The title refers to the Security and Prosperity Partnership of North America (SPP), also known as the North American Union - formerly launched at a March 23, 2005 Waco, Texas meeting attended by George Bush, Mexico's President Vincente Fox, and Canadian Prime Minister Paul Martin. It's for a tri-national agreement, below the radar, for greater economic, political, and security integration with secret business and government working groups devising binding policies with no public knowledge or legislative debate.
In short, it's a military-backed corporate coup d'etat against the sovereignty of three nations, their populations and legislative bodies. It's a dagger through the heart of democratic freedom in all three, yet the public is largely unaware of what's happening.
Last April, New Orleans hosted the last SPP summit. Ever since, progress may have stalled given the gravity of the global economic crisis and top priority need to address it. Nonetheless, what's known to date is updated below plus some related information.
Last September, the Army Times reported that the 3rd Infantry's 1st Brigade Combat Team in Iraq would be re-deployed at home (October 1) as "an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks."
"This marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities."
Then on December 1, the Washington Post reported that the Pentagon will deploy 20,000 troops nationwide by 2011 "to help state and local officials respond to a nuclear attack or other domestic catastrophe." Three "rapid-reaction" combat units are planned. Two or more others may follow. They'll be supplemented by 80 smaller National Guard units trained to respond to chemical, biological, radiological, nuclear, high-yield explosive, and other domestic "terror" attacks or disturbances. In other words, homeland militarization and occupation are planned using troops trained to kill.
The pretext is national security. In fact, they'll be on-call against another major terrorist attack, real or contrived, as well as civil unrest given the gravity of the economic crisis, its affect on millions, and likelihood that sooner or later they'll react. Armed combat troops will supplement militarized local police in case security crackdowns are ordered or martial law declared.
"Catastrophic Emergency" procedures are in place to react to situations, "natural or manmade," according to DHS/FEMA's March 2008 "Preparedness for the Next Catastrophic Disaster" policy paper. Should conditions warrant, initiatives to suspend the Constitution and declare martial law are in place, but militarizing America for business is also at issue.
Last October 1, the Canadian Action Party posted a "COUP IN USA ALERT" after the Bush administration announced the homeland deployment of troops with "$100 billion (bailout) dollars" to do it.
What's Likely in Prospect
SPP efforts paused during the Bush to Obama transition, but "deep integration" plans remain. On January 19, Ottawa's Carleton University's Centre for Trade Policy and Law outlined an agenda for America and Canada going forward. It called for "early and sustained cooperation" at a time of continuing global crisis, to include security, defense, trade and competitiveness.
It said the "most pressing issue is the need to re-think the architecture for managing North America's common economic space (including) trade liberalization." It used language like "re-imagining (and) modernizing the border" that reads like erasing it and doing the same with Mexico. In a similar vein, it recommends "integrating national regulatory regimes into one that applies on both sides of the border." It called the arrival of a new Washington administration "a golden opportunity" to forge a "mutually beneficial agenda (that) will define global and North American governance for years to come."
It mentioned the specter of protectionism and need to avoid it given the current economic climate. It advocates a "more ambitious Canada-US Partnership" beyond NAFTA," in co-partnership with Mexico.
Titled "North America Next," a recent Arizona State University North American Center for Transborder Studies report called for "sustainable and security competitiveness" and deeper US-Canada-Mexico integration through "sustainable security and effective trade and transportation (to) make (the three nation) North America(n partnership) safer, more economically viable, and more prosperous."
Both Carleton and Arizona State University project participants want SPP initiatives invigorated under a new Washington administration, especially in a climate of global economic crisis when addressing it takes precedence.
Other Issues in Play
"The Canadian's" Mike Finch "North American Union (NAU) watch" reports that US and Canadian organizations want to end free flow Internet information. He cites an "net-neutrality activist group" discovery of "plans for the demise of the free Internet by 2010 in Canada," and by 2012 globally.
Canada's two largest ISPs, Bell Canada and TELUS, are behind a scheme to limit browsing, block out sites, and charge fees on most others as part of a 2012 "planned full (NAU) launching." Web host I Power's Reese Leysen called it "beyond censorship: it is killing the biggest (ever) 'ecosystem' of free expression and freedom of speech." He cited big company inside sources providing information on "exclusivity deals between ISPs and big content providers (like TV studios and video game publishers) "to decide which sites will be in the standard package offered customers, leaving the rest of the Internet unreachable except for fees."
Leysen called his source "100% reliable" and cited similar information from a Dylan Pattyn Time magazine article, based on Bell Canada and TELUS sources. Plans are for "only the top 100 - 200 sites making the cut in the initial subscription package," likely to include major news outlets at the expense of smaller, alternative ones. "The Internet would become a playground for billion-dollar content providers," like cable TV providers, unless efforts are made to stop it.
Leysen thinks US and global ISPs have similar plans that include free speech restrictions and privacy invasions. The stakes are high if he's right. Yet the profit potential is huge and friendly governments may oblige. Also involved are "deceptive marketing and fear tactics" (like citing child pornography threats) to gain public approval for subscription services masquerading as online safety. The time to stop it is now.
Earlier Plans to Rename SPP/NAU
Last March, Canada's Fraser Institute proposed it in an article titled: "Saving the North American Security and Prosperity Partnership" at a time of mounting criticism. It recommended discarding NAU in favor of the "North American Standards and Regulatory Area (NASRA)" to disguise its real purpose. It called the "SPP brand" tarnished so changing it was essential to continue where NAFTA left off by combining security with quality of life issues like food safety, global warming, climate change, and pandemic diseases. It also wants better communications to sell it to the public. Their idea is to fool most people until it's too late to matter.
Rumblings in America at the State Level
Running counter to "deep integration," News with Views (NWV) writer Jim Kouri headlined on February 23: "Individual States Declaring Sovereignty." He cites political strategist Mike Baker saying "Americans are becoming disenchanted with the federal government's lack of perspective on" matters like: "illegal aliens, crime, (and) economic turmoil - while intruding into the private lives of citizens with gun-control laws and other intrusions," issues our Founding Fathers "relegated to the individual states." Bothersome also are unfunded mandates that states can't handle given their over-stretched budgets and need to cut back. In addition, Washington's intrusion into local law enforcement is a big issue.
So far, nine states have declared sovereignty and another dozen or more are considering it. Enacted or proposed legislation varies from all states' rights to selective ones like gun control and abortion.
As of January 30, Washington State is one of the former under House and Senate bill HJM-4009 stating:
"The Tenth Amendment to the Constitution of the United States specifically provides that, 'The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people;' and The Tenth Amendment defines the total scope of federal power as being those powers specifically granted to it by the Constitution of the United States and no more."
Earlier in January, New Hampshire enacted similar legislation (HCR-6) "affirming States' rights based on Jeffersonian principles." Other states doing it totally or in part include California, Arizona, Montana, Michigan, Missouri, Oklahoma, and Georgia. In addition, the following states are considering similar measures: Colorado, Pennsylvania, Illinois, Indiana, Kansas, Arkansas, Idaho, Alabama, Maine, Nevada, Hawaii and Alaska, and reportedly, Wyoming and Mississippi may as well.
Besides states rights issues, driving the current movement are:
-- the grave and deteriorating economy;
-- Wall Street's harmful control over policy;
-- its effects on checks and balances;
-- excessive bailouts for an insolvent and corrupted banking system at the expense of local state budgets and rights; and
-- reckless and unsustainable spending and national debt levels driving the nation to bankruptcy and placing untenable burdens on states.
Overall, concern is that Washington is complicit in driving the nation to ruin, and they want out or at least lean that way. If this movement gains strength, at the least it will slow "deep integration," stall it for a considerable time, but won't likely halt it. Corporate America wants it, and most often what it wants, it gets.
It may just take longer than planned, much longer given the gravity of the global crisis, how hard it will be to resolve, and how long doing it will take. Some experts predict another Great Depression as bad or worse than the first one and far worse than Japan's "lost decades" - from 1990 to the present.
Top priority in world capitals and corporate boardrooms is preventing it if possible. Except for "national security," other initiatives are secondary.
Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.
Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday through Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.
http://www.globalresearch.ca/index.php?context=va&aid=12593
RT On Air
Friday, 13 March 2009
Renewable energy's role 'underestimated'
Renewable energy could play a much larger role in supplying the world's energy needs than previously estimated — but it won't come cheap, according to a new study.
The research, presented at the International Scientific Congress on Climate Change in Copenhagen, Denmark, this week (11 March) says that renewable energy could supply 40 per cent of the world's energy needs by 2050.
The new estimate is considerably higher than previous projections, which put renewables' share at only 12 per cent by 2030, said Peter Lund, an author of the research from the Laboratory of Advanced Energy Systems at Finland's Helsinki University of Technology.
If renewable technologies were given the same government attention and financial backing as nuclear energy was in the 1970s and 80s wind energy and solar power would cost the same as traditional electricity generation by 2020–2025 and 2030 respectively, said Lund.
But such ambitious targets require substantial financial investment, Lund warned. The technologies would require global support of US$12.8 billion to US$25.5 billion per year and without this backing wind and solar energy would contribute less than 15 per cent of the world's energy output.
"What we need is a complete transformation in the way we produce, consume and distribute energy," Lund told SciDev.Net.
Erik Lundtang Petersen, head of the Risø STU National Laboratory for Sustainable Energy's wind energy division in Roskilde, Denmark, said that for the wind sector to deliver its full potential it must focus on efficiently delivering, installing and connecting large amounts of wind power to the grid.
But Joyashree Roy, an economics professor at Jadavpur University in Kolkata, India, who has been involved in producing reports for the Intergovernmental Panel on Climate Change, says that these targets are too ambitious.
She says that as the technologies are already available the key issue is deployment — which requires money. But investing in carbon capture and storage, nuclear technologies and biofuels is leaving less money for renewables — an issue that governments need to consider.
Internet monitored and controlled, even in democracies
After joint appeal with Amnesty International for an end to online censorship, Reporters Without Borders issues report on “Enemies of the Internet” “The 12 ‘Enemies of the Internet’ - Burma, China, Cuba, Egypt, Iran, North Korea, Saudi Arabia, Syria, Tunisia, Turkmenistan, Uzbekistan and Vietnam - have all transformed their Internet into an Intranet in order to prevent their population from accessing ‘undesirable’ online information,” Reporters Without Borders said. “All these countries distinguish themselves not only by their ability to censor online news and information but also by their virtually systematic persecution of troublesome Internet users,” the press freedom organisation said. “Not only is the Internet more and more controlled, but new forms of censorship are emerging based on the manipulation of information,” Reporters Without Borders said. “Orchestrating the posting of comments on popular websites or organising hacker attacks is also used by repressive regimes to scramble or jam online content.” A total of 70 cyber-dissidents are currently detained because of what they posted online. China is the world’s biggest prison for cyber-dissidents, followed by Vietnam and Iran. Download the Internet Enemies report
Reporters Without Borders today issued a report entitled “Enemies of the Internet” in which it examines Internet censorship and other threats to online free expression in 22 countries.
Reporters Without Borders has placed 10 other governments “under surveillance” for adopting worrying measures that could open the way to abuses. The organisation draws particular attention to Australia and South Korea, where recent measures may endanger online free expression.
Internet Enemies 2009
The Real Problem with CNBC
Stewart also makes fun of Obama from time to time (check out him ripping Obama here). Does this mean he doesn’t like Obama? No, it means he’s a comedian. Over the last couple of days Cramer and Joe Scarborough have been using that word as a pejorative, but that’s the guy’s job — to make people laugh. They are pissed because he’s good at it.
But if they think there is a kernel of truth in what Stewart is saying — which, of course, is why they’re actually angry — they’re right. Stewart also wants to make you think about what the role of the media is. And when you think about that in regard to CNBC, Jim Cramer is the least of their problems.
In fact, I don’t blame Cramer at all (disclaimer: he’s been on our show and I had a friendly interaction with him personally once). Everybody knows what Cramer does — he yells and screams about his stock predictions. That’s his job. You’d have to be crazy to think Cramer knows everything and that you should invest all of your money purely based on what he says. And I think he would be the first to admit that.
That’s not the problem with CNBC. The real problem is their reporting — or lack thereof. The CNBC reporters and anchors make the Bush press corps look like draconian inquisitors. They are obsessed with access. This is a problem with all of the media, and something Jon Stewart points out all the time. But it is particularly acute at CNBC (and all other business news channels).
I have a close friend who works at a business news station — and here is the worst kept secret in show business — it’s all about the access. If you piss off the CEOs or the companies, you’re going to get a call from your boss. You have jeopardized our relationship with them!
That is very thinly disguised code words for — don’t ever say anything negative about a company we cover otherwise your job is in the trouble. The message is clear — go along to get along. This isn’t journalism. It’s public relations by another name.
CNBC never did any exposés about the enormous risks these financial companies took. They never exposed the insanity of the derivatives market. And they never told their audience that the executives of these companies have been robbing their shareholders blind. Because they didn’t see that as their job. They saw their job as doing whatever it took to keep Wall Street happy and playing ball with them.
They were part of the broken system. There was no journalism going on at CNBC. That is what our underlying complaint is. That is what CNBC continues to miss to this day as they try to defend themselves by saying their words were taken out of context. The problem was the context!
Will they straighten ship and start doing real investigative journalism uncovering the abuses of Wall Street now that they have been called out. I doubt it. That’s not how they’re structured. They don’t view the average guy in their audience or the American public overall as their main constituency. They view Wall Street as their constituency. So, they will continue to serve them.
I don’t say this because I have some sort of axe to grind with CNBC. They didn’t lose me any money (that was the upside of having no money to lose before the crash). I don’t even begrudge them what they do. I get it. They do fluff pieces on Wall Street. So, if you want to know what the companies are telling the public, check out CNBC. That’s also a service. Buyer beware. If you want hard hitting business journalism, look elsewhere.
I don’t have a problem with that. The question is, does CNBC? If they can make their peace with that, then they should carry on. If they want to change that image, then they have to change the reality. It’s up to them. I’m wildly indifferent either way (as long as they don’t pretend to be something they’re not). It depends on what they think their role is. And that’s for them to decide.
