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Discordant notes on the economic crisis

Reuters has been indulging in navel-gazing over the global economic crisis to try to discover whether the media has been doing its job in reporting the story.

Are journalists keeping things in perspective? Should they even be using words like “crisis” or “meltdown”? Are they being careful not to sow panic and make things even worse?

David Schlesinger, editor-in-chief, doubts whether financial journalists could have done much more to predict the depth of the crisis.

“Journalists do best when reporting what’s happening and giving the news context and analysis,” he said. “We also do well when we look backwards and discuss past events from the perspective of the present. We do least well when we prognosticate. While our reporting and commentary did discuss potential weak points in the economy, we did not - and nor frankly could we - accurately predict the calamitous events of this year.”

Dean Wright (pictured), global editor, ethics, innovation and news standards, says Schlesinger worries, though, that there was a certain inevitability to the crisis and that the media played a role.

“I do worry about the narrative lines of reporting that contributed to the crisis,” he said. “To take just one example, much of the crisis was caused by banks taking on excess risks in the pursuit of higher profits. Yet had a major bank president stepped back from that fray and declined to participate, the ‘grammar’ of our results reporting would surely have compared that bank’s results negatively against expectations and against its peers.

“That brave bank president would surely have lost at least his bonus and probably his job. The very fear of that kind of negative comparison helped spur things on - as Citibank’s ex-CEO Charles Prince said (while still in his job), ‘As long as the music is playing, you’ve got to get up and dance.’

“We in the media help play that music, probably exacerbating the highs on the way up and the lows on the way down.”

So, did the media help change the tune that was being played, Wright asks in a recent Reuters Editors blog. Did it raise questions about the factors that contributed to the crisis, including complex financial instruments, subprime mortgage lending and excessive risk?

Questioning notes were sounded, he writes. As early as 18 August, 2003, a Reuters story quoted a Federal Reserve governor citing the dangers of “predatory lending” in extending subprime credit. By 2006, the pace had accelerated. A Factiva search found 128 Reuters stories that mentioned the phrase “subprime mortgage” that year, including a number in which analysts predicted a deterioration in credit quality. The crescendo came in 2007 when there were more than 10,000 stories that referenced subprime mortgages and when built a special section to house material on the issue.

“Still, the overall ‘music’ was loud and infectious and it’s easy to understand why so many couldn’t stay off the dance floor, says Wright.

He adds: “As Schlesinger says, ‘We have a responsibility to be careful, and most of our reporting has been very careful. But we too have played some discordant notes and we need to learn from that.’" ■