British Journalism Review    
HomeCurrent EditionArchiveBlogSubscription & Back IssuesAbout the BJRLinksContact the BJR


Danny Schechter

Credit crisis: how did we miss it?

British Journalism Review
Vol. 20, No. 1, 2009, pages 19-26

Danny Schechter is an American investigative journalist, blogger, film maker and editor of His new book Plunder: Investigating Our Economic Calamity (Cosimo) is available at online bookstores (go to

Contents - Vol 20, No 1, 2009

Editorial - The sharp end 3

Not finally... Subjective views on matters journalistic

Michael Leapman - Martyrs to a cause 5

Brian McNair - Journalism's screen test 7

Michael Henderson - Journalistic stage frights 10

Daya Thussu - Turning terrorism into a soap opera 13

Danny Schechter - Credit crisis: how did we miss it? 19

Nick Pollard - Staying alive in the killing fields 27

Bill Hagerty - Chicago: down but not out 33

Ivor Gaber - Them and us: is there a difference? 41

Nick Wilkinson - Spookmania and the media 47

Sky News - The way they were 53

Martin Moore - Only change can save self-policing 55

Keith Somerville - BBC wounds that won't heal 61

Nicholas Jones - A piranha fish bites back 69

Conrad Black on Michael Wolff 77

Tony Thomas on Richard Dowden 80

Donald Trelford on Anthony Sampson 82

Liz Vercoe on François Maspero 84

Roy Greenslade on Mick Temple 87

Brian Winston on Laurel Brake and Marysa Demoor 89

Mike Molloy on Murray Sayle 91

BJR conference – 68
Quotes of the Quarter – 76
Ten years ago The way we were 93
Letters 94
Cudlipp Award 96

Cover: Unemployed in New York, 1932: AP/PA PHOTOS

  Most journalists failed to pick up the worldwide crunch that was to rock capitalism. Were they lazy, or embedded with the bankers?

We were just entering the new millennium when I joined a caravan of journalists and business leaders on a mountain-climbing trek, from the airport in Zurich to the snowy peaks in Davos, Switzerland, for a the annual meeting of the World Economic Forum. It was hardly taxing or dangerous. We went by limo. Even though I am an independent journalist, I had wangled an invitation as a guest to a special media programme for top editors, and was given full credentials to mingle with the heavy hitters. I was not there as a mere reporter, consigned to the working press room carved out of a fallout shelter in the basement of the Conference Centre, but as a fully-fledged delegate alongside editors of The Wall Street Journal, Time, Newsweek and the Financial Times.

We were the chosen ones and allowed to “embed” ourselves into the elite of the multi-national corporate culture. The affluence and the elitism was seductive and co-optative on that mountain top, with many media outlets glowing over a new genre of masters of the universe – the “Davos Man”. One of our number, a reporter for CNBC TV, would soon “cross the aisle” and leave reporting for a hedge fund (it later went bust).

At the time, January 2000, the dot com bubble was unravelling but there was no discussion as to what might replace it, or any expectation that just a few years later the world economy would collapse in a global crisis. The hype that year was about the promise of globalisation, and a capitalist system that could do no wrong. A spirit of “cautious optimism” was as much criticism as was permissible.

Eight years later, Bloomberg News went back to Davos in the heart of Europe and found leaders there willing to concede they had not alerted us to the problems, and in effect may have contributed to the environment of greed and free market bullishness. Now, in the rip-tide of the worst financial crisis since the Great Depression, World Economic Fund (WEF) officials and delegates say many of the chief executive officers who gathered in Davos over the past five years didn’t listen to warnings from their peers. Davos organisers also say they failed to play tough with the financial industry bosses, opting to accept their funding and let them turn Davos into a rave-up for Wall Street excesses: “Once upon a time, the World Economic Forum was the ultimate Wall Street jamboree” (Bloomberg). “The partying crept in,” says Klaus Schwab, the 70-year-old WEF founder and executive chairman. “We let it get out of control, and attention was taken away from the speed and complexity of how the world’s challenges built up.”