Thursday, 12 March 2009
US lawmakers pressure Obama on Armenian genocide issue
Several U.S. lawmakers have written to President Barack Obama urging him to follow up on campaign statements and label the 1915 massacre of Armenians as genocide.
The pressure on Obama comes ahead of an expected presidential trip to Turkey, which has warned that such declarations by the United States would damage relations.
Turkey denies that up to 1.5 million Armenians suffered genocide at the hands of Ottoman Turks during World War One. Turkey accepts many Armenians were killed, but denies they were victims of a systematic genocide.
Ronald Reagan was the only U.S. president to publicly call the killings genocide. Others avoided the term out of concern for the sensitivities of Turkey, an important NATO ally.
Four members of the House of Representatives urged Obama to make a statement ahead of the 94th anniversary of the killings on April 24.
"As a presidential candidate, you were ... forthright in discussing your support for genocide recognition, saying that 'America deserves a leader who speaks truthfully about the Armenian genocide and responds forcefully to all genocides.' We agree with you completely," the letter said.
It was signed by Democrats Adam Schiff of California and Frank Pallone of New Jersey, and Republicans George Radanovich of California and Mark Kirk of Illinois.
Secretary of State Hillary Clinton, on a visit to Turkey last week, said Obama would visit "within the next month or so" in his first trip as president to a Muslim country.
During Clinton's visit, Foreign Minister Ali Babacan said Turkey would consider mediating between the United States and Iran over Tehran's nuclear program.
The foreign minister also said in a recent television interview that he saw a risk that Obama would describe the Armenian deaths as genocide, because Obama had done this during his campaign. But Babacan said the United States needed to understand the sensitivities in Turkey.
Another consideration for Obama will be that both Turkey and Armenia say they are close to normalizing relations after nearly a century of hostility.
Other members of the administration, including Clinton and Vice President Joe Biden, have in the past supported calling the Armenian killings genocide.
Democratic aides said they also expected several lawmakers to reintroduce a resolution branding the massacre of Armenians as genocide. Armenian-Americans have been pushing for passage of similar proposals in Congress for years.
Two years ago, a resolution was approved in committee but dropped after Turkey denounced it as "insulting" and hinted at halting logistical support for the U.S. war effort in Iraq.
The pressure on Obama comes ahead of an expected presidential trip to Turkey, which has warned that such declarations by the United States would damage relations.
Turkey denies that up to 1.5 million Armenians suffered genocide at the hands of Ottoman Turks during World War One. Turkey accepts many Armenians were killed, but denies they were victims of a systematic genocide.
Ronald Reagan was the only U.S. president to publicly call the killings genocide. Others avoided the term out of concern for the sensitivities of Turkey, an important NATO ally.
Four members of the House of Representatives urged Obama to make a statement ahead of the 94th anniversary of the killings on April 24.
"As a presidential candidate, you were ... forthright in discussing your support for genocide recognition, saying that 'America deserves a leader who speaks truthfully about the Armenian genocide and responds forcefully to all genocides.' We agree with you completely," the letter said.
It was signed by Democrats Adam Schiff of California and Frank Pallone of New Jersey, and Republicans George Radanovich of California and Mark Kirk of Illinois.
Secretary of State Hillary Clinton, on a visit to Turkey last week, said Obama would visit "within the next month or so" in his first trip as president to a Muslim country.
During Clinton's visit, Foreign Minister Ali Babacan said Turkey would consider mediating between the United States and Iran over Tehran's nuclear program.
The foreign minister also said in a recent television interview that he saw a risk that Obama would describe the Armenian deaths as genocide, because Obama had done this during his campaign. But Babacan said the United States needed to understand the sensitivities in Turkey.
Another consideration for Obama will be that both Turkey and Armenia say they are close to normalizing relations after nearly a century of hostility.
Other members of the administration, including Clinton and Vice President Joe Biden, have in the past supported calling the Armenian killings genocide.
Democratic aides said they also expected several lawmakers to reintroduce a resolution branding the massacre of Armenians as genocide. Armenian-Americans have been pushing for passage of similar proposals in Congress for years.
Two years ago, a resolution was approved in committee but dropped after Turkey denounced it as "insulting" and hinted at halting logistical support for the U.S. war effort in Iraq.
Put water centre stage, says UN report
Unless water occupies a more central role in decisions regarding crises such as climate change and food security, a global water shortage could ensue — leading to political conflict and insecurity, says a new report.
It summons leaders in government, the private sector and civil society to put water at the heart of their thinking, stressing water's essential role in achieving sustainable development and the Millennium Development Goals.
The report, 'Water in a Changing World', is an assessment of global freshwater resources prepared by the World Water Assessment Programme under the UN Educational, Scientific and Cultural Organisation (UNESCO).
It says that awareness of the potential severe water shortages has not diffused into the wider political community. It also highlights a major research gap in understanding water resources, particularly in developing countries, and warns that incomplete data is leading to incorrect predictions.
If water is not linked to other problems such as the food crisis "other crises may intensify and local water crises may worsen, converging into a global water crisis and leading to political insecurity and conflict at various levels", the report says.
It urges policymakers who are responsible for key decisions on development objectives and financial resources to act immediately on such grounds.
The report also calls for a more holistic approach to predicting future pressures on global water resources, branding existing predictions "outdated, incomplete or sectoral".
All external threats to global water resources — including natural forces such as climate change and human factors such as population dynamics, increasing international trade in goods and services, and individual lifestyle changes — should be incorporated into predictions, it says.
"Drivers should not be considered in isolation of related socioeconomic and political factors or of other drivers."
More complete data on water quantity and quality is also required if water resources are to be properly managed and future needs accurately estimated, according to the report. It says that while technologies such as remote sensing and modelling have made significant advances, these gains are hampered by an inadequate ability to validate observations on the ground.
"There is little doubt that global hydrologic data are inadequate in both spatial coverage and frequency of observations. Moreover hydrologic observation networks are worsening in many countries because of changing national investment priorities and declining human capacity," the report says. "Synthetically-generated data cannot substitute for real-world observations."
And policy and security issues, a lack of protocol and limited physical access to data means that data are not being shared — hindering regional and global projects that rely on shared datasets, and causing observational gaps.
The report, presented today (12 March), is accompanied by a series of case studies on selected countries including Cameroon, Sudan and Swaziland.
Tuesday, 10 March 2009
Economic Crisis = USA Riots
“The riot be the rhyme of the unheard!”
Citizens of the US… Brace for IMPACT!
As the global economy continues its downward spiral, rioting due to this Wall Street led meltdown is spreading through the globe like wildfire. The list of countries experiencing civil unrest is growing by the day, to name some recent hotspots: Bolivia, Bosnia, Brazil, Britain, Bulgaria, Cameroon, China, Egypt, France, Greece, Germany, Haiti, Iceland, India, Indonesia, Ireland, Ivory Coast, Latvia, Lithuania, Mexico, Montenegro, Morocco, Nigeria, Pakistan, Panama, Philippines, Russia, Senegal, Thailand, Turkey, Ukraine and Yemen.
In an article titled “A Planet at the Brink: Will Economic Brushfires Prove Too Virulent to Contain?” Michael T. Klare explains:
“As people lose confidence in the ability of markets and governments to solve the global crisis, they are likely to erupt into violent protests or to assault others they deem responsible for their plight, including government officials, plant managers, landlords, immigrants, and ethnic minorities. (The list could, in the future, prove long and unnerving.) If the present economic disaster turns into what President Obama has referred to as a ‘lost decade,’ the result could be a global landscape filled with economically-fueled upheavals.”
A UK Guardian news report ran with the headline: “Governments Across Europe Tremble as Angry People Take to the Streets.”
Once stable countries have seen millions of their citizens revolt - taking to the streets, disrupting public services, blocking roadways, participating in nationwide strikes, seizing shopping malls and engaging in many other forms of civil disobedience - as entire governments have fallen. Government offices, public facilities, businesses, homes and cars have been vandalized, looted and burnt to the ground. Death tolls and crime rates due to this crisis are reaching epidemic levels.
However, here in the US, we haven’t seen much unrest yet. With the election of Obama we have had a brief reprieve, as HOPE momentarily shined across the USA. The US presidential election and the rise of Obama came just in time. (Could you imagine what might have happened under another year of Bush-Cheney rule?) The hope-filled Obama is the perfect figurehead casting the perfect illusion. The Obama illusion is one of a new day, one of hope and better times ahead.
As positive an impact as Obama might have on governmental policy and national confidence, we can only escape reality for so long. In the words of Chris Hedges:
“It is only a matter of time. And not much time. When things start to go sour, when Barack Obama is exposed as a mortal waving a sword at a tidal wave, the United States could plunge into a long period of precarious social instability.”
/ The Obama Illusion \
Things have obviously been bad for the past year, but things are just beginning to get much worse. As economic forecasters predict another two years of decline, the Associated Press reports: “The economy’s downhill slide at the end of last year was likely much steeper than the government initially thought and it is probably doing just as poorly now — if not worse — as a relentless slew of negative forces feed on each other, pushing the country deeper into recession.” Danny Schechter, a journalist who was one of the first to sound the economic alarm and author of Plunder: Investigating Our Economic Calamity, explains: “It seems endless, and we are not even touching the surface of the real economic time bombs on the horizon from credit default swaps, derivatives and credit cards.” A BBC report states: “There is now $2.2 trillion of toxic bank debt worldwide, the IMF says, $500bn more than it estimated a few months ago.”
It was staggering in January when 655,000 people lost their job in the US, but this pace has continued with no signs of slowing. The US economy is now shedding over 23,000 jobs every day. Since the beginning of the crisis, a little over one year ago, over 4.4 million jobs have been lost, with more than half of the cuts occurring in the past four months. We haven’t seen losses like this since World War II - over 60 years ago. A record (and quickly increasing) five million US citizens now file for unemployment benefits. In the past month, 787,000 people had their work hours cut and now work part-time instead of full-time, bringing the number of underemployed people up to 8.6 million. When you add in unemployed people and jobless workers who have literally given up looking for a job, you get a astounding number of over 22 million unemployed/underemployed people - that’s a 14.8% rate - and climbing fast!
The International Labor Organization predicts there will be over 50 million jobs lost worldwide in 2009. The world’s largest credit insurer reports that 42,000 companies went out of business in 2008, a 45% increase over 2007, and they expect a stunning 62,000 to fail in 2009. Just think of what will happen when all these companies and people are added to the masses that already can’t pay back loans and credit cards, let alone afford to keep their warehouses, stores, offices and homes. The US government, which is about to pump another $787.2 billion of tax payer funds into the dying economy, is already over $60 TRILLION in debt - that’s over $500k per US household - owed before the new stimulus bill! On top of that, US consumers are already $14 trillion in debt from credit cars and mortgages.
On the housing front things are in full-blown crisis mode. As Depression-era style tent cities spread throughout the US, Ariana Huffington writes, “we are facing nothing less than a national emergency, with 10,000 Americans going into foreclosure every day and 2.3 million homeowners having faced foreclosure proceedings in 2008. When we put flesh and blood on these numbers, the suffering they represent is enormous and so is the social disintegration they entail.”
Other than a few worker strikes and some significant, but under-reported, incidents on the home foreclosure front, things have been eerily tame in the US thus far. But with things quickly going from bad to worse, that’s all about to change. For example, ACORN, the nation’s largest grassroots community organization of low and moderate-income people, recently stated:
“ACORN’s campaign is working to put the human faces of foreclosure victims front and center while escalating the campaign tactics to include civil disobedience aimed at keeping people from losing their homes. Everything is on the table: disruption of sales, disruption of banking business, even refusing to be evicted or moving families back into their foreclosed homes. The urgency of the crisis demands no less.”
Salon writer Glenn Greenwald recently wrote about a Fox News interview that shows how much of a disconnect there is between large corporate news organizations and the obviously frustrated public:
“This Fox News interview with Virg Bernero — the Mayor of highly unionized Lansing, Michigan and himself the son of a retired GM worker — is, for several reasons, really worth watching…. The glaring discrepancy he notes — between (a) the consensus of our political class that workers must endlessly give up wage, health and other benefits even as (b) we shovel trillions of dollars in government subsidies to Wall Street for ongoing massive executive bonuses and the like for the very people who caused the collapse — is one that… is rarely heard in our mainstream debate with such clarity and passion.
Even more notable is the dripping condescension directed at him by the Fox personality at the end of the interview for having committed the sin of exhibiting genuine passion and anger over something as trivial as the disappearing middle class and the massive and growing rich-poor gap. That’s the crime of Shrillness, one of the prime hallmarks of Unseriousness — failing/refusing to suppress one’s anger towards our political and financial establishment.”
For another recent example of reality bursting through the numbing television set, former National Security Adviser Zbigniew Brzezinski expressed his fears with MSNBC’s Joe Scarborough :
JOE SCARBOROUGH: You also talked about the possibility of class conflict.
ZBIGNIEW BRZEZINSKI: I was worrying about it because we’re going to have millions and millions of unemployed, people really facing dire straits. And we’re going to be having that for some period of time before things hopefully improve. And at the same time there is public awareness of this extraordinary wealth that was transferred to a few individuals at levels without historical precedent in America….
And you sort of say to yourself: what’s going to happen in this society when these people are without jobs, when their families hurt, when they lose their homes, and so forth?
We have the government trying to repair: repair the banking system, to bail the housing out. But what about the rich guys?… Where is the monied class today? Why aren’t they doing something: the people who made billions, millions…. there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots!
Things are about to… EXPLODE
As desperate people in the US and throughout the world look to take vengeance on the people responsible for this disaster, the US, and Wall Street in particular, will be their target. Joseph Stiglitz, Nobel Laureate in Economics, recently stated that this economic global crisis has a “ made in the USA label on it.” Harvard economic historian Niall Ferguson adds:
“… this is a very unfair crisis. The epicentre is the United States… it’s an unfair world…. Here is the world’s biggest economy, which gave us subprime mortgages, rampant securitization, the collateralized debt obligation, Lehmann Brothers, Merrill Lynch….
