Senior Correspondent
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THE blame game has been ongoing for several months now, and has increased in intensity as the pain inflicted by the financial crisis spreads through the real economy in ever-widening circles.
It's lax regulation by the US government. It's the greed of Wall Street. It's the fault of Alan Greenspan and the US Federal Reserve for keeping rates too low for too long. It's China - for flooding the world with liquidity and forcing Wall Street to take ever-increasing risks to make higher returns. It's the capitalist system - it's broken.
The latest group of people to be blamed are financial journalists. In an article headlined 'How Could 9,000 Business Reporters Blow It?' on non-profit media outfit Mother Jones' website, Dean Starkman asked where were the financial media when mortgage lenders and Wall Street linked up to flood the market with defective products? And where were they when Citigroup brought sub-prime lending from the mortgage industry's margins into the mainstream?
Mr Starkman, who was a Wall Street Journal staff writer for eight years until December 2004 and now critiques the business media full-time at the Columbia Journalism Review, put together a convincing case. A confluence of three factors, he said, led to an absence of barks by society's supposed watchdogs.
If revenue falls, costs have to be cut. And US newspapers shed 13,000 jobs last year. It is estimated that the number of print business reporters has fallen 25 per cent since 2000 to 9,000. Back in 1996, when Mr Starkman joined the Journal, the group's market cap was more than US$4 billion, almost similar to that of Morgan Stanley. In his words: 'You can argue that the size doesn't matter; all I can say is that it made for a confident, freewheeling environment, where the staff was encouraged to take a chance once in a while, maybe even think big. A Journal reporter had a swagger.'
Since then, free-swinging axes in US newsrooms have made journalists there more risk-averse. Productivity matters - and it will suffer if a reporter wastes too much time following up leads that don't work out. And horror of horrors, there is even the danger of the paper being sued.
Consequently, business reporting has tilted towards safe personality-driven stories.
In the Enron, WorldCom, Adelphia and Tyco scandals, the SEC opened formal investigations into each doomed company - forcing disclosures that tipped off investors - and provided roadmaps and official cover to the financial press.
In the current disaster, Bear Stearns, Lehman Brothers, AIG, Fannie Mae and Freddie Mac had all but collapsed before the SEC even launched an investigation.
Covering financial corruption without regulators, according to Mr Starkman, is like trying to clap with one hand.
Over the years, business news has come to be reported almost entirely from the perspective of shareholders and investors, rather than citizens. And this, according to Mr Starkman, is a subtle but powerful shift in perspective. The fact is, there are many stakeholders in a company, in society. But the voices of employees, the community that lives within the business compound, have all but been snuffed out in US newspapers.
So, the industry in its current form will be unlikely to blow the whistle on the next disaster in the making. Or put more simply, there's little chance of it sniffing out the next sub-prime mess.
But as events have shown, this is an important role that someone has to perform. The advertising-driven model for the newspapers is broken. For one, it will make the media increasingly beholden to advertisers. And as the downturn has shown, it is becoming increasingly unviable commercially.
We are happy to spend money changing our handphone every couple of years or changing our car every four or five years, so perhaps we should be happy to spend some money on something that is really of value - good, relevant and accurate information. Information written from the perspective of what is good and what is not for newspaper readers. Information that will alert them to transgressions or excesses. Information that exposes those who exploit and sheds light on those who are exploited.
If the advertising-driven model ceases to work, an alternative suggested by Yale University's chief investment officer David Swensen and financial analyst Michael Schmidt is to turn newspapers into non-profit, endowed institutions - like colleges and universities.
Endowments, they argue, would enhance newspapers' autonomy while shielding them from the economic forces that are now tearing them apart.
'By endowing our most valued sources of news, we would free them from the strictures of an obsolete business model and offer them a permanent place in society, like that of America's colleges and universities,' they say.
'Endowments would transform newspapers into unshakeable fixtures of American life, with greater stability and enhanced independence that would allow them to serve the public good more effectively.
'Many newspapers will not weather the digital storm on their own. Only a handful of foundations and wealthy individuals have the money required to endow, and thereby preserve, America's premier news-gathering organisations. Enlightened philanthropists must act now or watch a vital component of American democracy fade into irrelevance.'
What is happening in the US will play out in the rest of the world. So perhaps we too should seriously start to consider the alternatives.
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