Book Review: The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, by Dean Starkman

Abstract

The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism. Dean Starkman. New York: Columbia University Press, 2014. 368 pp. $24.95 hbk. $18.95 pbk. $23.99 ebk.In a March 2009 interview, Jon Stewart confronted CNBC business commentator Jim Cramer with the charge that in the period leading up to the Wall Street crash of 2008, Cramer, specifically, and business journalism generally, had missed the biggest financial story of their era. Now a popular view, it is a charge that Dean Starkman largely supports. A former reporter for the Wall Street Journal and other newspapers, Starkman is an editor and Kingsford Capital Fellow of the Columbia Journalism Review.He concludes that the mainstream business press failed to meet even minimum standards of investigative reporting on financial institutions during the bubble period. This was despite the fact that many times throughout the history of business journalism, even up until a short time before the bubble (the period 2000-2003), many fine examples of investigative journalism exposed fraud and held the fraudsters to account, as in the New York Times' expose of Lehman and its deep relationship with predatory lenders. Yet in 2004-2006 when subprime lending went stratospheric, the watchdog was dormant. Drawing from a Columbia Journalism Review survey of relevant coverage, Starkman offers three main causes for this failure: (a) the rise of CNBCization and accompanying dominance of what he calls access journalism, (b) deregulation, and (c) financial distress among media outlets. A small number of reporters (whom Starkman identifies) did understand and report the story, but they worked for local media or did not get the backing and exposure from big media employers that could have unleashed the necessary critical force.Even media that did see subprime lending as dangerous for the economy simply did not get the reality that a great deal of it consisted of egregiously fraudulent and criminal behavior in which borrowers, who either could not afford loans or already had satisfactory low-interest mortgages, were aggressively and massively scammed into signing up for new debt without the safeguard of proper disclosure of fundamentals such as rates, fees, and built-in triggers for future interest hikes. The brokerage system in subprime came out of a culture of hire-and-fire boiler room cold-calling, door-knocking sales frenzy often conducted by sleazy companies whose funding nonetheless came from Wall Street. This not only smashed the rules of professionalism characteristic of prime lending but insidiously contaminated the prime lending institutions as well.Wall Street's culpability was threefold. Wall Street provided the money to support the loans. Sometimes, Wall Street banks became directly involved in subprime practices. And it was Wall Street that leveraged the loans for the mainstream investment community worldwide through the sale of spliced-and-diced bonds. …