There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.”
These conflicts are something that the US government has been expecting, and preparing for. Dennis Blair, the new US Director of National Intelligence, recently testified before the Senate Intelligence Committee stating that the greatest threat facing the US is not terrorism, but the current economic crisis:
“The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications. The crisis has been ongoing for over a year…. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.” [Let us not forget the lessons of history, in the most extreme case, it was the Wall Street led economic meltdown in the 1930's that led to Hitler's rise in Germany.]
So, as Intelligence Committee Vice-Chair Christopher Bond feared, the economic crisis is now “the primary focus of the intelligence community.”
In addition to threats from outside US borders, the US Army has been preparing for expected riots and turmoil from US citizens. Chris Hedges sums it all up:
“The specter of social unrest was raised at the U.S. Army War College in November in a monograph [click on Policypointers’ pdf link to see the report] titled ‘Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development.’ The military must be prepared, the document warned, for a ‘violent, strategic dislocation inside the United States,’ which could be provoked by ‘unforeseen economic collapse,’ ‘purposeful domestic resistance,’ ‘pervasive public health emergencies’ or ‘loss of functioning political and legal order.’ The ‘widespread civil violence,’ the document said, ‘would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.’
‘An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,’ it went on.
‘Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,’ the document read.
In plain English, something bureaucrats and the military seem incapable of employing, this translates into the imposition of martial law and a de facto government being run out of the Department of Defense. They are considering it. So should you.
Adm. Blair warned the Senate that ‘roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown.’ He noted that the ‘bulk of anti-state demonstrations’ internationally have been seen in Europe and the former Soviet Union, but this did not mean they could not spread to the United States.”
As Joshua Holland put it: “At least in Western Europe, cries of ‘burn the shit down!’ are being heard in countries with some of the highest standards of living in the world…”
Are you ready for the “Summer of Rage”?
In preparation for what many believe is going to be a tumultuous summer, the Obama administration has recently made $2 billion in aid available to local police departments.
In Europe, Military Intelligence and police are bracing for the worst. They have been preparing to suppress mass civilian disorder, as they fear a “summer of rage.” A recent UK poll revealed, “More than a third of voters believe the Army will have to be brought in to deal with a ’summer of rage’ on British streets as the recession bites…” Police and governments around the world know that it is now much easier to recruit “foot-soldiers” to take part in civil disobedience when you have so many unemployed and struggling to make ends meet.
Now that President Obama is off the campaign trail and settled into the oval office, his “Hope” seems to be fading fast as he sees the tidal wave heading for us. Just listen to the “hopeful” Obama in his first news conference as president:
“And if there’s anyone out there who still doesn’t believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside down because they don’t know where their next paycheck is coming from.”
Or, as George W. Bush said about the US economy just before leaving office: “This sucker is going down!”
So, as we sit here in the US, at the epicenter of the economic meltdown - also the country with the highest inequality of wealth in the industrialized world - it seems to be just a matter of time before all hell breaks lose.
Tick… tick… tick…
AMPED VIDEO: Turn up the volume and click play!
Now that you’ve seen it…
CLIMATE CHANGE: Acid Oceans Altering Marine Life
Some of the first species impacted by increasingly acidic oceans have been identified just as scientists meet in Copenhagen this week to present new data showing that climate change is far more urgent and serious than current economic problems.
One affected species, foraminifera, a sand grain-sized plankton, is responsible for the sequestration of 25 to 50 percent of the carbon the oceans absorb and thus plays a major role in keeping atmospheric carbon dioxide (CO2) concentrations at much lower levels than they would be otherwise. Now scientists have learned that foraminifera (forams) shells are much thinner in oceans made more acidic by the enormous volumes of CO2 released in the burning of fossil fuels.
It was only a few years ago that researchers realised that human emissions of CO2 were making the surface waters of oceans more acidic. That prompted a rush of new research to determine what the impacts might be. It turns out that forams, other shell forming species like mussels, as well as corals and fish are casualties in humanity's giant, uncontrolled experiment that involves injecting huge quantities of CO2 into the atmosphere.
"We think we are the first to document effects in the field as opposed to in a laboratory experiment," said William Howard of the Antarctic Climate and Ecosystems Cooperative Research Centre, Hobart, Tasmania, Australia.
The shells of one species of foraminifera (Globigerina bulloides) in the Southern Ocean are 30 to 35 percent thinner than shells than those shells formed prior to the industrial period, Howard and colleagues wrote in a paper published in Nature Geoscience Mar. 8.
Howard told IPS that forams live in the surface waters and when they die they fall to the ocean bottom. As they fell through the water column researchers collected them and compared their shell weights with forams in the sediments. Forams are widespread, numerous and have a 200-million-year-old ancestry. Their hard calcite shells are well preserved, providing a detailed fossil record of their time on Earth.
Using a combination of radiocarbon dating and stable oxygen isotopes researchers determined the ages of the shells on the ocean bottom surface and those buried deep in the bottom sediments. They found a linear relationship between shell weight and atmospheric CO2 concentration over the past 50,000 years. The more CO2 in the atmosphere, the thinner the shells, and vice versa, their studies reveal.
The current CO2 level of 380 ppm is the highest concentration in several million years. Projections are that ocean acidification in the coming decades will reach levels unseen since the era of the dinosaurs 65 million years ago when the oceans were very different, experts from the University of Bristol in Britain will announce at the International Scientific Congress on Climate Change in Copenhagen this week, according to news reports.
There is absolutely no controversy about the basic chemistry of additional CO2 increasing ocean acidity. The oceans naturally absorb carbon from the atmosphere and have now absorbed about a third of the total amount of human emissions. This additional carbon has altered the oceans' chemistry, making them 25 to 30 percent more acidic because the extra CO2 combines with carbonate ions in seawater, forming carbonic acid.
Shell-forming creatures - mussels, corals, hard planktons, shrimps and many more - all need those carbonate ions to build their shells.
Research on the effects of acidification on marine species in the open ocean is just getting started. Lab experiments had previously shown that the ocean's shell-forming creatures produce thinner shells in more acidic ocean waters, so William Howard is unlikely to surprise the 2,000 attendees in Copenhagen when he presents his findings. And no one knows at this point if the thinner shells are harming or affecting the forams.
However, scientists and policy makers ought to be alarmed to learn that Howard's planktonic forams play a crucial role in the sequestration, or storage, of carbon in the deep ocean, accounting for between 25 and 50 percent of the carbon transfer from the atmosphere to the deep ocean.
Each day, the oceans absorb 30 million tonnes of CO2 and if forams can no longer play their role in this carbon storage system then atmospheric concentrations of CO2 could skyrocket with calamitous effects on the global climate system.
And it turns out that forams have a particularly tough shell, utilising calcite - the most stable form of calcium carbonate and less sensitive to acidification. Many other shell-forming species that are vital parts of the oceanic food chain like pteropods utilise a carbonate mineral called aragonite and are likely to be more vulnerable to acidification, researchers warn.
Another new study has found that the larvae of clownfish - the bright orange and white reef fish - were unable to detect the odours from adult fish that led them to their breeding sites. This lab study shows that acidified waters that are expected before the end of the century affected the larvae's ability to follow odours, disrupting the breeding cycle of an important fish species.
The world's leading marine scientists are increasingly alarmed by acidification and its impacts. Last Jan. 30, they issued a warning to policy makers called the Monaco Declaration that states "acidification is accelerating and severe damages are imminent" and that corals will not survive in most of the oceans by 2050.
The declaration was a dramatic step for scientists, says signatory Victoria Fabry, an oceanographer at the University of California, Santa Barbara. "The potential is there for drastic changes in the oceans," Fabry told IPS.
There is a crucial need to alert policy makers and the public and to act soon. "We can make a difference by reducing emissions," she said.
"About two percent of the Gross World Product would need to be invested in energy production, efficiency and usage to reach the stabilisation target of 450 ppm, a cost considered to be tolerable by most economists," said Hermann Held of the Potsdam Institute for Climate Impact Research, Germany, who helped craft the Declaration.
Despite this modest investment, little is happening to substantially reduce emissions in virtually every country in the world. For that reason this week's climate science update involving experts from 80 countries is a deliberate attempt to influence policy, said conference organiser Katherine Richardson, a marine biologist at the University of Copenhagen.
This latest science paints a dire picture, from increasing ocean acidification to rapidly rising sea levels that will swamp most of the world's coastal regions before 2100, among many other impacts.
The hope is this climate science update will push policy makers to reach a significant emissions reduction agreement at the climate change negotiations at the end of the year in Copenhagen, Richardson has said in media reports.
One affected species, foraminifera, a sand grain-sized plankton, is responsible for the sequestration of 25 to 50 percent of the carbon the oceans absorb and thus plays a major role in keeping atmospheric carbon dioxide (CO2) concentrations at much lower levels than they would be otherwise. Now scientists have learned that foraminifera (forams) shells are much thinner in oceans made more acidic by the enormous volumes of CO2 released in the burning of fossil fuels.
It was only a few years ago that researchers realised that human emissions of CO2 were making the surface waters of oceans more acidic. That prompted a rush of new research to determine what the impacts might be. It turns out that forams, other shell forming species like mussels, as well as corals and fish are casualties in humanity's giant, uncontrolled experiment that involves injecting huge quantities of CO2 into the atmosphere.
"We think we are the first to document effects in the field as opposed to in a laboratory experiment," said William Howard of the Antarctic Climate and Ecosystems Cooperative Research Centre, Hobart, Tasmania, Australia.
The shells of one species of foraminifera (Globigerina bulloides) in the Southern Ocean are 30 to 35 percent thinner than shells than those shells formed prior to the industrial period, Howard and colleagues wrote in a paper published in Nature Geoscience Mar. 8.
Howard told IPS that forams live in the surface waters and when they die they fall to the ocean bottom. As they fell through the water column researchers collected them and compared their shell weights with forams in the sediments. Forams are widespread, numerous and have a 200-million-year-old ancestry. Their hard calcite shells are well preserved, providing a detailed fossil record of their time on Earth.
Using a combination of radiocarbon dating and stable oxygen isotopes researchers determined the ages of the shells on the ocean bottom surface and those buried deep in the bottom sediments. They found a linear relationship between shell weight and atmospheric CO2 concentration over the past 50,000 years. The more CO2 in the atmosphere, the thinner the shells, and vice versa, their studies reveal.
The current CO2 level of 380 ppm is the highest concentration in several million years. Projections are that ocean acidification in the coming decades will reach levels unseen since the era of the dinosaurs 65 million years ago when the oceans were very different, experts from the University of Bristol in Britain will announce at the International Scientific Congress on Climate Change in Copenhagen this week, according to news reports.
There is absolutely no controversy about the basic chemistry of additional CO2 increasing ocean acidity. The oceans naturally absorb carbon from the atmosphere and have now absorbed about a third of the total amount of human emissions. This additional carbon has altered the oceans' chemistry, making them 25 to 30 percent more acidic because the extra CO2 combines with carbonate ions in seawater, forming carbonic acid.
Shell-forming creatures - mussels, corals, hard planktons, shrimps and many more - all need those carbonate ions to build their shells.
Research on the effects of acidification on marine species in the open ocean is just getting started. Lab experiments had previously shown that the ocean's shell-forming creatures produce thinner shells in more acidic ocean waters, so William Howard is unlikely to surprise the 2,000 attendees in Copenhagen when he presents his findings. And no one knows at this point if the thinner shells are harming or affecting the forams.
However, scientists and policy makers ought to be alarmed to learn that Howard's planktonic forams play a crucial role in the sequestration, or storage, of carbon in the deep ocean, accounting for between 25 and 50 percent of the carbon transfer from the atmosphere to the deep ocean.
Each day, the oceans absorb 30 million tonnes of CO2 and if forams can no longer play their role in this carbon storage system then atmospheric concentrations of CO2 could skyrocket with calamitous effects on the global climate system.
And it turns out that forams have a particularly tough shell, utilising calcite - the most stable form of calcium carbonate and less sensitive to acidification. Many other shell-forming species that are vital parts of the oceanic food chain like pteropods utilise a carbonate mineral called aragonite and are likely to be more vulnerable to acidification, researchers warn.
Another new study has found that the larvae of clownfish - the bright orange and white reef fish - were unable to detect the odours from adult fish that led them to their breeding sites. This lab study shows that acidified waters that are expected before the end of the century affected the larvae's ability to follow odours, disrupting the breeding cycle of an important fish species.
The world's leading marine scientists are increasingly alarmed by acidification and its impacts. Last Jan. 30, they issued a warning to policy makers called the Monaco Declaration that states "acidification is accelerating and severe damages are imminent" and that corals will not survive in most of the oceans by 2050.
The declaration was a dramatic step for scientists, says signatory Victoria Fabry, an oceanographer at the University of California, Santa Barbara. "The potential is there for drastic changes in the oceans," Fabry told IPS.
There is a crucial need to alert policy makers and the public and to act soon. "We can make a difference by reducing emissions," she said.
"About two percent of the Gross World Product would need to be invested in energy production, efficiency and usage to reach the stabilisation target of 450 ppm, a cost considered to be tolerable by most economists," said Hermann Held of the Potsdam Institute for Climate Impact Research, Germany, who helped craft the Declaration.
Despite this modest investment, little is happening to substantially reduce emissions in virtually every country in the world. For that reason this week's climate science update involving experts from 80 countries is a deliberate attempt to influence policy, said conference organiser Katherine Richardson, a marine biologist at the University of Copenhagen.
This latest science paints a dire picture, from increasing ocean acidification to rapidly rising sea levels that will swamp most of the world's coastal regions before 2100, among many other impacts.
The hope is this climate science update will push policy makers to reach a significant emissions reduction agreement at the climate change negotiations at the end of the year in Copenhagen, Richardson has said in media reports.
The Internet's Energy Drain - There's No Free Lunch on Your Browser
The recently passed federal stimulus package contains $18 billion to stimulate the Internet. Technology fans are looking to that planetwide digital organism to help revive our economy.