It was not only the CEOs who indulged and enabled practices that would destabilise the system – many media outlets lacked the independence and critical judgment needed to investigate the financialisation of the economic system and warn of serious excesses and, sometimes, criminal conduct. When I say “ the media”, I mean newspapers and TV stations – with some exemplary exceptions – in the United States and Europe.

Ridiculed as an alarmist

I am an investigative reporter and global journalist. In 2006, I wrote an article in Harvard University’s Nieman Reports, a journalism review, calling on my colleagues to improve their scrutiny of credit and debt issues. There was little response. A year later I made a film, In Debt We Trust, warning of a collapse if nothing was done. I was later ridiculed by some reviewers as an “alarmist”, or a “doom and gloomer”. I then wrote write a book on the emerging crisis, called Plunder. Thirty publishers “passed” because they believed I was exaggerating. The book was finally published just a week before Lehman Brothers went bust. Some reviewers were wrong again, deciding this time that I was a prophet.

Others saw what was coming and were also ignored. In fact, the economist James Galbraith says that only eight to 10 out of thousands of his colleagues saw what was coming. He noted: “It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.” If an economist will criticise his colleagues, why not more of us in the media?

Today, we are all alarmed by the rapidly spreading global crisis. Plunder investigates three aspects of it: the practices of the mortgage industry and Wall Street firms; the regulators who didn’t regulate; and the media that were often complicit. Not only were there few investigations of sub-prime predatory practices between 2002 and 2007, media companies took billions – that’s right, billions – in advertising revenue from dodgy lenders and credit card companies. We had gone from telling to selling.

One of the key sources of revenue for newspapers is real-estate advertising in weekend supplements and classified sections. The newspaper industry became, in some communities, the marketing arm of the real-estate industry. In some cities you actually had newspapers getting a piece of the action of sales through the ads they generated – they were actually part of the corruption. So of course there was little real scrutiny of what was actually happening in the neighbourhoods where mortgage fraud was pervasive, where people who couldn’t afford to buy houses were buying them with bogus mortgages. Some newspapers were making money on the sales of these homes.

While coverage in Europe may have been better once the crisis erupted, there had been little reporting on, or questioning of, the large investments by European and Asian banks in sub-prime securities, many based on shoddy and discriminatory lending practices. Some of those banks would later collapse or write off billions because these “asset-backed” securities had no assets backing them. They would blame the Americans for scamming them – and there is truth to the charge – but surely they had a responsibility to do due diligence and realise that their money was underwriting sleazy practices that have led to a foreclosure crisis affecting millions of families.

Instead many outlets politicised the problem, with the media rarely acknowledging their laziness and superficial coverage. Soeren Kern, a senior analyst for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos (strategic studies group), wrote: “While much of the initial reaction emanating from Europe was self-congratulatory gloating to the effect that Europe’s ‘superior’ economic model made it immune to the kind of problems plaguing the United States, the fact that this has now proved to be false has unleashed an entirely predictable populist reaction; European leaders of all ideological stripes are now busy blaming the United States for the financial problems in their home countries, as if anti-Americanism will somehow shield them from political fall-out of the trouble that lies ahead. Many Europeans are calling for an end to American global economic dominance, with, of course, a correspondingly greater regulatory role for Europe…

“Some of the most virulent anti-Americanism stems, as usual, from Germany, where media soothsayers have had a field day prophesying America’s imminent downfall. The weekly news magazine Der Spiegel, for example, has a cover showing the Statue of Liberty’s torch extinguished, with the headline: ‘The Price of Arrogance’. The cover of the Die Zeit newspaper shows a Bald Eagle plunging to Earth, feathers flying, with a flag of the European Union clutched in one of its talons. Another Die Zeit article entitled ‘USA: Can the Superpower Learn to Step Down?’ asks: ‘How can the land of victory and optimism adapt to life after the imperial moment?’ And so on. German politicians have joined in the America-bashing too. Finance Minister Peer Steinbrück predicts: ‘The U.S. will lose its superpower status in the world financial system.’ (He also said: ‘the financial crisis [is] above all an American problem’, words he ended up eating a few days later while trying, unsuccessfully, to rescue Germany’s Hypo Real Estate banking group).”

