“YOU cannot hope to bribe or twist, thank God, the British journalist. But seeing what the man will do, unbribed, there’s no occasion to.” Those lines from Humbert Wolfe come to mind when contemplating a new book of essays* that asks whether financial journalists were to blame for abetting, or not spotting, the financial crisis of 2007-08.

The picture that emerges is mixed. Did journalists spot that house prices were inflated? Yes, a study found that the Spanish press used the term “real estate bubble” 2,500 times between 2003 and 2008.

Did journalists report on the worrying growth of subprime instruments like collateralised debt obligations? Yes, at least in the specialist press. Did they spot that banks were expanding their lending very rapidly? Yes, an oft-cited quote from Chuck Prince of Citigroup about the bank having to keep dancing as long as the music played comes from an interview with the Financial Times. Did anybody tie the whole thing together to predict a seizure in banking and the deep recession that followed? No. But regulators and economists did not foresee that either.

Nevertheless, the crisis did illustrate how the message can be scrambled. There is a trade-off between access and independence. Back in the 1980s the biggest names in British financial journalism (City editors, as they were called) were very grand figures, often lunching at the Savoy or the Ritz with the titans of industry. Public-relations firms indulged in the “Friday night drop”, whereby they would place favourable stories about their clients in the Sunday papers. Scoops were the currency of the day and hostile coverage would cause such scoops to stop.

Things are not as bad as that today, largely because regulators have enforced the need to release financial news to all investors simultaneously; there are fewer scoops. But journalists are nevertheless aware that they may lose access to sources if their coverage is too critical.

A related problem is that of asymmetry of information. When writing about the complex structured products at the heart of the credit boom, journalists had two main sources: the bankers who devised them and the credit-rating agencies who analysed them. Neither was wholly independent. Academic papers did start to emerge about the riskiness of this lending in early 2007, but by that stage there were already signs of a bursting bubble. Nor was it possible for journalists to know who owned the most risky tranches of such products; that information was not public. When regulators announced that the financial system had become less risky because securitisation had diversified the ownership of mortgage debt, it was hard for newspapers to prove them wrong.

Another issue is that newspapers tend to report on what has recently happened, not what might happen. After 40 days of sunshine, journalists will be writing about water shortages and forest fires, not about the risk of floods. In a booming economy, the bulk of articles will be explaining why things are going well. This can, of course, lead to a feedback loop in which positive stories boost investor confidence, spawning more positive stories. Readers do not always welcome contrarian views: those commentators who decried the excesses of the dotcom bubble were often told they “just didn’t get it”.

One final criticism is that journalists get captured by those they cover, subconsciously absorbing their world view. Many financiers would disagree: Buttonwood once spent an uncomfortable hour on stage, along with colleagues from rival papers, being berated by hedge fund types about negative coverage of their industry. Familiarity with the financial markets tends to breed, if not contempt, then a healthy degree of scepticism.

But if journalism consists of talking to people and then writing down what they say, it is hardly surprising that most press coverage reflects the consensus. As a historical essay by Richard Roberts shows, the press welcomed Britain’s return to the gold standard in 1925 and then applauded its exit in 1931. The Archduke Franz Ferdinand’s assassination in June 1914 was treated with indifference by the financial press and the markets.

When the First World War started, the financial press helped to cover up news of a run on the Bank of England. One brave street vendor dared to tell the truth, shouting “Run on the bank”. He was immediately arrested. Not quite shooting the messenger, but close enough.


*“The media and financial crises: Comparative and historical perspectives”, edited by Steve Schifferes and Richard Roberts, Routledge, 2014.