BOB GARFIELD:
Collapse, crisis, failure – all words the President used in his primetime address on the economy this week. For business reporters, though, such words pose a different challenge. They're supposed to avoid influencing events with their language.

But when does too much caution in choosing words become incautious? Andy Serwer is the managing editor of Fortune Magazine. He says that sometimes you just have to call a panic – a panic.
ANDY SERWER:
You have to really be careful about yelling “Fire” in a crowded theater, obviously. On the other hand, is it really your job to say, don't worry, don't panic, sit tight? I'm not sure if that’s anyone’s job in the press to do that.

And last week, there was a panic in the financial markets, there’s no question, when the price of gold soared, a record one-day jump. I mean, if that’s not a panic, I don't know what is.
BOB GARFIELD:
Now, you raised the subject of the crowded theater. I notice that for all the coverage of the Wall Street debacle, nobody has actually come out with a blaring headline that says, Run for Your Life. Do you suppose that’s because business media don't wish to make the panic worse?
ANDY SERWER:
I don't think that you shouldn't say it’s a panic if you really think it is. I believe – and while it sounds trite to say this, it really is true – you've got to ride this out to a great extent.

I mean, we're not saying that you shouldn't look at your investment portfolio and your 401 K and make sure that, you know, you don't own things that are toxic. But selling everything and running off and putting your money in the mattress, it’s probably not going to make any sense at all to do that.
BOB GARFIELD:
We began this conversation talking about the special responsibility that financial journalists have in understanding that what they print or say on the air could move markets up or down, but what about the responsibility for due diligence? It seems to me that over the last few years, there were plenty [LAUGHS] of opportunities for magazines like Fortune to really dig into the balance sheet and the accounting practices of companies like Lehman Brothers. But clearly, media outlets did not unearth how serious the problems were in advance. You know, how plead you?
ANDY SERWER:
Guilty to an extent. I think all of us in the financial press are. Having said that, if you go back and you look at our magazine and The New York Times, The Wall Street Journal, we've all done stories that say this company or that company or this financial product is a ticking time bomb.

The problem with those stories is that unless the bomb goes off, people forget about them and say, oh, that’s not true. You know, we wrote a story, for instance [LAUGHS], going all the way back to 1994, saying that derivatives were this hidden time bomb that had the potential to undermine our entire financial system. Gee, did it really take 14 years to happen? Well yeah, it did.

There are stories like that. I think that we're guilty of not doing enough of them, but I think also people are guilty maybe of not paying enough attention a little bit.
BOB GARFIELD:
But what about the celebratory nature of so much financial journalism including Fortune? You did a, you know, fairly glowing profile just a couple of years back of Richard Fuld, the CEO of Lehman Brothers. We often see these executives, you know, portrayed as kind of masters of the universe when, in fact, they're leading us on a path to hell.
ANDY SERWER:
Well, you know, I'll have to plead guilty as charged there a little bit. In that particular story about Dick Fuld, we said that he has managed to capitalize on this one particular type of business, but will he take it too far? You know, we did show that there was the potential for a problem there.

I don't mean to be, you know, waffley on this, but we have some pretty sophisticated people who do darn good work, but sometimes, you know, through the lens of history, it doesn't hold up.
BOB GARFIELD:
Well, let me ask you one final thing.
ANDY SERWER:
Mm-hmm.
BOB GARFIELD:
It has become clear in this crisis that some of these investment banking houses were, as it’s been described, “lying to their own computers,” and - in the valuation of some of these derivatives and other securities, actually misrepresenting internally in a way that clearly obscured the trouble.

Fortune employed some of the most sophisticated financial journalists in the world, and yet are they up to the task of understanding the complexity of some of these securities and - for evaluating them?
ANDY SERWER:
I think we've got people here who do understand derivatives, credit default swaps as well as anyone on Wall Street. Now [LAUGHS], having said that, the best minds on Wall Street got it wrong.

You’re right in saying that this is the ultimate in financial complexity, and it’s very hard to report, it’s very hard to make it palatable. There were a certain set of circumstances that occurred that were just right that created a perfect storm – the mortgage meltdown, easy credit, derivatives that people didn't understand.

BOB GARFIELD:
Predatory lending practices.
ANDY SERWER:
Predatory lending practices.
BOB GARFIELD:
Conflict of interest in loan origination.
ANDY SERWER:
No regulation, inappropriate regulation. And it all came together. And it sort of reminds me of the Beatles song, A Day in the Life. Do you know when the music kind of comes up in a crescendo at the end?
BOB GARFIELD:
Yeah.
ANDY SERWER:
That’s what last week reminded me of. And, unfortunately, that ringing tone is still going on.
BOB GARFIELD:
Andy, thank you very much.
ANDY SERWER:
Thank you, Bob.
BOB GARFIELD:
Andy Serwer is managing editor of Fortune Magazine.
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