Where Was Media When Sub-Prime Disaster Unfolded?

“It is somewhat surprising,” Larry Elliott, economics editor of London’s The Guardian observed recently, “that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.” If such a fraud was taking place, and if Wall Street’s financial crisis, according to the usually staid Economist, was on the edge of “disaster” with a “financial nuclear winter” waiting in the wings, why were American news consumers among the last to know?

On the fifth anniversary of the war in Iraq, our press was papered with retrospectives that dealt with every aspect of the conflict except its own miscoverage. At the same time, another and, arguably, more serious crisis had been underway longer and covered even more poorly.

The New York Times finally got around to examining war reporting as a business not journalism story on March 24 (below the fold), well after the unhappy anniversary. The story cited as a prime excuse for the fall-off in coverage, a study suggesting a “decline in public interest” as if that was not influenced by the lack of the issue’s visibility. Other factors were the expense and danger of covering a Iraq.

Those excuses cannot justify the fact that most of the reporting on Wall Street’s woes started only after the market melted down in August 2007,and not as this crisis built in intensity since 2001 when a housing bubble was engineered to replace the failed dot.com bubble. The financial world is not in Baghdad, not risky or expensive to cover. In fact, most media outlets have correspondents on the scene every day.

Was the press just not paying attention as hundreds of billions of dollars were swept into exotic structure investment vehicles over years, and then sliced and diced into CDO’s and so-called asset based securities? A New York Times columnist even admitted that experts and advocates first warned them in 2001 that predatory lending practices were devastating poor neighborhoods but the issue was not covered in any depth for five years. This has resulted in nearly three million families facing foreclosure and the rest of us losing share and home values.

A day before its “analysis” of the fall off in war coverage, the Times business section devoted a staggering 2905 words to explaining the mortgage crisis. This opus followed a similar spread in the Washington Post by two weeks. Both stories explained that the downfall was sparked by the use of overly complex securities designed not to be understood.

Noted the Times story: “It is the private trading of complex instruments that lurk in the financial shadows that worries regulators and Wall Street and that have created stresses in the broader economy. Economic downturns and panics have occurred before, of course. Few, however, have posed such a serious threat to the entire financial system that regulators have responded as if they were confronting a potential epidemic.”

Most of the coverage has been relegated to not widely read business sections that focus on the ups and downs of the markets and the way the collapse of these arrangements have affected the fortunes of CEOS and business enterprises, not citizens, consumers and most of all homeowners, many of whom are or will be losing their homes.

Dean Starkman ,who studied the spotty “business” coverage in detail for the Columbia Journalism Review, concluded: “Today, as the credit crisis unravels, the business press can be fairly blamed for inattentiveness to the growing strains on middle-income borrowers. Maybe that’s why so many middle-income people don’t read it.”

There is more to this very sad failure. Many newspapers and TV outlets were complicit. They accepted and made tons of money carrying slick and often deceptive advertising for shady mortgage lenders and credit card companies encouraging readers and viewers to accept more debt. Some major newspaper are tied into local real estate syndicates and get kickbacks from sales tied to their extensive advertising of homes for sale.

Was there a conflict of interest perceived in taking these ads–which were important sources of revenue in a soft ad market—and producing watchdog journalism warning of the dangers of buying into subprime loans and other injurious products?

Is the press too imbued to our government’s mission of inspiring consumer confidence? Is that, in turn, connected to using the news pages to benefit advertisers? Think of all those local TV reports “live at the mall” at Christmas time cheerleading for more shopping? At the time, it appeared as if everyone was buying everything. It was only later, well after the fact, that we learned that it was the worst Christmas season in five years.

What’s worse is that the coverage may have missed the truly criminal aspects of this crisis, the issue so far being raised mostly overseas. This will be fought out in courtrooms worldwide when those who purchased worthless mortgages sue the companies who sold them knowing their true value. Why are the RICO laws not being used to prosecute a scam involving so many “entangled” companies? There is no shortage of data on this fraudulent and discriminatory scheme.

Already the FBI is investigating 17 mortgage companies. Attorney General Michael Mukasey, who never figured out that waterboarding is torture, now says his department is trying to figure out whether there is a larger criminal story.

Don’t hold your breath for him to figure it out. Where is our mighty media that devoted so many acres of print to investigating Eliot Spitzer’s victimless hypocrisy in looking into a far deeper failure that affects all of us and the future of our society?

Will we wait for the first credit-inspired riots to recognize the size and scale of this catastrophe or only read about it in the British press?

Danny Schechter