But it’s an organism nourished by electricity, and lots of it. The Internet’s escalating power consumption stands as a warning that the engines of economic growth can’t run without depleting resources and cranking out wastes.
The servers and large data computing centers that run the Internet and other computer networks doubled their energy use between 2000 and 2006, the Environmental Protection Agency estimates. Add in the power used by computers and peripheral equipment in homes and commerce, along with a projected 75 percent further growth in data centers by 2011, and the system’s electricity needs will exceed the total current consumption of 18 million average American households. The EPA says that by 2011 the peak load placed on the power grid by servers and data centers alone will require the output of 25 typical coal-fired power plants.
The national digital network doesn't rank among America's largest 
energy hogs, but it's no cute little piglet either. Demand projected for 2011 would sop up Mexico's entire current production of almost 200 million kilowatt hours, or by 2014, Australia's. That it's a small slice of the national electricity pie reflects more than anything just how big that pie is.
The harder and faster computers "think," the more power they require. Each generation of technology, from the vacuum tube to today's advanced processors, has handled more information per watt, but that efficiency has always been harnessed to push speed and output higher, not to save energy.
The industry produces tinier chips and bigger, hotter arrays of chips every year. A large share of the wattage going into a data center ends up as waste heat, so 40 percent or more of a center's energy use typically is for air conditioning. Running and cooling a single 6-foot-high rack of servers occupying 7 square feet of floor space can consume as much power as 30 typical California homes. Thousands of these racks in rooms or buildings ranging into the hundreds of thousands of square feet can have city-sized power demands.
Internet exponents claim that this vast expenditure of energy is more than canceled out by the many resource-efficiency gains that computers make possible. But such gains, where they have occurred, appear to be getting blotted out by our general resource use.
For example, electronic communications were expected to cut paper use, but savings have been slow in coming. Paper consumption for all uses in the United States hit a peak of more than 700 pounds per person annually in the 1990s, a 25 percent increase over the 1970s, before e-mail. A 3 percent drop in paper use in the 2000s may mean that computerization is finally having an effect.
Online marketing was supposed to help limit the size of the brick-and-mortar retail world and keep shoppers out of their cars. But retail floor space per American grew 12 percent from 1995 to 2003. Mall space grew by 34 percent per capita. Now a recession rather than digital shopping has finally slowed that growth.
It's widely anticipated that videoconferencing and telecommuting will substitute increasingly for business travel. But industry data show that, aside from a short post-9/11 slump, U.S. business travel marched upward at a steady rate of 5 percent per year from 1990 through early 2008.
Thanks to the economy's plunge, business travel fell off sharply in the last half of 2008 and is sure to fall further. In light of that and similar downtrends, the time may have come to enlist the Internet in the cause of saving energy.
Hard times might present electronic communication and virtual travel with their best opportunities yet to substitute for the costly hauling of live human beings and bulky goods or the paving of more big-box parking lots.
But conservation won't happen automatically. Today, a big share of the energy going into data centers — and the waste heat coming out — is aimed at persuading Internet users to consume more of everything, to convert more matter and energy into waste somewhere else. If the digital infrastructure is to help curb resource consumption rather than push it higher, all that power will have to be aimed in a different direction.
Stan Cox is lead scientist for the Land Institute in Salina, Kan., and author of Sick Planet: Corporate Food and Medicine. He wrote this comment for the institute's Prairie Writers Circle. Write to him at t.stan@cox.net.
Monday, 9 March 2009
What is Financial Journalism for? Ethics and Responsibility in a time of Crisis and Change
Source: Dr. Damian Tambini
To read the POLIS report, "What is Financial Journalism for? Ethics and Responsibility ina time of Crisis and Change' by Dr. Damian Tambini from the LSE Media and Communications Department please click here
Don’t shoot the messenger: media and the economic crisis
Who would have predicted two years ago that a debate on financial journalism would fill a 450-seat theatre on a Monday night? When I first commissioned a research report on economic media back in early 2007 I had no idea that it would be published amidst the biggest financial story of our lives. It is a story that people want told and they want it told with honesty and expertise. Has British journalism delivered?
The message from our stellar panel of economists, journalists and politicians was that no-one could have predicted the severity of our current predicament. Yes, financial journalism is deeply fallible. It is vulnerable to group-think, resource cuts, and incompetence. But the media was no worse than the bankers, politicians and economists in predicting and warning of the coming crisis. This crash is so spectacular, so massive and so profound that no-one could have seen it coming.
Dragon’s Den and BBC Today Programme Presenter Evan Davis is an economist by training and a former economics editor at the BBC. He is acutely concious of the damage done but he sees the media role in a much wider context. Why should the journalists have been so much wiser than everyone else?
He pointed out that there are thousands of ‘warnings’ all the time about all sorts of things. It was ‘forgivable’ that journalists ‘did not beat a drum on their own’. The media does tend to operate in a ’single dimension’ where life is either sunny or rainy, but the ‘world is a complicated place’.
Alex Brummer from the Mail pointed out that it has been banging on about a coming crash in housing for years. Indeed, the Mail has been parodied for its gloomy obsession with property prices. However, Brummer’s point was not that he was right, but that the wider story about impending economic disaster never made it from the (largely unread) City pages to the front pages.
Alex did blame some of the media for a pack mentality. He laid into the ‘liars’ in City PR companies. Even now, most journalists are obsessesed by simple stories such as the row over bonuses instead of the deeper economic crisis, he said.
Gillian Tett (Financial Times) brought a very different perspective. She said that her pioneering reporting of the obscurer parts of the financial jungle, such as complex derivatives, was informed by her academic training as a social anthropology. She delved into parts of the City that other hacks did not venture into. To mix metaphors, it is what she calls the bulk of the financial iceberg that most business journalism fails to spot.
As she pointed out, there was no incentive to cover these compicated structures, it was seen as ‘geeky and technical’ and it was dominated by ‘ferocious’ PR companies.
There was some supporting evidence for the journalists from a top economist, Willem Buiter (LSE). He very clearly and entertainingly pointed out that no-one saw the ‘full shock and horror’ coming. Indeed, he believes that there is no reason to think that we will see the next massive crash before it happens. “how” asked Buiter, “could anyone see when there was such an act of collective blindness”?
This makes it sound like our panel were incredibly defensive and self-justifying. If they all take the blame, then no-one can be found guilty. But I sensed that they are all still reeling from the reality of this huge folly. It is such a collosal event and we are too close to it to see the context or causes.
The media can rarely be held ‘responsible’ for any particular social or economic disaster. Journalism can exaggerate trends and accentuate flaws but it doesn’t often cause things to happen.
But that does not mean that it doesn’t have to look to its own performance and ask how well it is doing its job. In a way, the question about seeing disasters coming is the wrong query. What really matters is how well we are going to report the reality and choices that face us from here on.
This debate, chaired by LSE boss Howard Davies and supported by the Media Society, helped clarify some of the issues. It disposed of some of the more facile concerns. It raised a whole lot of new questions, too. Polis will continue its research in this area with Dr Damian Tambini. You can see our report on financial journalism here. Get in touch with us if you want to be part of our continuing investigation at polis@lse.ac.uk
Continue the debate at the Polis Facebook group
The LSE audio podcast will is here.
Follow me, the Polis director on Twitter
Here is the report on the event by Journalism.co.uk
Here is the report by Press Gazette
Transcript - Background Briefing - The media in boom and doom
Reporter: Apples up more than 6% right now, Google about 3%, but Dell, Intel, Research Motion and Microsoft are all to the upside....
Reporter: Trading did not disappoint, 400 points higher yesterday, the market's more high the last 40 minutes of trading as volatility once again ruled the day.
Reporter: Most of the techs this morning, if not all of them, have just exploded to the upside; we are better than 5% to the upside ...
Stan Correy: Remember the decade of the credit bubble? Money flowed freely, fortunes were made, and there was dancing all around.
SONG: Let's face the music and dance
Stan Correy: Then, 18 months ago, the whole house of cards began to look unstable. But the music went on, and the former head of Citigroup, a bank now a shadow of its former self, was still telling The Financial Times:
Reader: As long as the music is playing, you've got to get up and dance. We're still dancing.
Stan Correy: Hello, I'm Stan Correy and this is Background Briefing on ABC Radio National.
Now the music has long stopped; the world is in deep economic trouble and everyone is asking how did it go so wrong, and why didn't anyone spot it earlier?
Behind the façade was a hollow shell of dodgy contracts, toxic debt, fraud, lies, and a dash of corruption, all allowed to flourish because of poor regulations and greed.
Where were the watchdogs? What was the media doing all that time? This week in London, there's even a conference called 'Why did nobody tell us? Reporting the global crash of 2008.'
There are now some very interesting questions about the role of the media, especially the business media. Is it supposed to be a messenger between business and the public, or is it a watchdog on behalf of the public? Does it have a responsibility not to write bad news stories, because that could lead to a loss of confidence, and the whole edifice is built on confidence.
Monitoring the business media for The Columbia Journalism Review, Dean Starkman.
Dean Starkman: Most of the time the media presents itself as more than a messenger, but as a watchdog, and that's exactly what it is. It does have an oversight or watchdog responsibility over these institutions and markets, and so now we're sort of left with the situation where the institutions and markets that they were watching over, have collapsed. So yes, it's time to ask some questions.
Stan Correy: These questions aren't new. They were asked by none other than the author of the novel Robinson Crusoe, Daniel Defoe, way back in the 1700s. He was also a journalist, one of the first business journalists, and here's what he wrote in 1719.
Reader: 'Tis a trade found in Fraud, born of Deceit, and nourished by Trick, Cheat, Wheedle, Forgeries, Falsehoods and all sorts of Delusions; Coining false News, this way good, that way bad; whispering imaginary Terrors, Frights, Hopes, Expectations, and then preying upon the Weakness of those, whose Imaginations they have wrought upon, whom they have either elevated or depress'd. If they meet with a Cull, a younger Dealer that has Money to lay out, they catch him at the Door, whisper to him, Sir, here is a great piece of News, it is not yet publick, it is worth a Thousand Guineas but to mention it:
MUSIC
Stan Correy: This is the kind of music playing in the London streets and theatres, as the financial bubble of the early 1720s deflated.
Much has been written about the various financial bubbles over time, and the subsequent busts. Journalist, investor and author, on the phone from Boston, Edward Chancellor.
Edward Chancellor: There was a lot of coverage in various newspapers and having read many of those newspapers when writing about the South Sea bubble, I'd say by and large the newspaper coverage was pretty sceptical of the bubble and was pretty good at revealing the excesses of behaviour, the psychological excesses, the greed or the irrationality of the investors, and also people who were promoting the South Sea bubble, frauds, Ponzi schemes if you will, from a very early stage. And I think Defoe, who was a journalist, a businessman and author, was one of the most prominent critics of the South Sea bubble, and exposed it as what he called a chimera, something that would disappear. And Defoe was the sharpest critic of stock jobbers as they were called in those days, of speculators, and of men in the City of London who were profiting form the trade in shares. In fact he wrote a pamphlet called The Villainy of the Stock Jobbers Detected.
Reader: How often did the Gentlemen run down true News as if it had been false, and run up false News as if it had been true. In a word, the putting false News upon us is nothing but an old Trade reviv'd.
Stan Correy: Almost 300 years later, the blurring between 'true news' and 'false news' is still a critical issue in financial markets. For the past 20 years, Sydney business journalist and columnist Michael West, has had an ear to the ground and written widely on the world of high finance.
In his flat in Sydney, not far from the beach, Michael West says journalists do have a very fine line to tread.
Michael West: Well for years I went through many examples, very long lunches with extremely expensive bottles of wine, trips to big sporting events, gifts, and that kind of thing. Because I find that actually a bit of a conflict personally, I'm not didactic about what other people should do, but I don't accept any gifts, and rarely go to lunch; lunch is probably OK, but no more sporting events and that kind of thing, because it is hard to write an objective piece about a corporation or about high profile executives if you've been drinking fine chardonnay at the one-day cricket with them for four hours, and suddenly something blows up the following week, or at any stage. These human interactions have a terrific potency to finance journalists, so the commentators in particular are targeted at a personal level, in order to write nice things or to be amenable to taking phone calls to allow the other side of the argument, or whatever, which is fine, the other side should be put. But it is excessive; the level of financial PR is absolutely excessive now in the media.
Stan Correy: Journalists have a strange relationship with PR people and lobbyists. On the one hand they have to listen because they need all the information they can get, but at the same time they have to try not to become captive to their informants.
Under the pressure of deadlines, the news can become warped. Last year, the University of Cardiff's media school produced a study which showed that 38% of business stories in the national quality newspapers of Britain were based on press releases. For broadcasters, the figure was 32%.
Getting independent sources of information in the world of business can be tricky, says Michael West.
Michael West: The other thing is of course, that as a financial journalist you follow the opinions and the arguments of people who are experts in their field, and I think if you look at all the experts, they are all personally invested as well. All the market economists that work for the big four banks and the other banks, all the strategists that work for the investment banks, they're supposed to be independent, but they're hardly independent because they're too personally invested. So most of them are in fact closer to cheerleaders than they are to independent analysts.
Stan Correy: Not particularly comforting to those who rely on the media for information on how to invest their savings or prepare for retirement.
Michael West: At the beginning of every recession, like the one we're entering right at the moment, look at all their growth forecasts, they're all around 3% a year ago; they pulled them back to 2% six months ago, and now they're going to 1% and finally a couple of them are saying 'recession'. But effectively at the 11th hour they change recommendations. And they're all in a pack. Now, why are they all in a pack? They're all in a pack because none want to venture outside the pack, because none of them want to be seen to be talking down the market.
7:30 Report THEME
Kerry O'Brien: Welcome to the program, and first to the near collapse of one of Australia's most prestigious investment banks.
The large Australian investment conglomerate, Babcock & Brown today announced its Chairman and Chief Executive have stepped down following a collapse in the share price amidst growing investor concerns over the company's future.
Stan Correy: That was August last year. Four months earlier, Michael West was already beginning to get suspicious about Babcock & Brown's financial position.
