The Great Recession of 2008 will doubtless occupy historians for decades to come. The detonation of the housing bubble, the infiltration of toxic derivatives, the collapse of Wall Street giants like Bear Stearns and Lehman Brothers, the tsunami of mistrust that shuddered through the economy, choking off credit and shredding millions of jobs into slips of pink— any one of these, on their own, would constitute a major crisis. That all of them should happen with barely a word of warning from the media constitutes journalistic failure on an epic scale. Why didn’t someone sound the alarm sooner?
This compelling collection of essays by prominent reporters (and a token economist) explores the various forces that prevented the press from doing its job, from deadline pressure, structural fatigue, and milquetoast regulators, to a sort of mass psychosis.
Anya argues that business reporters suffer from a journalistic version of Stockholm Syndrome—identifying so strongly with the people and institutions they cover that they failed to ask the hard questions and probe the fundamentals until it was too late. They also tend to focus on the trees, not the forest. “We spent so much time trying to explain what a CDO and the other derivatives were that we never actually stood back and said, ‘This won’t work. You can’t be leveraged 30 times,’” one editor told her after the collapse.
Nonethless, there were warnings—especially early in the decade, when the new forms of flaky finance were first being pioneered. The New York Times ran an exposé, “Mortgaged Lives: Profiting from Fine Print with Wall Street’s Help” in March 2000. Businessweek followed with “Easy Money: Subprime Lenders Make a Killing Catering to Poorer Americans. Now Wall Street Is Getting in on the Act” a month later.
But the articles that questioned the logic of the bubble never gained enough currency to pop it. “The problem has been that the average consumer has not wanted to understand what the business media were telling them or simply chose to ignore the warning signs,” writes journalism professor Chris Roush. “No one likes a nattering nabob of negativism, especially when the stock market is climbing and all of our 401(k) plans are tied to it.”
It was almost as if Americans bought into a collective delusion and could not bear to let it be shattered. As Upton Sinclair once wrote, “it is difficult to get a man to understand something, when his salary depends upon his not understanding it.”