The City Herald

Update 5 Dec: A video of the debate is available online.

Exactly one year ago, Richard Lambert stood up in front of the CBI Reform Media Group and said, “If journalists come across important stories that they know to be true, they should publish and be damned.” The debate since then has moved on from the individual rights or wrongs of Robert Peston’s decision to break the story on Northern Rock. Last night’s panel discussion – Saints or Sinners: the role of the media in the financial crisis – brought up more fundamental issues and questioned the identity of financial journalists.

On the panel were Hugh Pym from BBC News, Larry Elliot from The Guardian, Faisal Islam from Channel 4, Michael Wilson – ex Sky News, Alistair Milne from Cass Business School, and Professor Charles Goodhart and Damian Tambini from the London School of Economics.

Professor Steve Schifferes, City University London’s first professor of financial journalism, chaired the debate. He began by whizzing through his special BBC report on the financial crisis and producing a quote from Lambert’s speech:

The media has become part of the story. And so it’s perhaps not surprising that one of the personalities that has become most visible and even controversial as a result of what has happened is a journalist rather than a banker…. What makes me sick, though, is some of the sloppier journalism we have seen in recent months. For example, ABC Bank is in difficulty – XYZ is in the same line of business, and unnamed analysts say that it is next in line for trouble.

There was another from Dean Starkman’s cover story for the Columbia Journalism Review:

These are grim times for the nation’s financial media. Not only must they witness the unraveling of their own business, they must at the same time fend off charges that they failed to cover adequately their central beat—finance—during the years prior to an implosion that is forcing millions of low-income strivers into undeserved poverty and the entire world into an economic winter.

Where were we and have we been leaders or followers? Did we miss the story? A study published in August 2008 by the Pew Research Center for the People & the Press seems to suggest that coverage was reactive and erratic. (Graphs from Tracking the Economic Slowdown and The Arc of the Story.)

Mr Pym disagreed, saying, “The Queen asked the pertinent question at the London School of Economics and it took the government months to produce a letter in reply. The letter holds all of us to blame. Most economists had failed to see it coming, but so too had MPs, journalists and consumers when they borrowed money.” The letter Mr Pym referred to is a summary of the British Academy’s forum convened to discuss the Queen’s question:

So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole.

As Mr Pym put it, “the illusion replaced reality”. The main claim, he continued, was that markets would function by themselves and that light-touch regulation was all that was needed. That was the illusion. But is it the role of the BBC to challenge the consensus? Mr Pym argued that the BBC is trying its best to keep up with events and to report in a sensible and balanced way. The greatest difficulty lies in explaining policies like quantitative easing. And when the policymakers themselves don’t fully understand the implications of what they’re doing, what is the role of the media to second-guess them?

“It was just like Tinker, Tailor, Soldier, Spy,” said Mr Elliot. “We had a whole group of journalists who were completely embedded in the system – writing ghastly profiles of Fred Goodwin – pumping up the economy and telling people that they can make money from nothing. The press was at fault here.”

At this point, Mr Tambini took the discussion in a completely different direction, saying that we can understand the current situation as an “identity crisis for financial journalists”. What he said bears repeating here in its entirety:

What is our role? How do we confront issues? Do we have a watchdog role? Should we hold to account? Political journalists are at home with the latter idea, but financial journalists are less so. Collectively, why wasn’t it pushed onto the front pages? The public are angry because they think that journalists have failed to fulfil their watchdog role. We did research in 2007 about what journalists think their role is. One business editor said that he would be fulfilling his role if his audience read his columns and followed his tips. But is that were it ends? It might be fuelling a longer term problem in the economy. What role does financial journalism serve in the wider world of corporate governance? This is the question that we should be asking. What is their watchdog role and should they be serving a broader public interest rather than just those of investors?

Professor Goodhart, the charismatic LSE Professor Emeritus of Banking and Finance spoke with gravitas when he said, “The invitation for the kind of hubris of a world without risk came when Gordon Brown stood up in parliament and said that we have eliminated boom and bust.” He said that the reason people queued up to withdraw their money from Northern Rock accounts was primarily because it was an “e-bank”. When its customers saw that the RBS website was down, they assumed it had gone bust and rushed out to get their money.

“I think it’s ludicrous to blame journalists for the crisis,” Professor Goodhart said, followed by shot at US-style reporting:

The part of financial reporting that bother me is ‘let’s put a human face on this’. The media think that they can’t tell a story about a systemic problem without putting a human face on it, even when doing so will add nothing but waffle.

Mr Mill backed up the statement when he said:

The weakness I see in financial journalism is a failure to ask, who exactly am I communicating with? Professionals who have an interest in banking and financial markets or the much bigger audience that has typically only a passing interest — households who work hard and save, putting their trust in banks and government? What I see in financial journalism is a failure to ask this question.

For example, why does the BBC report stock market prices? A story that the stock market has dipped 1 per cent is meaningless. Of course it matters, though to the people that get their information from somewhere else. This kind of reporting just adds noise. We have to be much clearer about whom we’re talking to.

The problem is built into the structure. There is so much information, and everyone is scrambling for attention, that we’ve lost the ability to filter out the right information.

Mr Pym interjected, saying that he sees no reason to scrap reporting of the FTSE 100 because “there is value in it”. Mr Islam said that the only value it adds is superficial, does not provide any insight – which is far more important – and even creates a kind of laziness. He pointed out that his team could see that a crisis was coming when credit markets started falling; but their editors at Channel 4 decided not to cover it because they could not link the story to stock market prices.

Perhaps audience members were tired after the two-hour discussion. Only one memorable question was asked, and by a non-journalist at that. “Do you think it’s corrupt for our journalists to accept a free trip to iceland?”

Mr Tambini replied, referring to City University London’s new financial journalism MA, launched that night:

The consensus in the City is that people are quite fairly clean. But we’re still relying on a kind of rugged individualism. Maybe this new degree will be an interesting chance to reflect on the professionalisation of financial journalism. Some students whom I have spoken to think that financial journalists must have a certificate in accountancy. We can’t rely on a kind of rugged individualism when it comes to technical financial reporting. A lot of established financial journalists can’t read a balance sheet. There is an obvious skills gap.

Mr Wilson was more direct:

There is no need to accept freebies. If I got frozen out by the Bank of England — well — sod it.