Michael West: I went to the press conference for the Babcock & Brown results. There was hundreds of pages of glossy tables and documents and graphs and pie-charts, and everything looked so magnificent. It was very difficult to poke a hole in any of it. Then you read through and keep on reading and so on. I wrote quite a positive piece; I've always suspected that Babcock would blow up and had always written as much. But on the strength of these results early last year, it seemed that they had plenty of cash, the debt situation was under control and so on. Now it was only days afterwards when with a contact, we discovered that if you put the two annual reports together, because the changed the wording in different annual reports, it all complies supposedly with the law, but suddenly there were all these loans between the satellites and the parent companies, which were leveraged, and hadn't been disclosed in plain English. They were buried in the footnotes. You had to look at two different annual reports to establish this was going on, and they changed the language in each one, so it was difficult to see like for like.
Now for a guy that hasn't been trained in balance sheets, that took me quite a while to work that out, and it was subsequently quite a strong story. and everything that you want to know is buried, is interred deep in the fine print of these documents, and often you have to have more than one document to work out what's going on; which means if you've got to write a story every day like I do, I mean how do you find five hours, maybe three days, to go through that? You rely on contacts, so who you choose for your contacts I think is particularly important.
Stan Correy: And how do the contacts in the markets view the expertise of the financial journalists?
Former investment banker and author of Traders, Guns and Money, Satyajit Das.
Satyajit Das: I think the financial journalist role does change, and to a large extent one of the big issues with financial journalists, is often they're not well placed to understand the minutiae of the business they're covering. They may know something about economics, they may know something superficially about finance, but they're highly unlikely to be specialists, which means that they're actually captive to the people they talk to. And they have to protect these sources, they have to cultivate these sources. But the sources themselves are interesting; the sources who are clever know that the journalist will sometimes repeat verbatim what they've said, and so it give them the opportunity to get things into the newspapers, or into the press, which helps them in terms of the way they want certain events to be shaped and seen. And you can just see this in terms of the stories that you see. Often when I read things, I find myself asking why is that particularly story there? And there might be something about that. And I think Donald Rumsfeld once summed it up pretty astutely. He said, 'Anyone who knows anything isn't talking, anyone with any sense isn't talking'. Therefore the people that are talking to the media, by definition, are people who don't know anything, or people who don't have a hell of a lot of sense. And that sometimes sums up pretty much what's going on between people in financial markets, and financial journalists.
Stan Correy: How journalists convey and obtain information about the market and financial institutions is now a matter of significant international interest.
The London School of Economics, and a private think-tank, reported on it last November. And one of the concerns mentioned was the powerful role of public relations in infiltrating the media. About 30 leading business editors in New York, Hong Kong and London were interviewed. From the LSE, Dr Damian Tambini.
Damian Tambini: We found when speaking to financial journalists, that they were in broad agreement that there are a number of really fundamental challenges which prevent them doing their job. The challenges of increased complexity, and I think there's a related problem of speed, the 24 hour news cycle, blogging. Journalists are under an enormous amount of pressure to get more stories out more quickly, and that means less editorial oversight, and less of an ability to deal with these complex stories in an effective way.
Stan Correy: The complexities are legion. Very few people really understand hedge funds, for instance, or the lexicon of jargon thrown out by financial institutions: securitization, short selling, the infamous CDOs, SIVS, Structured Investment Vehicles; CPDOs, and CDSs, Credit Default Swaps.
And then there are the rumours and whispers. Some are genuine, others are planted. the planting of false rumours has coined a new word, 'Rumourtrage', used in order to bring down the prices of shares so that a buyer can get in at a low price.
In Australia, our securities regulator, ASIC, has a special taskforce investigating the incidence of 'rumourtrage' in our markets.
There is a specialist banking newsletter called The Sheet, edited by Ian Rogers.
Ian Rogers: Rumours are the daily diet of the Stock Market, as indeed is insider trading, and when reporters pick up on rumours and care to relate those rumours, preferably clearly labelled as rumours, and in some relevant context, I think that is legitimate financial journalism. Because one alternative to that is that rumours are known only to fund managers and stockbrokers and others who are closely involved. And others who are not so closely involved are denied access to that information. So to that extent, reporters are doing their job in reporting rumours. The only qualification is that it needs to be done in a judicious and qualified fashion.
Stan Correy: The question is, was it done in a judicious and qualified fashion in the last ten years? And to whom do journalists owe their first allegiance, the public, their contacts, their editors, or their ethics?
Treasury Committee Chairman: Good afternoon, and welcome to this session of the Banking Crisis, the Role of the Media. Can you introduce yourselves please, and where you come from for the shorthand writer, starting with Jeff.
Stan Correy: Early this year, the powerful Treasury Committee of the UK Parliament, met to discuss these very issues. In February, Britain's top financial journalists fronted the panel.
Jeff Randall: Yes, I'm Jeff Randall, I'm here representing Sky and The Daily Telegraph.
Lionel Barber: Lionel Barber; I'm the Editor of The Financial Times.
Robert Peston: I'm Robert Peston, the BBC's Business Editor.
Alex Brummer: I'm Alex Brummer, the City Editor of The Daily Mail.
Simon Jenkins: Simon Jenkins of The Guardian.
Chairman: Good. You are all welcome. Now, many submissions to this inquiry have stressed the importance of maintaining press freedoms, even during periods of financial instability, and that's a sentiment which I share. However, is there a case for journalists to exercise self-restraint and temporarily delay publication of a story, perhaps for a few hours, or a day or two, where there is a risk that immediate publication would trigger widespread market turbulence and lead to the collapse of a particular institution? Robert?
Robert Peston: Well -
Chairman: Sorry, I just picked you at random.
Stan Correy: It was no coincidence that there was nervous laughter in the committee room as the Chair picked on the prestigious Business Editor of the BBC, Robert Peston.
Robert Peston: It seems to me that there are two related issues here. At the risk of sounding slightly pompous and pretentious, it does seem to me there is a -
Mr Fallon: Go on!
Stan Correy: Two years earlier Peston had gone on air to report some financial difficulties at the Northern Rock Bank. His report, some said, caused a run on the bank, forcing the British government to nationalise Northern Rock. Before we go back to the Treasury Committee hearings, here's part of Robert Peston's report on the Northern Rock Bank in September, 2007.
Robert Peston: Northern Rock has been one of the fastest-growing British banks, but it's now set to become famous for reasons it would rather keep quiet. It's become the first bank in years to seek emergency funding from the Bank of England in its role as lender of last resort. Northern Rock's problem is not that it's making colossal losses, or is bust, what it feared is that it could run out of cash. Why? Because in the market turmoil of the past few weeks, investors of other banks have become increasingly reluctant to lend to it. Northern Rock is no pebble...
Stan Correy: After that report there was rush on the bank as the public formed long queues in the streets to get their money out fast, and these images ricocheted around the world. At the Treasury Committee Hearing, Peston answered the question whether he was responsible for the run on the bank.
Robert Peston: There is a public interest in letting millions of people know what's going on with their banks, and what's going on with the economy, and if their banks are weaker than they think to be the case, then there's a public interest in telling them such, and telling them the more general problems we've been experiencing with the economy. Now I can only speak for the BBC, but we do not broadcast, publish on the blog, stuff without giving it huge amounts of thought, obviously going through a massive detailed verification procedure, and I will talk to some senior editors about what we do. But at the moment, where I feel that the story is being nailed down and the wider social public interest is served by publication, of course we just publish.
Stan Correy: Also appearing before the committee was Alex Brummer, the City Editor of The Daily Mail. He's very critical of the BBC reports by Peston, and the Committee Chairman asked him to explain why he took that view. Brummer is these days a little more defensive about his remarks.
Alex Brummer: What I thought was that the tone of the report, rather than the content of the report, may have made people slightly unsure of what's going on. And I think I am still of that view. However, we have to bear in mind here that most of the response, was really the result of the poor systems that Northern Rock had, that they had computers which broke down, and they had very few branches, so the queues built up very, very quickly. And indeed, when I think back on the episode now, I think that actually Robert did everyone a big favour. Because he did them a big favour by alerting small depositors, they were taking a perfectly rational decision to withdraw their own money because what was going on behind the scenes, which none of us could see, was that the big wholesale depositors, the big operators in the money market, were moving their money out by the billions. So they had inside information, they knew what was going down, the small depositors, the small investors didn't. So he alerted them to that.
Stan Correy: Alex Brummer, City Editor of The Daily Mail. And Robert Peston responded.
Robert Peston: Look, I think this is a very delicate issue isn't it? I mean, very difficult for broadcasters, and we're not the only broadcaster, not to show those queues. I think it is also unarguably the case that pictures of the queues did reinforce the concern, of course they did.
Mr Breed: So with the benefit of hindsight, looking back at your actual report and the filming, and what subsequently happened, would you have done anything different?
Robert Peston: I think it's very difficult. I not only said in my broadcast for example, I didn't only refer to deposit protection, I also said the fact that the Bank of England was giving this money, not giving, lending this money to Northern Rock, meant that the immediate danger of a collapse due to a shortage of liquidity, a shortage of funding, was gone. I said that I didn't think this bank would now collapse, as it were. Now it didn't stop people getting very anxious, because of course we hadn't seen a bank rescued in this way by the Bank of England for - well not within people's living memory, as it were, so of course it caused anxiety.
Stan Correy: The images of people lining up to get their money out before it was all gone, reverberated around the world.
Tony Jones: Meanwhile the British government has intervened to halt a run on the Northern Rock Bank in Britain, the country's fifth largest mortgage lender. Customers queued for hours to withdraw money after it was revealed the bank made an application to the Bank of England for emergency funding last week. Account holders have now withdrawn more than $5-billion, or about 8% of the company's total deposits.
Northern Rock client: I wished I'd come earlier than this, because perhaps we've - they're predicting a five hour wait from this point, which is - we're cold, we're fed up, we're not getting much information.
Northern Rock client: I hadn't intended, but the panic sets in and you just wonder where it's going to go.
Stan Correy: The wondering continues. Financial journalists are being attacked from two angles.
During the boom times, they often acted as cheerleaders of the bull market, only reporting the good news, and underplaying any negative sentiment. Indeed so powerful was the climate of the freewheeling, free market ideology, that it was almost sacrilege to question it. Then when there's volatility and the market literally falls in a heap, reporting of bad news could be seen as spreading rumours, or undermining confidence.
From the London School of Economics, Dr Damian Tambini.
Damian Tambini: I do think that when something as serious and consequential as the credit crunch and the financial crisis happens, people do look around for anyone they can possibly blame, and I certainly wouldn't personally start anywhere near Robert Peston. I think at the BBC and prior to that at The Financial Times, he's done a really wonderful job in pointing out some of the contradictions underlying the current financial crisis. Indeed I think we need more Robert Pestons, not less of them.
Stan Correy: Yes, but it's pointing out those contradictions that can get journalists into trouble, I suppose, because given that you've got reporting in a crisis, do you have a different responsibility? Do you approach stories in a different way, or do you continue along the standards that you already have?
Damian Tambini: It is a very difficult question, which is why my view currently is that we need more research on this, we need to bring together working financial and business journalists to have an exchange of ideas on whether the previous regulatory and ethical structure and also professional practices can be continued into this new different world.
Stan Correy: The new technologies have increased the number of financial bloggers, many of them well-informed players in the market, who don't have to pay attention to editors, or house lawyers, or to the financial PR firms.
These bloggers don't have anyone sitting over their shoulders, which can be both a good and a bad thing. Damian Tambini.
Damian Tambini: Now if you ask financial journalists themselves what they do and what they are for, it's quite interesting to find there's a great range of views, there's quite a lot of confusion about that role. Some (this I think is quite revealing) say that their role is to serve investors, in the sense that they provide the information that investors need in order to make investment decisions. So a leading business editor on a national newspaper, said to me 'That is his role, and he knows if he's been successful if those investors have done well.'
Stan Correy: By that standard, financial journalists have failed miserably in the past 18 months, as the value of investments has plummeted. But there is another more sceptical approach to financial journalism.
Damian Tambini: More traditional journalistic view, which is my role as a financial and business journalist, is to hold companies to account and to inform society about financial and business-related issues that may impact them.
Stan Correy: There's a link to Damian Tambini's report on Background Briefing's website.
You can also find information on a conference being held this week in London called 'Why did nobody tell us? Reporting the Global Crash of 2008'.
Over the past four years, the dangers of some of the more complex financial products, like CDOs, have been talked about by Gillian Tett when interviewed by the BBC.
Gillian Tett: I have personally been extremely worried about what was happening for about four years, and I've written a number of pieces on those issues. But what I think the real issue is, is not so much how the media has covered the crisis over the last year, but the fact that during the first seven years of this decade, the vast majority of journalists, and even business journalists, were not covering the financial revolution that was under way, partly because it was seen as rather unfashionable, rather geeky, but also frankly, because bankers and the people who are running the system, didn't want to talk about it very much.
Stan Correy: And if they did talk, the answer would always be, the EMT, a very powerful piece of jargon.
EMT stands for the Efficient Markets Hypothesis and what it means is that the market could in the end do no wrong, and would right itself. There would be 'corrections' and the shares would go up and down, but that was evidence the market was working. Gillian Tett.
Gillian Tett: This has been a fantastically difficult financial crisis to report. It's been fast-moving, it's been multifaceted, it's been very abstract and esoteric, it's not like a war, where you can see battlefields and tanks, and you have human beings, this war, this financial crisis is being fought in cyberspace, for the most part.
BBC interviewer: And do you think it's been covered differently in print than by broadcasting? Because in a sense, it's quite unusual to see broadcast breaking stories in this area.
Gillian Tett: Well what has made this crisis so different from any which have hit the financial world before, has been the immediacy with which the events have been broadcast around the world.
Stan Correy: Gillian Tett of The Financial Times, speaking on the BBC's Media Program late last year.
At the Treasury Committee hearing, there was a lot of talk about the way words are used in business journalism, words like adjustment, correction, or gloom and doom.
Doomsayers are hated, because they make people lose confidence, and in the end confidence is what keeps the boat afloat. You don't use the word 'panic' until it's actually sinking. Here is Lionel Barber, Managing Editor of The Financial Times.
