wall Street Journal, New York Times, Financial Times, all have written about these issues. The scale of derivatives, the rapid growth of unregulated, over-the-counter securities, the risk in financial institutions."

A search of stories dating back several years found prime examples in several major papers of forewarning. Among them:

• An Oct. 8, 2003 Journal story by Patrick Barta and John D. McKinnon that discussed tougher regulations sought for Fannie Mae and Freddie Mac: "The two companies have been under intense scrutiny since June, when Freddie Mac fired three of its top executives amid an accounting scandal, causing critics to call for stricter oversight. Regulation of the companies is now split between the Department of Housing and Urban Development and the Office of Federal Housing Enterprise Oversight, a little-known entity within HUD that monitors the companies' safety and soundness."

• An April 9, 2003 piece by columnist Robert J. Samuelson in the Post on the mortgage situation that stated: "The danger is less a total collapse than a gradual descent. The two props of the boom -- falling interest rates and rising prices -- both seem wobbly. In 2000, rates on 30-year fixed mortgages averaged 8.1 percent; recently they've been well below 6 percent. Any further decline might perversely signify a much weaker economy."

• A Dec. 19, 2004 piece in the Times by Gretchen Morgenson about Fannie Mae that warned: "The Securities and Exchange Commission's smackdown of Fannie Mae should upset not only the company and its arrogant executives. It should also embarrass the Wall Street analysts who reassured investors last September that the S.E.C. would probably take a friendlier view of the company's accounting than did its other regulator, the Office of Federal Housing Enterprise Oversight."

But Brauchli also points out that not everyone will take the warnings of news outlets, even when they are continually given: "I think there was abundant coverage. But at times of popular enthusiasm for financial markets and the wealth that they promise, people have a hard time being skeptical, including regulators and legislators. Journalists in this country sent a lot of signals."