Financial journalists saw some trees but not the forest. Now what? One day in June 2005, my colleague Nell Henderson and I hiked over to the Bond Market Association to get ourselves educated on collateralized debt obligations and related products. I was editing The Washington Post’s Wall Street coverage, and Nell was covering the Federal Reserve, and we both had a feeling this might be a corner of the market in which troubles could occur. A couple of hours later our heads were spinning, but at least we felt like we had a better sense of how some of these increasingly complicated financial instruments that were flooding the markets worked.
What we didn’t have was a story to write, or so we thought. What would we have said? That there is a rapidly growing, unregulated market in these things that might turn out to be pretty risky? We had been assured repeatedly all afternoon that the people who dealt in these products were constantly on guard, looking for risks and figuring out how to defuse them. But more than that, we both knew that there isn’t much appetite for speculative stories about complicated issues in most newsrooms. Once the crisis occurs, once you can quote government officials referring to credit-derivative obligations and credit-default swaps as “toxic assets,” it gets easier.
Still, I wish I had gone further and considered other options. I wish I had walked downstairs to where the Real Estate section was segregated from the rest of the business staff to find out more about the connection between the subprime loans they were writing about and these new types of securities. I wish I had learned back then, instead of in the course of writing this story, that the market for asset-backed securities, loans secured by mortgages or other debt, had grown by 45 percent the previous year, mostly because of loans backed by housing, and had surpassed the market for corporate debt for the first time in history. And I wish I had suggested a meeting of the real-estate staff, the reporters who covered the economy, and those who covered regulatory agencies, markets, and banks to explore the connections.
Tags: Financial, journalists
