Economic Crisis

The Backstory: Dean Starkman

Dean Starkman talks about wading through thousands of major articles from The Wall Street Journal, The New York Times, Business Week and the rest of the leading financial press to solve the question: did journalists fail to see the financial crisis in the making?

The “eye-roll” treatment: what you get when you have the temerity to question whether senior editors did an adequate job warning the public about the financial crisis. “Power Problem”: what you get when Dean Starkman and two colleagues read 2,000 stories from the business press to prove that said senior editors were actually sleeping on the job. In this interview, conducted by Nation Institute Web Editor Jayati Vora, Starkman shares what he learned, what advice he'd give reporters, and why his attitude has hardened since doing the investigation. — Jayati Vora

Click here to listen to the interview.

Jayati Vora: So what made you contemplate a project of this magnitude?

Dean Starkman: Well, I'm a media critic and I cover the business press, and I was innocently covering the business press at the time of the complete and utter collapse of its main beat. And the slow-motion train wreck began in the summer of 2007. And you're probably aware, it reached its crescendo last September when Lehman Brothers declared bankruptcy, AIG was bailed out, and it became pretty macro-nationalized. Basically, all hell broke loose. Just given those facts, of course, I'd be inclined to — as a journalism critic — try and figure out where journalism played or figured into this catastrophe and what did and didn't happen, what was and wasn't done and where there might be, at least, room for improvement.

Then as the coming months rolled on, I detected what I thought was really disturbing complacency among senior editorial leaders and news executives, basically to the effect that this crisis didn't implicate them in any way. It had nothing to do with them. And in fact, those people who had the temerity to ask or suggest that there was something that wasn't done, they were given what's becoming known as the “eye-roll” treatment: you don't know what you're talking about. And they also shifted the burden to their readers when they suggested that they actually did provide ample warning but their readers and others didn't pay attention to them.

So the whole thing didn't make sense to me. It wasn't even tenable as a matter of logic. If you're a journalist, you really can't be put in the position of saying your readers were inattentive.

So that's what got me going, energized me a little bit. It was, come on, guys, this can't be so. There has to be at least some kind of questioning or introspection or somebody has to look and see what was and wasn't done. And it turned into, became a pack gathering problem in the end. It isn't really a matter of debate, what was and wasn't done. Right? It's not a matter of opinion. It's either there or it's not. The question becomes, how do you find out? And it became a pack gathering problem, of reading through this enormous ocean of material. How do you do that?

Vora: So you read 2,000 stories.

Starkman: Yeah, at least. Minimum. So what we did was, ok, we'll try and read. The business press as an institution has staked out this claim that they've done all they could do and it was everybody else's fault. So what we did was try and find out what actually was and wasn't done. It was a lot of grunt work, with me and two staffers, Elinore Longobardi and Megan McGinley, who were given search terms of nine publications, The Wall Street Journal, The New York Times, Forbes, Fortune, Business Week, LA Times, Washington Post — there were nine main ones. Because the idea was that, and people said, well, what about the local paper, what about the blogs, what about CNBC? We were saying, wait, these are the agenda-setters, these are the ones that we've decided to work on.

Vora: That's what I was curious about: why not CNBC? Or why not any of the other TV channels?

Starkman: Well, one was a practical reason. We had to cut it off at some point. Second was that CNBC would have posed technical problems, because how do you read their record? It's verbal, garbled transcripts and so on. Third, and it's really much more substantive, CNBC is not in the warning business. CNBC doesn't perform the watchdog function, much as they might suggest to the contrary. They are very tethered to the tick-tock of the day's news and they're not even really set up to go deep or to really seriously question the business practices of the institutions that they cover.

So, we were looking for what caused the financial crisis. Well, it was reckless lending, funded by Wall Street. We had to go with the assumption that we weren't going to find predatory lending investigations done by CNBC. We were confident that it wasn't something we had to worry about.

Vora: You write that “CJR's study, I believe, provides strong support for the idea that sometime after 2003, as federal regulation folded like a cheap suitcase, the business press institutionally lost whatever taste it had for head-on investigations of core practices of powerful institutions.” What happened?

