BOB GARFIELD: In the aftermath of the crisis, there was so much handwringing over how the mainstream press could have missed this thing, but in your conversations reporters insisted that they hadn't missed it at all, that they'd covered it but that the world had simply missed it. So you dug in to find out where the truth lies. What did you look at?
DEAN STARKMAN: Nine publications, mainstream business press, Washington Post, New York Times, BusinessWeek, Fortune, Forbes, Financial Times, Bloomberg and others, from 2000 to mid-2007, the idea being that that's when the seeds for the financial crisis were laid, that’s when the mortgage market ran amok, that's when all of the mortgage products were made on Wall Street and the derivatives were sold.
BOB GARFIELD: And I guess what you found were isolated stories that did describe a housing bubble or terrible mortgage products or dangerous derivative trading, but not ones which describe a systemic crisis or brewing catastrophe.
DEAN STARKMAN: That was the big failure. The overwhelming majority of the work was done within the frame of Wall Street, itself, whether or not Lehman would become a bond leader, whether or not Citigroup would recover from scandals and increase its profitability. What was happening in the mortgage market was not something that you were going to learn from interviewing Stan O'Neal of Merrill Lynch, Dick Fuld of Lehman Brothers, Lloyd Blankfein of Goldman Sachs. The sources for the story, if you really wanted to know what was happening and as a result what was going to happen, was to be outside of Wall Street -- state bank regulators, states’ attorneys generals, community groups, like the Center for Responsible Lending, plaintiffs’ lawyers, whistleblowers. All of those outsiders that were clamoring to be heard during this period were actually spoken to by isolated reporters, most of whom did not work for the mainstream business press and had this very important story to tell.
BOB GARFIELD: There is a tendency to do these profiles of business celebrities with a kind of journalistic rigor of a Hollywood puff piece and there's also the tendency to do the equivalent of political journalism, you know, a horse race.
DEAN STARKMAN: Yeah.
BOB GARFIELD: Like who is going to win Goldman or Lehman, that kind of thing.
DEAN STARKMAN: Right.
BOB GARFIELD: Did you find a lot of that stuff in your survey?
DEAN STARKMAN: That’s exactly the issue. It's really the frame through which you are viewing the story. If you're looking at Lehman Brothers and its relationship to a subprime lender named FAMCO, you’re doing one particular kind of story but if you’re looking at Lehman Brothers in its relation to its competitors, whether its profitability would increase or decrease from one quarter to the next, you are going to be looking at the business press from a completely different frame, and essentially you are speaking on Wall Street's terms and you’re speaking to a Wall Street audience.
BOB GARFIELD: I want to ask you about the premise of your research. The reporters said, we covered it and –-
DEAN STARKMAN: Right.
BOB GARFIELD: -- other observers in the aftermath said, no, you di'n't.
DEAN STARKMAN: If you say well, we covered the housing bubble, I would say you did, and we covered that banks were taking exceptional risks, yeah, I would say that's probably true too. But no one was covering a mortgage system that had become unhinged, really systemically corrupt.
BOB GARFIELD: You sifted through the haystack and you did find a few needles. There was a 2002 piece in Forbes about toxic mortgages and predatory lending.
DEAN STARKMAN: What was maddening about the research was the best work really was done in the years 2000 to 2003, really before subprime took off. And then the whole thing completely fell off, exactly when the subprime was beginning to spike, 2003 through 2006-7.
BOB GARFIELD: You attribute this to two competing and sometimes converging journalistic approaches. Can you tell me about the difference between access reporting and accountability reporting?
DEAN STARKMAN: Right. Access reporting is about trying to get access to powerful people to find out what they are thinking and intending, and there’s a lot of value to that. Its sources, almost by definition, are elites. All of these qualities conspire to give you a [LAUGHS], a very particular and fairly narrow picture of the subject that you happen to be looking at. Accountability reporting is a different approach. Accountability reporting would have dissident sources, like plaintiffs, lawyers and whistleblowers and community groups and, in the case of financial crisis, attorneys general and state bank regulators and all the people who had their fingers on the problem. As opposed to appealing to investor interest, they would be looking for the public interest. And it’s not a question of good guys and bad guys.