Lionel Barber: We were very careful to avoid using the word 'panic'. We only used it twice. Once was in late September when essentially Wall Street was melting down, and you could see the share prices had crashed through the floor, so we thought that that was justified in a headline. We don't use words like that are emotive, that can clearly have a very destabilising effect on markets, especially if they're written in a paper like The Financial Times.
Stan Correy: September 2008, and the big meltdown on Wall Street. For many years the most authoritative media analysis in the US has been the fake news program, The Daily Show, with Jon Stewart.
Here's how they reported the collapse of Lehman Brothers in that week.
Jon Stewart: How bad can it really be?
George W. Bush: Americans are concerned about the adjustments that are taking place in our financial markets.
Jon Stewart: Oh, it's adjustments. That sounds incredibly minor. I wonder if anyone else has framed the issue differently.
MEDIA BITES;
There was blood on the floor at the end of trading on Wall Street today ...
A financial Tsunami ...
One of the ugliest days I have ever seen ...
Nightmare on Wall Street ...
The atomic bomb ...
Almost Armageddon ...
A nine on the Richter scale ...
Something of a financial hurricane hitting the United States today.
Jon Stewart: So there you go, two different opinions, an apocalypse and adjustments, the state of the American economy lying somewhere between the four horsemen riding steeds and wielding blades of fury over a charred landscape, and something you get at your chiropractor.
That's your rage, America, go confidently and plan your financial future!
Stan Correy: The Columbia Journalism Review has a specialist blog called 'The Audit', which looks at the performance of the business media. Editor of 'The Audit' is Dean Starkman.
Dean Starkman: Actually I think the questions are fairly clear and I want to say that they're really not answered yet. I think the question is fairly simple: Did the business press as an institution provide the public and policymakers with adequate warnings about dangerous practices in the lending industry and in the securitisation business that would have helped put pressure on policymakers to head this off? I want to say that I don't know that they didn't, there's a lot of research to do before we can finally conclude that. But I think that's the question.
Stan Correy: And to answer that question, says Starkman, you have to be clear about what the financial journalist is actually meant to do.
Dean Starkman: Their job is to monitor and report on important and complex institutions and where appropriate, report back warnings to readers. The question is, did they do it? They say they did, a lot of people say they didn't. What's ironic about this argument, and it is an argument, it's a kind of raging in some circles, as to how vigilant the press was, or were they asleep at the switch? The irony about this argument is of course that there's a record out there to be checked; the record is of course what was published and aired over the seven years that preceded the crisis, the crash. The trouble is, the record is huge.
Stan Correy: That record is being pored over right now as the academics, the politicians, the editors and the journalism schools try to figure out the role of the media in the years leading to the current meltdown. But it's not as if there weren't some very large warning signs along the way. For example, in 2001, Enron.
Dean Starkman.
Dean Starkman: The comparison with Enron is kind of interesting, sort of a small-scale of what we're seeing now, what was an extremely complex entity that inflated into essentially a bubble, right? So the stock price became extremely high; a lot of people staked their retirement on it, all sorts of things, and then the business media and of course the analyst community and others, were falling all over themselves to praise this marvel. And sort of similar to what was happening on Wall Street where people forget, from 2002, 2003, through 2006, Wall Street probably had its most profitable era ever. There was a point when Citigroup, this is a bank we're talking about, you know we're not talking about anyone using fancy, Citigroup was the most profitable company in the country. And there's a time when Citigroup was so immensely wealthy and profitable, and that's certainly the point, that's sort of where we rely on analysts yes, but hopefully the media, which has more of an arm's length, and less conflicted relationship with the institutions, to go in and just sort of question how they making all this money. So what are they doing - where is that - where are these profits coming from? And they were huge. So your Enron parallel isn't bad. I mean here were institutions that were extremely complex, and immensely profitable and that's the time when you're sort of relying on knowledgeable people who full time come to work every day to cover these institutions, to ask the right questions.
Stan Correy: Dean Starkman, Editor of The Colombia Journalism Review's business media blog, the Audit. In the last few months, US journalists from newspapers, TV and radio were surveyed on how they covered financial institutions before and after the current crisis.
The survey was conducted by media consultants, Abrams Research, by Rachel Sklar.
Rachel Sklar: The journalists on the whole did tend to say that yes, the media did drop the ball in the lead-up to the crisis. I think that 68% ticking 'yes' for that question, is a significant number, like no question that's not a significant number.
Stan Correy: The journalists didn't only tick the box, they gave some interesting reasons for missing the story.
Rachel Sklar: Some people said that the press was too busy cheerleading, because of the fact that the housing crisis was happening while the stock market prices were still high. So that was a reason there was a lot of cheerleading in the business press, and not enough people taking notes of what was happening in the housing market. The other thing is that the victims, the first victims of the financial crisis were low income home owners, who started getting foreclosed on, so that was just basically a story about poor people, and that doesn't attract as much press attention as say Bernie Madoff. So there was some feedback about the fact that the press ignored the story at first, because all it seemed like were poor people who couldn't pay their bills, rather than the first giant warning sign of a massive world-wide crisis.
WALL STREET MONTAGE:
Reporter: What in the world is happening on Wall Street?
Man: Do you hear no deals, one from 190 to 166 in the blink of an eye ...
Woman: I have never lied, looked at the Dow Jones Industrial board and seen a 600 point loss.
Man: Who knows where this is going to end up? I mean this is volatility ...
Stan Correy: September last year was the cruellest and the weirdest month in global financial history.
Man: ... since 1929. So almost everything there, completely wiped out. And the NASDAQ everything and more has been completely wiped out.
Man: The Dow traders are standing there watching in amazement, and I don't blame then.
Woman: The credit market, 676 points down ...
Man: It was the worst day on Wall Street since the crash of 1987 ...
Man: From the financial capital of the world, the opening bell is going to ring in five seconds, and to be honest with you, we wish it wouldn't.
Woman: Traders here working the phones say a lot of their customers are freaked out, waiting to see how low the Dow will go ...
Stan Correy: In that week, in every market in the world, financial regulators and banks were caught out. What was driving the market down so quickly? Someone or something had to be interfering in the smooth running of the market. The banks blamed the hedge funds for spreading misinformation about their financial viability. And they also blamed the financial media for repeating the rumours put out by the hedge funds.
At the parliamentary Treasury Committee in London, City Editor of The Daily Mail, Alex Brummer, responded to that allegation, saying that many journalists didn't need the help of hedge funds to figure out that something was seriously wrong in British banking.
Alex Brummer: There is no doubt that in the period leading up to that date - have I got the date right here? Hopefully I did September 17th, we would have been asking questions as Robert would have been, as all the journalists on this table would have been, about Halifax Bank of Scotland. There was a known weakness in the way that bank was run, in its book, its exposure to the mortgage market, and in particular its corporate loans, which we all knew about. So we will have reported on some of those problems, and indeed we will have reported about some of its toxic debts and laid that out in the paper because we were getting numbers on a regular basis, so we may have fuelled a knowledge which this short sellers latched onto.
Stan Correy: In recent months, the short sellers in the global market have achieved almost mythical status. So who are they and what do they do? To keep it very simple, they're investors who are hoping that the price of a company will fall. They sell shares in order to drive down the price, and then they buy back the shares at a lower price. Now there are endless variations to this practice and it's driving international regulators mad as they try to control it.
One of the big questions is, are the short sellers, if they belong to a hedge fund, good, bad, or just smarter than the average investor?
Alex Brummer.
Alex Brummer: I actually think the short sellers were probably almost certainly ahead of us in many ways. Many of them took out their short positions months before we knew information about HBOS. I think if you go back to March of that year, I think some of the short positions were set up. March, 2008. So what they have been doing, and I've spent time with hedge funds for instance, on this issue. I went to one hedge fund based overlooking Buckingham Palace actually, almost overlooking Buckingham Palace, where they had an analyst who laid out to me over a luncheon, the pecking order of banks which he thought were in trouble. He'd been through their credit books and he laid it out. And this guy was absolutely right, the pecking order he had of who would go first and in what order. It went Northern Rock was already gone. It went Bradford and Bingley, Alliance & Leicester, HBOS, RBS. That was the order, and he was bang on the money, and their positions were out there on that piece of analysis. They were doing the analysis which the regulator should have been doing, Financial Services Authority, and never did.
Stan Correy: The US banks like their British counterparts also blamed the short sellers. Here's a report from Bloomberg Business News. And there's a warning, it's full of jargon.
Bloomberg Report.
Presenter: Morgan Stanley, one of the big-name financial firms has seen its stock plunge today, and CEO John Mack says short sellers are in part responsible. Short sellers, who essentially bet against the stock are also been blamed for contributing to the collapse of Bear Sterns and Lehman Brothers. Today the SEC said it's adopting a zero tolerance policy against one type of short selling, they call it naked short selling. And Jesse Westberg covers the SEC for us here at Bloomberg. He joins me now here in the studio to talk about this SEC action, and Jesse, first of all thanks very much -
Jesse Westberg: Sure.
Presenter: Remind us what is naked short selling.
Jesse Westberg: Well most of us know what a legitimate short sale is, it's when you borrow stock from your broker, you sell it to someone, and then you buy it back, hopefully buy it back at a lower price, return the shares to your broker and pocket the difference.
Presenter: Nothing wrong with that.
Jesse Westberg: Nothing illegal, nothing - no manipulation there. A naked short sell is different in the sense that you never actually borrow the shares from your broker. Hypothetically you can turbocharge your short sales if you're not borrowing the stock, you can just flood the market with sell orders, and the more sell orders that come in, obviously a stock price goes down, so that's the theory anyway about naked short selling.
Stan Correy: If you find that report as clear as mud, you're not alone.
A few days after the collapse of Lehman Brothers, several Western governments including Australia, banned short selling of shares in financial institutions. Explaining all this at a press conference was Treasurer Wayne Swan, who was between a rock and a hard place, as he had to evade a direct answer to persistent questions by journalist Peter Martin of The Age.
Wayne Swan: Many people in the market then and now, have been lobbying the government and regulators about these issues. There is absolutely nothing unusual about that. In fact, it's the way you would want it to be. You would want decisions that are taken like this to be decisions which have been discussed at length with industry.
Peter Martin: So you said, just to be clear, Macquarie was one of those organisations?
Wayne Swan: I spoke to a large number of organisations ...
Peter Martin: Including Macquarie?
Wayne Swan: I'm not buying into who I spoke to over the weekend. I spoke to a large number of organisations over the weekend. In any one week since event commenced on 1st January, I would have had regular conversations with CEOs of most of the major financial services corporations in this country, and I'll continue to do it.
Peter Martin: You see the point of the question that they're the only beneficiary, they're the only big beneficiary of the short selling.
Wayne Swan: I'm sorry, that is a completely absurd characterisation which doesn't reflect well on your good self. The fact is that this was a very substantial decision about the integrity of our market. In an environment where serious regulators around the world were moving to take very substantial decisions, and they were markets in which Macquarie Bank or any of our banks were not big players. So these were decisions being implemented around the world.
Stan Correy: The Treasurer, Wayne Swan, responding to questions on banning short selling of shares in financial institutions.
Those bans were lifted recently in the US and Britain, but will remain in place here for a few more weeks.
Macquarie Bank said last year that market rumours that they were having difficulty refinancing $45-billion of debt were false. And ASIC, our financial regulator announced that it was looking into those alleged false rumours about a number of companies, including the Macquarie Group.
Ian Rogers, editor of the banking newsletter, The Sheet.
Ian Rogers: Macquarie Bank was certainly extremely upset about that at the time. But one antidote to that is for Macquarie to address the rumours and to respond to what's being reported in the media. At the time it irritated them, but I think they managed to respond and put their side of the story.
So the difficulty is that if there were an attempt to limit what recognised I suppose media outlets were able to report, for example, in the Macquarie type episode, that would still leave hundreds or thousands of others who are involved in the market who would be familiar with the rumours. So that kind of regulatory approach serves to create a privileged class of recipients of information and to deny a wider audience access to that information.
Stan Correy: Ian Rogers.
The market has many audiences and lots of competing messages, and those messages are not getting any easier to understand. The complexities and volatility still remain.
Back in London, at the UK Parliamentary Committee, Simon Jenkins of The Guardian says the media is working within two polar extremes in reporting the financial crisis.
Simon Jenkins: I just think this whole conversation is about an organic whole which is called a market. At one end of the market is the Chancellor of the Exchequer. At the other end of the market is a crowd running down the street screaming, 'Panic'! And we're all part of that, including the press, if you're asking me would I rather trust the Chancellor of the Exchequer or the mob running down the street shouting 'Panic!', I'd rather trust the mob, because it's more likely to be telling the truth. And the closer you get to the mob, and we are quite close to the mob, I frankly believe we're more likely to be telling you the truth. If you want to sit here and ask the Chancellor of the Exchequer all these questions, I don't think you'd get a very clear answer.
Stan Correy: The answer may be more complicated when it comes to talking and writing about money.
Satyajit Das.
Satyajit Das: I think there's a lot of groupthink in financial markets and in popular media. And I think there's a very, very interesting dynamic that plays out here. I think generally as a society, we want to portray certain things in certain lights. We think about ourselves as an advanced civilisation which can control things, and I think that in the last 15, 20 years in financial reporting, I think we've tried to always give the idea of a glittering, very sophisticated, masters-of-the-universe type of picture. And that, I think, has seduced everybody, seduced certainly the people in the industry, seduced investors, it certainly seduced the journalists and it's even seduced the regulators. So I think there's a lot of groupthink, and it takes somebody quite exceptional to stand outside that and scream repeatedly that the emperor has no clothes on, and I'm sure certain people did that. But also they're often ignored. The other issue here which is kind of important to put into context, particularly for non public broadcasters, banks have contributed enormous amounts of advertising revenue, so in many ways basic coverage of that particular set of products, or a particular set of transactions has been completed, as very important to enhancing the actual status, the position of a particular financial institution. And obviously they've advertised happily in these papers and so forth. So under those circumstances, there is some degree of commercial pressure in terms of the editorial coverage. I'm not saying it's in any way corrupt but there is pressure. And so you try to embrace or you tend to embrace the group thing a lot more easily and readily. And frankly, it also has something to do with the times. I think Walter Bagott once remarked that people are most credulous when they're making money, and you're now talking about a period of time, and the good times are well and truly rolling, and everybody is making money. Under those circumstances, I don't think anybody really questioned very much, at least the bulk of people didn't.
