How did the subprime crisis become so serious? The drop-dead shorthand explanation emerged today when Deborah Solomon of the Sunday New York Times Magazine, in her weekly interview (registration required), asked former Treasury Secretary Paul O’Neill how some fast-and-loose mortgage lending at the margin could trigger “a financial crisis of global proportions.” You remember O’Neill: he is the straight-arrow finance chief who was fired by George W. Bush and Dick Cheney on the eve of their war with Iraq.
O’Neill replied, “If you have 10 bottles of water, and one bottle had poison in it, and you didn’t know which one, you probably wouldn’t drink out of any of the 10 bottles; that’s basically what we’ve got there.”
It’s much too soon to sound an all-clear on the strange sub-prime lending crisis, but perhaps not too early to venture a tentative judgment on press coverage of the affair. It has been very good to this point, but not entirely satisfying. A certain dimension has been missing all along.
Reading the joint product of a couple hundred reporters, columnists and editors at three top papers, a couple of weekly magazines and Bloomberg.com has been splendid; never mind the nimbus of other magazines, broadcast journalism, insider newsletters and all the rest that surrounds the daily news. Reporters have been going at it with their sources day after day. And, taken altogether, the coverage has afforded a vivid demonstration of journalism’s fundamental aim – to establish a provisional kind of truth, the best that can be said quickly. Newspapers, after all, are machines for finding things out and putting them in perspective.
An outsider can’t join in, yet won’t sit out, at least not altogether. These days my job mostly is to follow developments in economics, not economic developments in markets. From time to time, however, EP inevitably seeks to find an angle, a hook on which to hang some discussion of current events – last summer it was Homer Hoyt’s neglected classic, One Hundred Years of Land Values in Chicago; in the autumn, a line of analysis that since has become widespread (Greenspan Shrugged); in December, a glimpse behind the scenes at the career of Karl “Chip” Case, the man who devised the index that is our only dependable guide to falling house prices (What Is Better than Beating the Yankees?). Two weeks ago EP had nothing more substantial to contribute than to note the centrality to the situation of the Bank for International Settlements (When Did It Become So Dangerous?), and to pass along the news of the appointment of Stephen Cecchetti, of Brandeis University, as its chief economist, effective July 1. (That last bit passed the test of news: The Wall Street Journal followed the next day with a small story.)
(I have never known anyone better at this business of finding the off-angle, incidentally, than Leigh Montville, for many years a sports columnist for The Boston Globe and later writer at Sports Illustrated. Montville could watch a game along with a million people and a thousand fellow hacks and still find something different and interesting to say about it afterwards. I was never in Montville’s league, but I do all right.)
Traditional print journalism, rooted in newspapers’ semi-monopolies on advertising and information, has been teasing apart, becoming dis-integrated, for nearly a century – ever since the first radio station broadcast the news and accompanied it with “commercials.” The advent of television was another inflection point, but posed no threat to newspapers’ help-wanted and classified advertising; the advent of the Internet has been quite another matter. The best newspapers seem certain to survive the onslaught of the World Wide Web. Probably they will retain their primacy at the top of the explanatory chain – their presentation can’t be beat; they come out only once a day; paper-and-ink corporeality means they can’t be changed; and printing presses, delivery networks and reputation all form formidable barriers to entry against competition. But newspapers of the future will be slimmed-down versions of their former selves, web-savvy, their print editions aimed mostly at elites.
Today, plenty of other newspaper editors and reporters are inventing new forms. None seems likely to replace a single newspaper, but all are likely to contribute to the further fragmentation and specialization of what was once a large, comfortable and easy-to-understand industry. The champion of all such efforts is Bloomberg News, the adjunct to a highly-successful bond-price database that former WSJ reporter Matthew Winkler transformed from a six-person editorial staff in 1990 into an online news juggernaut that today dwarfs the size and rivals the quality of his old employer, with some 2,000 reporters and editors deployed in 130 bureaus around the world. Reuters, 157 years old and now owned by Thomson Corp., an information services company, is not far behind.