Over the course of my career, some of my most fun moments as a business reporter were merger and acquisition scoops. They were the ultimate access story and they're really hard to get and they’re super satisfying. The trouble is that all too often the access tendency tends to overwhelm the accountability practice because, you know, let’s face it, accountability reporting makes few friends. It’s risky, it's stressful, it's expensive and, at the end of the day when the story’s published, somebody’s in trouble.
BOB GARFIELD: Can you give me some examples of the kind of reporting we saw in the ‘90s that was conspicuously absent in the aughts?
DEAN STARKMAN: The Boston Globe's coverage of Fleet Financial Group, and the reporter was a metro reporter. He was getting tips that there was a spike in foreclosures in minority neighborhoods in Boston and in working class neighborhoods. And he began to trace this problem to these small and, you know, highly-disreputable mortgage lenders that were not necessarily all local that were operating in these neighborhoods where they would go up and knock on your door and offer you a home repair and a loan. He tied it back to Fleet Financial Group, which was a innovator, if you will, in the subprime mortgage business. Those stories attracted the attention, actually, of Mike Hudson. He did a piece in the Washington Monthly. It attracted coverage by 60 Minutes, which did a devastating piece. It led to congressional hearings and it led to a 1994 anti-predatory lending law. It was a classic example of journalists, regulators, legislators all coming together to perform an important social function.
BOB GARFIELD: But one of the premises of this episode is that calamities do not happen in a moment. There is [LAUGHS] what's brewing long before them and then there is the aftermath of undetermined length. And a decade after the Wall Street collapse, this story isn't really over.
DEAN STARKMAN: We’re living in a post-financial crisis world. I happen to be living in Hungary right now. Hungary now is a quasi-authoritarian government. Its socialist government went into default just about [LAUGHS] six weeks after Lehman. It was a direct consequence of the financial crisis. The Orbán government came into power in 2010 and has, has stayed here ever since. I mean, the financial crisis destabilized democracies around the world.
BOB GARFIELD: Let's just say that you were the sultan of all financial journalism, which stories would you be siccing your watchdogs on in order that we don’t repeat the failures of a decade ago?
DEAN STARKMAN: We’ve got banking institutions that are fewer and larger than they were before the financial crisis and they’re more armored PR-wise than they ever were back in the day. The rise of PR has been so dramatic and the fall in journalism equally so that it's not a fair fight. If you're looking for where is the actual next crisis, I've seen work that says you should look at the energy sector. I would look at assaults on the Consumer Financial Protection Board. Those are sort of classic areas of vulnerability.
But the other category of story is this kind of slow-motion crisis of grinding student debt, of personal bankruptcy, of medical debt and the basic story of people who are working full-time who are unable to pay their monthly bills.
BOB GARFIELD: One of the problems leading up to the 2008 catastrophe was the systematic dismantling of the regulatory apparatus. Now, one of the advantages of regulators, in addition to regulating, is they give journalists the kind of information and ammunition they need to report on problems small and large. In the absence of robust regulation and further dismantling by the Trump administration, are journalists entering a gunfight half armed?
DEAN STARKMAN: Yeah, I liken investigative reporting without effective regulation as having all the impact of the sound of one hand clapping. It’s not just that journalists use material gathered by regulators but it flows the other way as well where regulators and prosecutors and bank examiners and legislators gather ideas or begin their probes based on newspaper accounts. Effective journalism and uncompromised regulation go hand in hand and if you lose one then the other is weakened. But that’s really just another way of saying that journalism and democracy are really inextricably interrelated. Without a democracy, journalism is going to falter and without journalism so is democracy.
BOB GARFIELD:Dean, thank you so much.
DEAN STARKMAN: Bob, it was a pleasure.
BOB GARFIELD: Dean Starkman is Fellow-in-Residence at the Center for Media Data and Society at the School of Public Policy of Central European University. His book is called The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance Of Investigative Journalism.