How Did Journalists Miss the Looming Financial Crisis?

Wall Street Journal reporter Dean Starkman had been writing about business for 10 years when the financial crisis of 2008 struck. Responses from his colleagues in the business press varied from disbelief to outrage, Starkman told students at the Yale School of Management on January 28.

“Some of us felt this required a reexamination of the entire financial system and the media that cover it,” he said.  Starkman undertakes that reexamination in his new book, The Watchdog that Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism. A Yale Poynter Journalism Fellow in 2012, Starkman returned to Yale for a conversation about the origins of the financial crisis and what he sees as the troubled state of the media today.

The financial crisis took business journalists by surprise, Starkman believes, because of the disappearance of investigative journalism that examines issues deeply and calls for accountability. 

At one time, he said, all sizable newspapers did investigative reporting of some merit. In the mid-1990s, investigative work began taking a back seat to “access” reporting, which focuses on simply relaying information, and was particularly popular in business reporting. At the same time, the newspaper business began contracting as ownership consolidated, decimating newsroom staffs.

As the subprime mortgage market ballooned, threatening the stability of the financial system, few reporters in the mainstream media were aware of the size of the threat, Starkman said. Other important stories are being missed too.

“We’re way below required levels of reporting in this country,” he said. As a result, many governmental bodies and other agencies are not being covered at all. “It’s a great time to be a crook or a crooked politician,” Starkman said.

The move toward digital media, with its emphasis on volume rather than quality, continues to pose serious problems for investigative journalism, Starkman said. What’s needed is a way to incentivize investors to invest in newspapers as long-term propositions that serve the public good, to staff them accordingly, and to not measure their financial performance “from quarter to quarter,” he suggested. “Great journalism and great value creation for the enterprises are not mutually exclusive.”