“We all failed”

Global media have a responsibility to do a better job covering the crisis and also acknowledging their own role. I am not the only media critic raising this issue. Howard Kurtz writes in The Washington Post: “As news organisations chase exclusives about the Wall Street meltdown, they are also grappling with a troubling question: Why didn’t they see this coming? ‘We all failed,’ says Steven Gasparino, a former Wall Street Journal and Newsweek reporter. ‘What we didn’t understand was that this was building up. We all bear responsibility to a certain extent.’ The shaky house of financial cards that has come tumbling down was erected largely in public view: overextended investment banks, risky practices by Fannie Mae and Freddie Mac, exotic mortgage instruments that became part of a shadow banking system. But while these were conveyed in incremental stories – and a few whistleblowing columns – the business press never conveyed a real sense of alarm until institutions began to collapse.”

Former business journalist Dean Starkman, who now covers the business press for the Columbia Journalism Review agrees. He told me: “The business press did not really recognise and understand what they were up against, how dramatically the world had changed, how the lending industry had changed, how out of control Wall Street had become. They were, to me, extremely slow to recognise, appreciate and confront the changes in the financial system.” He also believed there was a relationship between the advertising revenues and the quality of journalism: “They [the business press] made a lot of money. Again that was a big miss. A lot of time was spent on [reporting] the personalities, but not on how those earnings were being created. The third big miss is the growing financial distress of the middle-class, generally speaking. To me it was the most frustrating thing to see the coverage of the deterioration of the everyday financial life of Americans.”

The editors’ blog of the World Association of Newspapers in Paris discussed this issue in November: “The media stand accused of failing to foresee the global financial crisis, of a lack of understanding of the issues, and even of having a hand in the problems we now face.” The blog interviewed me as well as the managing editor of the Financial Times, Daniel Bogler, who believes the media are “fanning the flames” of the crisis.

I was in Paris in mid-October last year where the word “Crise” was plastered all over every magazine, newspaper and newsstand. It is big news and the French public seemed to think that its government acted swiftly to stem it. Le Figaro reported a 60 per cent approval rate for President Nikolas Sarkozy’s strategy of promptly injecting money into banks to make the “crise financiere” go away. Out in La Defense, an overdeveloped arrondissement known as the Wall Street of Paris where the banks and insurance companies are based, I was filming interviews against the background of glass towers, with the Arc de Triomphe visible on the far horizon. There, a German businessman assured me that the crisis will be “over by Monday”, since his government was busily capitalising – or is it recapitalising? – its engines of capitalism (while the German public was making a run on the bookstore for copies of Karl Marx’s Das Kapital).

One young man had no idea what I was taking about when we asked him if he was worried. He said he didn’t really know what was going on and doubted that it would affect him since he had a debit card, not a credit card. Another confided the worst that would happen was a “slowdown”. We don’t have subprime loans in Europe, I was assured. Maybe, I responded, but your banks invested in these bogus products, made billions and now are writing it all down. And then I followed my usual practice of interviewing people in junior positions who don’t feel the need to hype their companies. A grad student interning at a large bank that was taken over told me that people who don’t follow finance have no clue about what’s going on and how serious it is. He added that the companies and the media are not telling them either. He described the atmosphere of panic and uncertainty in the bank he worked for, where the new owner had yet to assert control, and, he said: “Who knows how long our jobs will last?” He spoke of a climate of greed that led a small number of interconnected executives, operating in their own bubble, to accumulate millions for themselves with no apparent concern about how it affected others.

It is hard for me to be as critical of European media as I am of the media I know best, in the U.S. For one thing, I seem to get on the air more in Europe, on radio, in the press and TV. The mass media in Europe seem more diverse and critical than the U.S. press, whose critics have suggested that a kind of corporate embedding took place in which journalists at leading newspapers and TV channels bought into the ethos and culture of money-making and reckless acquisition.