Reporter: ... Frankfurt is down by 9%, the Paris market down by 9%; Austria which was briefly suspended earlier on in the day, is down by nearly 11%.
Reporter: This market is as volatile as you'll ever see.
Reporter: Traders say this is the craziest day they have ever seen in these markets. Veteran traders ay they've never seen anything like it. The movement is ...
THEME
Stan Correy: Background Briefing's Co-ordinating Producer is Linda McGinnis. Research by Anna Whitfeld. Technical producer, Mark Don. The Executive Producer is Kirsten Garrett. I'm Stan Correy and this is ABC Radio National.
Reporter: Trading did not disappoint, 400 points higher yesterday, the market's more high the last 40 minutes of trading as volatility once again ruled the day.
Reporter: Most of the techs this morning, if not all of them, have just exploded to the upside; we are better than 5% to the upside ...
Stan Correy: Remember the decade of the credit bubble? Money flowed freely, fortunes were made, and there was dancing all around.
SONG: Let's face the music and dance
Stan Correy: Then, 18 months ago, the whole house of cards began to look unstable. But the music went on, and the former head of Citigroup, a bank now a shadow of its former self, was still telling The Financial Times:
Reader: As long as the music is playing, you've got to get up and dance. We're still dancing.
Stan Correy: Hello, I'm Stan Correy and this is Background Briefing on ABC Radio National.
Now the music has long stopped; the world is in deep economic trouble and everyone is asking how did it go so wrong, and why didn't anyone spot it earlier?
Behind the façade was a hollow shell of dodgy contracts, toxic debt, fraud, lies, and a dash of corruption, all allowed to flourish because of poor regulations and greed.
Where were the watchdogs? What was the media doing all that time? This week in London, there's even a conference called 'Why did nobody tell us? Reporting the global crash of 2008.'
There are now some very interesting questions about the role of the media, especially the business media. Is it supposed to be a messenger between business and the public, or is it a watchdog on behalf of the public? Does it have a responsibility not to write bad news stories, because that could lead to a loss of confidence, and the whole edifice is built on confidence.
Monitoring the business media for The Columbia Journalism Review, Dean Starkman.
Dean Starkman: Most of the time the media presents itself as more than a messenger, but as a watchdog, and that's exactly what it is. It does have an oversight or watchdog responsibility over these institutions and markets, and so now we're sort of left with the situation where the institutions and markets that they were watching over, have collapsed. So yes, it's time to ask some questions.
Stan Correy: These questions aren't new. They were asked by none other than the author of the novel Robinson Crusoe, Daniel Defoe, way back in the 1700s. He was also a journalist, one of the first business journalists, and here's what he wrote in 1719.
Reader: 'Tis a trade found in Fraud, born of Deceit, and nourished by Trick, Cheat, Wheedle, Forgeries, Falsehoods and all sorts of Delusions; Coining false News, this way good, that way bad; whispering imaginary Terrors, Frights, Hopes, Expectations, and then preying upon the Weakness of those, whose Imaginations they have wrought upon, whom they have either elevated or depress'd. If they meet with a Cull, a younger Dealer that has Money to lay out, they catch him at the Door, whisper to him, Sir, here is a great piece of News, it is not yet publick, it is worth a Thousand Guineas but to mention it:
MUSIC
Stan Correy: This is the kind of music playing in the London streets and theatres, as the financial bubble of the early 1720s deflated.
Much has been written about the various financial bubbles over time, and the subsequent busts. Journalist, investor and author, on the phone from Boston, Edward Chancellor.
Edward Chancellor: There was a lot of coverage in various newspapers and having read many of those newspapers when writing about the South Sea bubble, I'd say by and large the newspaper coverage was pretty sceptical of the bubble and was pretty good at revealing the excesses of behaviour, the psychological excesses, the greed or the irrationality of the investors, and also people who were promoting the South Sea bubble, frauds, Ponzi schemes if you will, from a very early stage. And I think Defoe, who was a journalist, a businessman and author, was one of the most prominent critics of the South Sea bubble, and exposed it as what he called a chimera, something that would disappear. And Defoe was the sharpest critic of stock jobbers as they were called in those days, of speculators, and of men in the City of London who were profiting form the trade in shares. In fact he wrote a pamphlet called The Villainy of the Stock Jobbers Detected.
Reader: How often did the Gentlemen run down true News as if it had been false, and run up false News as if it had been true. In a word, the putting false News upon us is nothing but an old Trade reviv'd.
Stan Correy: Almost 300 years later, the blurring between 'true news' and 'false news' is still a critical issue in financial markets. For the past 20 years, Sydney business journalist and columnist Michael West, has had an ear to the ground and written widely on the world of high finance.
In his flat in Sydney, not far from the beach, Michael West says journalists do have a very fine line to tread.
Michael West: Well for years I went through many examples, very long lunches with extremely expensive bottles of wine, trips to big sporting events, gifts, and that kind of thing. Because I find that actually a bit of a conflict personally, I'm not didactic about what other people should do, but I don't accept any gifts, and rarely go to lunch; lunch is probably OK, but no more sporting events and that kind of thing, because it is hard to write an objective piece about a corporation or about high profile executives if you've been drinking fine chardonnay at the one-day cricket with them for four hours, and suddenly something blows up the following week, or at any stage. These human interactions have a terrific potency to finance journalists, so the commentators in particular are targeted at a personal level, in order to write nice things or to be amenable to taking phone calls to allow the other side of the argument, or whatever, which is fine, the other side should be put. But it is excessive; the level of financial PR is absolutely excessive now in the media.
Stan Correy: Journalists have a strange relationship with PR people and lobbyists. On the one hand they have to listen because they need all the information they can get, but at the same time they have to try not to become captive to their informants.
Under the pressure of deadlines, the news can become warped. Last year, the University of Cardiff's media school produced a study which showed that 38% of business stories in the national quality newspapers of Britain were based on press releases. For broadcasters, the figure was 32%.
Getting independent sources of information in the world of business can be tricky, says Michael West.
Michael West: The other thing is of course, that as a financial journalist you follow the opinions and the arguments of people who are experts in their field, and I think if you look at all the experts, they are all personally invested as well. All the market economists that work for the big four banks and the other banks, all the strategists that work for the investment banks, they're supposed to be independent, but they're hardly independent because they're too personally invested. So most of them are in fact closer to cheerleaders than they are to independent analysts.
Stan Correy: Not particularly comforting to those who rely on the media for information on how to invest their savings or prepare for retirement.
Michael West: At the beginning of every recession, like the one we're entering right at the moment, look at all their growth forecasts, they're all around 3% a year ago; they pulled them back to 2% six months ago, and now they're going to 1% and finally a couple of them are saying 'recession'. But effectively at the 11th hour they change recommendations. And they're all in a pack. Now, why are they all in a pack? They're all in a pack because none want to venture outside the pack, because none of them want to be seen to be talking down the market.
7:30 Report THEME
Kerry O'Brien: Welcome to the program, and first to the near collapse of one of Australia's most prestigious investment banks.
The large Australian investment conglomerate, Babcock & Brown today announced its Chairman and Chief Executive have stepped down following a collapse in the share price amidst growing investor concerns over the company's future.
Stan Correy: That was August last year. Four months earlier, Michael West was already beginning to get suspicious about Babcock & Brown's financial position.
Michael West: I went to the press conference for the Babcock & Brown results. There was hundreds of pages of glossy tables and documents and graphs and pie-charts, and everything looked so magnificent. It was very difficult to poke a hole in any of it. Then you read through and keep on reading and so on. I wrote quite a positive piece; I've always suspected that Babcock would blow up and had always written as much. But on the strength of these results early last year, it seemed that they had plenty of cash, the debt situation was under control and so on. Now it was only days afterwards when with a contact, we discovered that if you put the two annual reports together, because the changed the wording in different annual reports, it all complies supposedly with the law, but suddenly there were all these loans between the satellites and the parent companies, which were leveraged, and hadn't been disclosed in plain English. They were buried in the footnotes. You had to look at two different annual reports to establish this was going on, and they changed the language in each one, so it was difficult to see like for like.
Now for a guy that hasn't been trained in balance sheets, that took me quite a while to work that out, and it was subsequently quite a strong story. and everything that you want to know is buried, is interred deep in the fine print of these documents, and often you have to have more than one document to work out what's going on; which means if you've got to write a story every day like I do, I mean how do you find five hours, maybe three days, to go through that? You rely on contacts, so who you choose for your contacts I think is particularly important.
Stan Correy: And how do the contacts in the markets view the expertise of the financial journalists?
Former investment banker and author of Traders, Guns and Money, Satyajit Das.
Satyajit Das: I think the financial journalist role does change, and to a large extent one of the big issues with financial journalists, is often they're not well placed to understand the minutiae of the business they're covering. They may know something about economics, they may know something superficially about finance, but they're highly unlikely to be specialists, which means that they're actually captive to the people they talk to. And they have to protect these sources, they have to cultivate these sources. But the sources themselves are interesting; the sources who are clever know that the journalist will sometimes repeat verbatim what they've said, and so it give them the opportunity to get things into the newspapers, or into the press, which helps them in terms of the way they want certain events to be shaped and seen. And you can just see this in terms of the stories that you see. Often when I read things, I find myself asking why is that particularly story there? And there might be something about that. And I think Donald Rumsfeld once summed it up pretty astutely. He said, 'Anyone who knows anything isn't talking, anyone with any sense isn't talking'. Therefore the people that are talking to the media, by definition, are people who don't know anything, or people who don't have a hell of a lot of sense. And that sometimes sums up pretty much what's going on between people in financial markets, and financial journalists.
Stan Correy: How journalists convey and obtain information about the market and financial institutions is now a matter of significant international interest.
The London School of Economics, and a private think-tank, reported on it last November. And one of the concerns mentioned was the powerful role of public relations in infiltrating the media. About 30 leading business editors in New York, Hong Kong and London were interviewed. From the LSE, Dr Damian Tambini.
Damian Tambini: We found when speaking to financial journalists, that they were in broad agreement that there are a number of really fundamental challenges which prevent them doing their job. The challenges of increased complexity, and I think there's a related problem of speed, the 24 hour news cycle, blogging. Journalists are under an enormous amount of pressure to get more stories out more quickly, and that means less editorial oversight, and less of an ability to deal with these complex stories in an effective way.
Stan Correy: The complexities are legion. Very few people really understand hedge funds, for instance, or the lexicon of jargon thrown out by financial institutions: securitization, short selling, the infamous CDOs, SIVS, Structured Investment Vehicles; CPDOs, and CDSs, Credit Default Swaps.
And then there are the rumours and whispers. Some are genuine, others are planted. the planting of false rumours has coined a new word, 'Rumourtrage', used in order to bring down the prices of shares so that a buyer can get in at a low price.
In Australia, our securities regulator, ASIC, has a special taskforce investigating the incidence of 'rumourtrage' in our markets.
There is a specialist banking newsletter called The Sheet, edited by Ian Rogers.
Ian Rogers: Rumours are the daily diet of the Stock Market, as indeed is insider trading, and when reporters pick up on rumours and care to relate those rumours, preferably clearly labelled as rumours, and in some relevant context, I think that is legitimate financial journalism. Because one alternative to that is that rumours are known only to fund managers and stockbrokers and others who are closely involved. And others who are not so closely involved are denied access to that information. So to that extent, reporters are doing their job in reporting rumours. The only qualification is that it needs to be done in a judicious and qualified fashion.
Stan Correy: The question is, was it done in a judicious and qualified fashion in the last ten years? And to whom do journalists owe their first allegiance, the public, their contacts, their editors, or their ethics?
Treasury Committee Chairman: Good afternoon, and welcome to this session of the Banking Crisis, the Role of the Media. Can you introduce yourselves please, and where you come from for the shorthand writer, starting with Jeff.
Stan Correy: Early this year, the powerful Treasury Committee of the UK Parliament, met to discuss these very issues. In February, Britain's top financial journalists fronted the panel.
Jeff Randall: Yes, I'm Jeff Randall, I'm here representing Sky and The Daily Telegraph.
Lionel Barber: Lionel Barber; I'm the Editor of The Financial Times.
Robert Peston: I'm Robert Peston, the BBC's Business Editor.
Alex Brummer: I'm Alex Brummer, the City Editor of The Daily Mail.
Simon Jenkins: Simon Jenkins of The Guardian.
Chairman: Good. You are all welcome. Now, many submissions to this inquiry have stressed the importance of maintaining press freedoms, even during periods of financial instability, and that's a sentiment which I share. However, is there a case for journalists to exercise self-restraint and temporarily delay publication of a story, perhaps for a few hours, or a day or two, where there is a risk that immediate publication would trigger widespread market turbulence and lead to the collapse of a particular institution? Robert?
Robert Peston: Well -
Chairman: Sorry, I just picked you at random.
Stan Correy: It was no coincidence that there was nervous laughter in the committee room as the Chair picked on the prestigious Business Editor of the BBC, Robert Peston.
Robert Peston: It seems to me that there are two related issues here. At the risk of sounding slightly pompous and pretentious, it does seem to me there is a -
Mr Fallon: Go on!
Stan Correy: Two years earlier Peston had gone on air to report some financial difficulties at the Northern Rock Bank. His report, some said, caused a run on the bank, forcing the British government to nationalise Northern Rock. Before we go back to the Treasury Committee hearings, here's part of Robert Peston's report on the Northern Rock Bank in September, 2007.
Robert Peston: Northern Rock has been one of the fastest-growing British banks, but it's now set to become famous for reasons it would rather keep quiet. It's become the first bank in years to seek emergency funding from the Bank of England in its role as lender of last resort. Northern Rock's problem is not that it's making colossal losses, or is bust, what it feared is that it could run out of cash. Why? Because in the market turmoil of the past few weeks, investors of other banks have become increasingly reluctant to lend to it. Northern Rock is no pebble...