Starkman: Yeah. It was actually one of the more surprising finds. We were looking from 2000 to 2007. There was this argument, we did do this work, we didn't do this work. And actually in looking at the record, you find that actually the best work was done between 2000 and 2003. Why is that? Well, several reasons. One of them certainly was that this was a period of very high activity by state and federal regulators and state legislatures. I think we said in the piece, in the period, half of all states passed anti-predatory lending laws. These laws don't come along once every century. But right then there was all this activity all over the country. Cities were doing it, attorneys-general were investigating, the Federal Trade Commission. This isn't a knock on the press, but predatory lending was very high on the public agenda, we forget now. And there's a reason for that, and you can back up, but there was this predatory lending boom-let, I call it, in the mid-nineties. It was interesting, in this period of prosperity, sub-prime lending became very, very, relatively large, relative to its historic position. And it led to this crash in the early part of the decade. So it's almost like a dress rehearsal for the big crisis.

One point I try to make in the piece is that when regulators and journalists are both active and doing their jobs, separately, they combine to create an interesting synergy and dynamic, basically for good, for reform. My thesis — and this is speculative; all I know is they didn't do this stuff after 2003. Why? You have to put them on the analyst's couch. But we know that the Bush administration was, I mean, it's not even a partisan question, the Bush administration was explicitly hostile to regulation of all sorts, particularly lending regulation. Again, this is not an ideological question, it's just a fact. Not only did OCC and OTS [The Office of the Comptroller of the Currency and the Office of Thrift Supervision] and all these agencies kind of curl up, in the OCC's case they actively fought state regulators who were trying to get a handle on these problem banks, Wells Fargo and Wachovia, Citigroup and all these that we know in retrospect were predators, actually, we knew at the time were predators. It gets you pissed off to remember it. But I think that the press took its cues from the tenor of the times. I think they certainly didn't lead — and they actually followed the lead set by people in authority. And that's a shame.

And I have to add, the thing that really is maddening, is that it's true that the federal government did turn hostile to regulation but at the state level, state banking commissioners and states' attorneys-general were banging on the window, trying to get the press' attention, to call their attention to this problem. These were people with credibility and in positions of authority, too, but the press didn't listen to them. And that's the tragedy.

Vora: So what cautionary advice would you give reporters in the future to avoid this kind of blindness?

Starkman: That's a good question. And the way I'd answer it is that it's really having worked in this milieu — I was at The Wall Street Journal for eight years and The Washington Post for a year — at least in those environments, it's surprising the degree to which reporters don't really have that much say in what they do. This is, as we say in the piece, an editorial leadership question. And news ownership. It's hard to describe, you have to have been there to know the degree to which senior editorial leadership sets the tone for what is and isn't a news story and a business story. And it's a highly subjective question. And there's no question in my mind that news organizations, starting from the top, internalized this general zeitgeist of anti-regulation, that accountability-oriented journalism became out of favor and that a more, I guess you could call it conventional business journalism, began to not only dominate, which it always did, but it squeezed out any kind of investigative impulse these organizations had. So investigations were out and scoops and deals and personality profiles and other stuff not only dominated, but basically took over the entire output of these organizations and that's a leadership question. It has nothing to do with reporters.

Vora: Were there any observations or conclusions that got left out of the story?

Starkman: If anything, my attitude was hardened. We read so much and were in it for so long, that you kind of lose perspective. And sometimes you can't believe what you're seeing or not seeing. But what was really remarkable was — we called the story “Power Problem” and the subhead was something like “The Business Press Did Everything But Take on the Institutions That Caused the Financial Crisis” — and that was the thing that really stunned me. There's almost no capacity in this field of business journalism to turn their resources, which are considerable, and their expertise, which is also considerable, and skills, again, these are very talented, top-minded people, but there's almost no culture of turning all this on individual institutions that happen to be doing the wrong thing. The concept that an institution that you're covering, even a mainstream brand-name institution like Ameriquest or Citicorp, could actually become corrupt in its basic business practices, was almost beyond the ken, beyond the ability of these organizations to understand. And the idea that the entire industry could go rogue, I think that these organizations are culturally incapable of understanding or absorbing that fact. And I think it's because of the depleted investigative culture and I think that's where things went off the rails.

So no, I guess I didn't leave anything out. I would say, if anything, the more you think about it, the more this needs to be addressed, because if journalism has any function whatsoever, it's to hold powerful institutions and individuals accountable for what they do. And that main job, the main function, just wasn't done.

About the reporter

Dean Starkman

Dean Starkman

Dean Starkman is a journalist and media critic.