In the news last month was Global News, a new website based in Boston that hopes to assemble a string of correspondents in some seventy countries around the world, pay each a monthly retainer, and, through judicious application of exposure and editing, create a stable of name-brands capable of attracting advertising. (Among its advisers is Sebastian Junger, author of The Perfect Storm, now a world traveler for Conde Nast’s Vanity Fair.) The first of these online magazines was Slate, edited by Michael Kinsley, bankrolled by Bill Gates. It still seems to me much the best, all the more so since it was acquired in 2004 by the Washington Post. The most recent gain in altitude has been experienced by The Huffington Post, a professionally-edited potpourri of breaking news generated elsewhere on the Web, celebrity bloggers and reader comments. Presumably the next will be ProPublica, edited by former WSJ editor Paul Steiger, staffed by professional reporters, and funded by banking magnates Herb and Marion Sandler. There will be many more.
Another innovation by a former newspaperman, at what is surely the high end of the spectrum, is the HBO pay-television series The Wire. Nearly everybody knows by now how David Simon, a former Baltimore Sun reporter, and Ed Burns, his retired-cop and former-teacher partner, put together a series that warranted this encomium from Jacob Weisberg: “[N]o other program has ever done anything remotely like what this one does, namely, to portray the social, political and economic life of an American city with the scope, observational precision and moral vision of great literature.”
The Wire built from the bottom up – from teen and sub-teen drug retailers to their bosses and their teachers; to the bosses’ bosses among suppliers, lawyers, real estate developers and politicians: it wove together their stories with extraordinary skill, and found actors, many of them from the neighborhoods of Baltimore, whose skill lay in seeming not to be actors at all. The series was diminished in the final season, but only slightly, by writing a cardboard version of the Sun into the story. Thanks to an enormous budget of both money and time– it required sixty hours of viewing from beginning to end – it is a towering achievement of teaching how to think about a city, how to read a newspaper, how to understand the lives of the poor – a civics lesson quite beyond the capacity of a daily newspaper to give.
This is the dimension that is missing in the coverage of the sub-prime story, I think. To do a Wire for the financial crisis would be to humanize and connect all the various spheres, from high to low, that participated in making the present mess — presidential politics, international economics, central banking, local supervision, home building, real estate lending – with the hope and greed that is always present at every level of ordinary people. It would take at least five seasons to tell the story.
What’s the nearest substitute currently available? The book that my international economist friends continue to read and recommend is And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina, by Paul Blustein. The US is not Argentina, they say (knocking on wood); nevertheless the book gives you a feeling for the main ways the interlocking worlds of borrowers and lenders become animated when governments must struggle with simultaneous financial and currency crises. It is a pretty good schematic blueprint for the more intricate approach to the current situation that I think is lacking in today’s newspaper coverage – patient, inquisitive, narrative, just add scriptwriters and bake. Blustein was inexplicably allowed to retire by the Washington Post a few years ago, along with veteran Fed-watcher John Berry. Today he is at the Brookings Institution, writing a book about the World Trade Organization. Berry, at least, is writing frequently for Bloomberg, where you can read him online for free; the Internet and the telecommunications revolutions have meant that more news is produced today than ever before. But Blustein is among the many wise voices that have been rendered silent by the bumpy dis-integration of news.
(Leigh Montville, by the way, has kept up a steady stream of singular work since leaving Sports Illustrated, including books on Dale Earnhardt, Ted Williams, Babe Ruth and the University of Connecticut basketball program. His latest is The Mysterious Montague: A True Tale of Hollywood, Golf and Armed Robbery. Next up: motorcycle stunt-man Evel Knievel.)
Compared to these ventures, Economic Principals is small potatoes, modest in its ambitions but interesting enough to twenty thousand readers or so around the world. It remains in many ways a reasonable approximation of the column I wrote for many years in The Boston Globe. Is it a rough proxy for the kind of material that successful regional papers could and should be publishing on other topics, and probably will be again in another five or ten years – politics, music, literature, architecture, the environment, sports? (I think of Montville in this connection.) Who knows? To the three hundred or so readers who support it through subscriptions to its day-early email version, now known according to newspaper custom as its bulldog edition, I am very grateful. I only wish there were three hundred more!