Don't blame us for the crash -- we just reported the news

The London Evening Standard ran a very interesting article in which it focused on the role of the media in reporting before and after the financial crisis.

The article highlighted a very important issue.

It looks at the difference between reporting press releases and actually offering a careful analysis of what is going on.

As regular readers know, I have been featured by several of the major financial publications and media outlets.  I like to think this is because of my willingness to help journalists understand what is going on (alternatively, it could be because I am quotable).

A study has shown that the British public is both confused and worried by the financial crisis. No surprise there, of course. What is significant is that so many of them think journalists have failed them. 

Despite the hourly reports on TV and radio, the pages devoted daily in newspapers and the attempts by commentators to analyse and explain, the media's audiences still feel that they have been left with gaps in their knowledge. 

According to the survey, which polled 2000, 49% said journalists had not told them enough about how the crisis will affect them personally. Some 35% say reports are too full of jargon they cannot grasp. And 45% claimed that they do not, in spite of the wall-to-wall coverage, understand the implications of the eurozone crisis on their own financial standing. 

There is much more that could be mined in the study, carried out as part of a research project led by Steve Schifferes, professor of financial journalism at City University London, such as the public's antagonism to both bankers and politicians. Those views could well have been stimulated by media coverage too. On the other hand, they could reflect the reality. 

That, in a nutshell, is one of the essential points to make. 

We, the media, are the window into the arcane world of finance and economics, and what we report, and how we report it, is hugely influential. 

People may have all sorts of opinions garnered from their own experiences but when it comes to the esoteric topic of high finance, the vast majority rely on what they are told by journalists, politicians and a variety of talking heads granted either airtime or newspaper space. 

The vast majority of the talking heads being card carrying members of Wall Street's Opacity Protection Team.

It means that we bear a great responsibility for what is, and is not, published and broadcast. 

Clearly, the author recognizes the need for balancing the reporting so that the voices for transparency are just as loud as the voices for opacity.

In this case, it is not so much a question of shooting the messenger as trying to establish whether the messenger has risen to the occasion.  

The fact is that the messenger has not balanced the reporting.  This is particularly troubling as transparency is the foundation for our global financial system and its absence was obvious in the description of the securities that started the solvency crisis on August 9, 2007:  opaque, toxic sub-prime securities.

Certainly, there are criticisms we do have to take on board, though not as many as some would suggest. 

First, we can be accused of acting like cheerleaders during the boom years. It wasn't simply that we suspended journalistic scepticism - as we undoubtedly did - but that we failed to get to grips with the basic building blocks of the boom. 

To be frank, most journalists were as ignorant as their readers and viewers of the range of financial products used to sustain the boom. When it was reported that the American investor Warren Buffett described derivatives as "financial weapons of mass destruction" in 2003, it made little impact. 

Why? Because it ran counter to the ongoing "good news" story, which was the major narrative of the decade. House prices were on the up. Retailers were raking in profits. Obtaining credit from banks was easy. The media itself was enjoying seemingly unlimited advertising revenue. 

It did not then appear necessary for journalists to get to grips with the credit markets, with their sophisticated instruments such as credit default swaps.... 

On the positive side, there were plenty of individual commentators who wondered in print and on air about the level of leveraging in the banking sector, warning that the bubble would surely burst. And although they pointed to the many warning signs, they were too easily dismissed as doom-mongers. Their colleagues, reporting the upbeat daily news breaks, were in the driving seat. 

There was no conspiracy to misinform.