Hendrik Hertzberg, a senior editor of The New Yorker, told me recently: “You could say that business journalism was in bed with, or embedded, in the institutions the way that war correspondents were embedded in the units in Iraq, but you know, that can go both ways. You have a kind of Stockholm Syndrome. You adopt the point of view with whom you’re embedded with on one hand and on the other hand, you are seeing it… the reality is coming before your eyes, whether you’re reporting it or not, so [then] you can get the kind of reporting we got in Iraq.”

Journalists… are really guilty

In Britain, former Observer editor Will Hutton, now CEO of the Work Foundation, echoed that when he lashed out at his former colleagues during a news agencies conference in Spain. Speaking to reporters and editors via video link, he charged the media with complicity: “General journalists, as well as business journalists, are really guilty in this. They have indulged madness in the last five years – we should have been better at whistleblowing than we were. Journalists for the most part missed the build-up to the crisis and did not warn the public. We all kind of believed that we had fallen upon some kind of alchemy, that capitalism had changed, and I think everyone got carried away. Even sceptics in the end found it was pretty difficult to maintain scepticism in the face of the tsunami of apparent easy money… We lost our senses, all of us journalists, politicians. We suspended our judgment and we are paying a big, big price.”

The British press has treated the crisis through the ideological lenses identified with various media outlets, but in some cases political lines have been crossed. The Daily Telegraph, nominally a pro-business free-market newspaper – enemy of statist liberals and mechanical Marxists – was the most outspoken in its predictions about a financial Armageddon. So much so that it was denounced as alarmist, even apocalyptic in its projections. Its columnists, though, were often accurate and ahead of the pack. What started as a kind of anglophile bashing of Wall Street and Americans for the lack of regulation turned into scrutiny of British practices in the Northern Rock affair and its aftermath. All this, as that newspaper and others began to deal with the consequences of the crisis by cutting even more staff and looking to save costs elsewhere.

In February the Treasury Select Committee took evidence from key figures in the news media, including Robert Peston, the BBC business editor who broke several stories last autumn when the financial crisis was most acute. Also called were columnist Simon Jenkins, who, in The Guardian, had written that financial journalists should be more aware of how their coverage can affect sentiment; Financial Times editor Lionel Barber, and Alex Brummer, financial editor of the Daily Mail. The Select Committee had said it would weigh whether financial journalists should exercise greater restraint during periods of market turbulence and whether any kind of reporting restrictions should be applied during such times. The journalists mentioned were largely on top of the story; countless others were not. Funny how there was no inquiry about lack of coverage of a pending crisis. It was as if, suddenly, it was the media’s fault.

What accounts for this media failure? I wrote to John Gittelsohn, of California’s Orange County Register, whose work on the mortgage fraud issues I admired. He wrote back indicting the media’s lack of depth and resources, the way our media system has cut back costly investigations because of our own financial crises. He also cited another factor – fear of lawsuits from businesses eager to silence or suppress “bad press” in an era when so many wealthy companies have invested in sophisticated public relations. So what’s to be done? Hutton calls for the media to ask tougher questions, but that may not be enough – journalists need to be educated, or re-educated, in the dark arts of financial institutions. During an interview recently on the World Association of Newspapers’ editors’ blog, the FT’s managing editor, Daniel Bogler, wrote: “It’s unfortunate that the financial literacy and understanding of how things work in the City and of basic accounting and so on is actually very thin in financial journalism.”

On the night I wrote this piece I chatted with a senior editor of The New York Times who deals with news ethics and practices. I set out my critique, arguing that, despite a few early strong articles in the NYTimes, most of the papers missed the run-up to the crisis just as much of the press was uncritical of the run-up to the war in Iraq. I thought he would argue with me. He didn’t. There is an unfortunate dialectic between financial failures and media failures. We, as journalists, may not be able to do much about the former but we must become more conscious of, and willing to do something about, the latter. We are now at the end of the Bush era. We in the United States are entering a new political order. Can we build a new media order?

This is an edited version of an article that first appeared in the German media magazine, Message.