Stan Correy: After that report there was rush on the bank as the public formed long queues in the streets to get their money out fast, and these images ricocheted around the world. At the Treasury Committee Hearing, Peston answered the question whether he was responsible for the run on the bank.
Robert Peston: There is a public interest in letting millions of people know what's going on with their banks, and what's going on with the economy, and if their banks are weaker than they think to be the case, then there's a public interest in telling them such, and telling them the more general problems we've been experiencing with the economy. Now I can only speak for the BBC, but we do not broadcast, publish on the blog, stuff without giving it huge amounts of thought, obviously going through a massive detailed verification procedure, and I will talk to some senior editors about what we do. But at the moment, where I feel that the story is being nailed down and the wider social public interest is served by publication, of course we just publish.
Stan Correy: Also appearing before the committee was Alex Brummer, the City Editor of The Daily Mail. He's very critical of the BBC reports by Peston, and the Committee Chairman asked him to explain why he took that view. Brummer is these days a little more defensive about his remarks.
Alex Brummer: What I thought was that the tone of the report, rather than the content of the report, may have made people slightly unsure of what's going on. And I think I am still of that view. However, we have to bear in mind here that most of the response, was really the result of the poor systems that Northern Rock had, that they had computers which broke down, and they had very few branches, so the queues built up very, very quickly. And indeed, when I think back on the episode now, I think that actually Robert did everyone a big favour. Because he did them a big favour by alerting small depositors, they were taking a perfectly rational decision to withdraw their own money because what was going on behind the scenes, which none of us could see, was that the big wholesale depositors, the big operators in the money market, were moving their money out by the billions. So they had inside information, they knew what was going down, the small depositors, the small investors didn't. So he alerted them to that.
Stan Correy: Alex Brummer, City Editor of The Daily Mail. And Robert Peston responded.
Robert Peston: Look, I think this is a very delicate issue isn't it? I mean, very difficult for broadcasters, and we're not the only broadcaster, not to show those queues. I think it is also unarguably the case that pictures of the queues did reinforce the concern, of course they did.
Mr Breed: So with the benefit of hindsight, looking back at your actual report and the filming, and what subsequently happened, would you have done anything different?
Robert Peston: I think it's very difficult. I not only said in my broadcast for example, I didn't only refer to deposit protection, I also said the fact that the Bank of England was giving this money, not giving, lending this money to Northern Rock, meant that the immediate danger of a collapse due to a shortage of liquidity, a shortage of funding, was gone. I said that I didn't think this bank would now collapse, as it were. Now it didn't stop people getting very anxious, because of course we hadn't seen a bank rescued in this way by the Bank of England for - well not within people's living memory, as it were, so of course it caused anxiety.
Stan Correy: The images of people lining up to get their money out before it was all gone, reverberated around the world.
Tony Jones: Meanwhile the British government has intervened to halt a run on the Northern Rock Bank in Britain, the country's fifth largest mortgage lender. Customers queued for hours to withdraw money after it was revealed the bank made an application to the Bank of England for emergency funding last week. Account holders have now withdrawn more than $5-billion, or about 8% of the company's total deposits.
Northern Rock client: I wished I'd come earlier than this, because perhaps we've - they're predicting a five hour wait from this point, which is - we're cold, we're fed up, we're not getting much information.
Northern Rock client: I hadn't intended, but the panic sets in and you just wonder where it's going to go.
Stan Correy: The wondering continues. Financial journalists are being attacked from two angles.
During the boom times, they often acted as cheerleaders of the bull market, only reporting the good news, and underplaying any negative sentiment. Indeed so powerful was the climate of the freewheeling, free market ideology, that it was almost sacrilege to question it. Then when there's volatility and the market literally falls in a heap, reporting of bad news could be seen as spreading rumours, or undermining confidence.
From the London School of Economics, Dr Damian Tambini.
Damian Tambini: I do think that when something as serious and consequential as the credit crunch and the financial crisis happens, people do look around for anyone they can possibly blame, and I certainly wouldn't personally start anywhere near Robert Peston. I think at the BBC and prior to that at The Financial Times, he's done a really wonderful job in pointing out some of the contradictions underlying the current financial crisis. Indeed I think we need more Robert Pestons, not less of them.
Stan Correy: Yes, but it's pointing out those contradictions that can get journalists into trouble, I suppose, because given that you've got reporting in a crisis, do you have a different responsibility? Do you approach stories in a different way, or do you continue along the standards that you already have?
Damian Tambini: It is a very difficult question, which is why my view currently is that we need more research on this, we need to bring together working financial and business journalists to have an exchange of ideas on whether the previous regulatory and ethical structure and also professional practices can be continued into this new different world.
Stan Correy: The new technologies have increased the number of financial bloggers, many of them well-informed players in the market, who don't have to pay attention to editors, or house lawyers, or to the financial PR firms.
These bloggers don't have anyone sitting over their shoulders, which can be both a good and a bad thing. Damian Tambini.
Damian Tambini: Now if you ask financial journalists themselves what they do and what they are for, it's quite interesting to find there's a great range of views, there's quite a lot of confusion about that role. Some (this I think is quite revealing) say that their role is to serve investors, in the sense that they provide the information that investors need in order to make investment decisions. So a leading business editor on a national newspaper, said to me 'That is his role, and he knows if he's been successful if those investors have done well.'
Stan Correy: By that standard, financial journalists have failed miserably in the past 18 months, as the value of investments has plummeted. But there is another more sceptical approach to financial journalism.
Damian Tambini: More traditional journalistic view, which is my role as a financial and business journalist, is to hold companies to account and to inform society about financial and business-related issues that may impact them.
Stan Correy: There's a link to Damian Tambini's report on Background Briefing's website.
You can also find information on a conference being held this week in London called 'Why did nobody tell us? Reporting the Global Crash of 2008'.
Over the past four years, the dangers of some of the more complex financial products, like CDOs, have been talked about by Gillian Tett when interviewed by the BBC.
Gillian Tett: I have personally been extremely worried about what was happening for about four years, and I've written a number of pieces on those issues. But what I think the real issue is, is not so much how the media has covered the crisis over the last year, but the fact that during the first seven years of this decade, the vast majority of journalists, and even business journalists, were not covering the financial revolution that was under way, partly because it was seen as rather unfashionable, rather geeky, but also frankly, because bankers and the people who are running the system, didn't want to talk about it very much.
Stan Correy: And if they did talk, the answer would always be, the EMT, a very powerful piece of jargon.
EMT stands for the Efficient Markets Hypothesis and what it means is that the market could in the end do no wrong, and would right itself. There would be 'corrections' and the shares would go up and down, but that was evidence the market was working. Gillian Tett.
Gillian Tett: This has been a fantastically difficult financial crisis to report. It's been fast-moving, it's been multifaceted, it's been very abstract and esoteric, it's not like a war, where you can see battlefields and tanks, and you have human beings, this war, this financial crisis is being fought in cyberspace, for the most part.
BBC interviewer: And do you think it's been covered differently in print than by broadcasting? Because in a sense, it's quite unusual to see broadcast breaking stories in this area.
Gillian Tett: Well what has made this crisis so different from any which have hit the financial world before, has been the immediacy with which the events have been broadcast around the world.
Stan Correy: Gillian Tett of The Financial Times, speaking on the BBC's Media Program late last year.
At the Treasury Committee hearing, there was a lot of talk about the way words are used in business journalism, words like adjustment, correction, or gloom and doom.
Doomsayers are hated, because they make people lose confidence, and in the end confidence is what keeps the boat afloat. You don't use the word 'panic' until it's actually sinking. Here is Lionel Barber, Managing Editor of The Financial Times.
Lionel Barber: We were very careful to avoid using the word 'panic'. We only used it twice. Once was in late September when essentially Wall Street was melting down, and you could see the share prices had crashed through the floor, so we thought that that was justified in a headline. We don't use words like that are emotive, that can clearly have a very destabilising effect on markets, especially if they're written in a paper like The Financial Times.
Stan Correy: September 2008, and the big meltdown on Wall Street. For many years the most authoritative media analysis in the US has been the fake news program, The Daily Show, with Jon Stewart.
Here's how they reported the collapse of Lehman Brothers in that week.
Jon Stewart: How bad can it really be?
George W. Bush: Americans are concerned about the adjustments that are taking place in our financial markets.
Jon Stewart: Oh, it's adjustments. That sounds incredibly minor. I wonder if anyone else has framed the issue differently.
MEDIA BITES;
There was blood on the floor at the end of trading on Wall Street today ...
A financial Tsunami ...
One of the ugliest days I have ever seen ...
Nightmare on Wall Street ...
The atomic bomb ...
Almost Armageddon ...
A nine on the Richter scale ...
Something of a financial hurricane hitting the United States today.
Jon Stewart: So there you go, two different opinions, an apocalypse and adjustments, the state of the American economy lying somewhere between the four horsemen riding steeds and wielding blades of fury over a charred landscape, and something you get at your chiropractor.
That's your rage, America, go confidently and plan your financial future!
Stan Correy: The Columbia Journalism Review has a specialist blog called 'The Audit', which looks at the performance of the business media. Editor of 'The Audit' is Dean Starkman.
Dean Starkman: Actually I think the questions are fairly clear and I want to say that they're really not answered yet. I think the question is fairly simple: Did the business press as an institution provide the public and policymakers with adequate warnings about dangerous practices in the lending industry and in the securitisation business that would have helped put pressure on policymakers to head this off? I want to say that I don't know that they didn't, there's a lot of research to do before we can finally conclude that. But I think that's the question.
Stan Correy: And to answer that question, says Starkman, you have to be clear about what the financial journalist is actually meant to do.
Dean Starkman: Their job is to monitor and report on important and complex institutions and where appropriate, report back warnings to readers. The question is, did they do it? They say they did, a lot of people say they didn't. What's ironic about this argument, and it is an argument, it's a kind of raging in some circles, as to how vigilant the press was, or were they asleep at the switch? The irony about this argument is of course that there's a record out there to be checked; the record is of course what was published and aired over the seven years that preceded the crisis, the crash. The trouble is, the record is huge.
Stan Correy: That record is being pored over right now as the academics, the politicians, the editors and the journalism schools try to figure out the role of the media in the years leading to the current meltdown. But it's not as if there weren't some very large warning signs along the way. For example, in 2001, Enron.
Dean Starkman.
Dean Starkman: The comparison with Enron is kind of interesting, sort of a small-scale of what we're seeing now, what was an extremely complex entity that inflated into essentially a bubble, right? So the stock price became extremely high; a lot of people staked their retirement on it, all sorts of things, and then the business media and of course the analyst community and others, were falling all over themselves to praise this marvel. And sort of similar to what was happening on Wall Street where people forget, from 2002, 2003, through 2006, Wall Street probably had its most profitable era ever. There was a point when Citigroup, this is a bank we're talking about, you know we're not talking about anyone using fancy, Citigroup was the most profitable company in the country. And there's a time when Citigroup was so immensely wealthy and profitable, and that's certainly the point, that's sort of where we rely on analysts yes, but hopefully the media, which has more of an arm's length, and less conflicted relationship with the institutions, to go in and just sort of question how they making all this money. So what are they doing - where is that - where are these profits coming from? And they were huge. So your Enron parallel isn't bad. I mean here were institutions that were extremely complex, and immensely profitable and that's the time when you're sort of relying on knowledgeable people who full time come to work every day to cover these institutions, to ask the right questions.
Stan Correy: Dean Starkman, Editor of The Colombia Journalism Review's business media blog, the Audit. In the last few months, US journalists from newspapers, TV and radio were surveyed on how they covered financial institutions before and after the current crisis.
The survey was conducted by media consultants, Abrams Research, by Rachel Sklar.
Rachel Sklar: The journalists on the whole did tend to say that yes, the media did drop the ball in the lead-up to the crisis. I think that 68% ticking 'yes' for that question, is a significant number, like no question that's not a significant number.
Stan Correy: The journalists didn't only tick the box, they gave some interesting reasons for missing the story.
Rachel Sklar: Some people said that the press was too busy cheerleading, because of the fact that the housing crisis was happening while the stock market prices were still high. So that was a reason there was a lot of cheerleading in the business press, and not enough people taking notes of what was happening in the housing market. The other thing is that the victims, the first victims of the financial crisis were low income home owners, who started getting foreclosed on, so that was just basically a story about poor people, and that doesn't attract as much press attention as say Bernie Madoff. So there was some feedback about the fact that the press ignored the story at first, because all it seemed like were poor people who couldn't pay their bills, rather than the first giant warning sign of a massive world-wide crisis.
WALL STREET MONTAGE:
Reporter: What in the world is happening on Wall Street?
Man: Do you hear no deals, one from 190 to 166 in the blink of an eye ...
Woman: I have never lied, looked at the Dow Jones Industrial board and seen a 600 point loss.
Man: Who knows where this is going to end up? I mean this is volatility ...
Stan Correy: September last year was the cruellest and the weirdest month in global financial history.
Man: ... since 1929. So almost everything there, completely wiped out. And the NASDAQ everything and more has been completely wiped out.
Man: The Dow traders are standing there watching in amazement, and I don't blame then.
Woman: The credit market, 676 points down ...
Man: It was the worst day on Wall Street since the crash of 1987 ...
Man: From the financial capital of the world, the opening bell is going to ring in five seconds, and to be honest with you, we wish it wouldn't.
Woman: Traders here working the phones say a lot of their customers are freaked out, waiting to see how low the Dow will go ...
Stan Correy: In that week, in every market in the world, financial regulators and banks were caught out. What was driving the market down so quickly? Someone or something had to be interfering in the smooth running of the market. The banks blamed the hedge funds for spreading misinformation about their financial viability. And they also blamed the financial media for repeating the rumours put out by the hedge funds.
At the parliamentary Treasury Committee in London, City Editor of The Daily Mail, Alex Brummer, responded to that allegation, saying that many journalists didn't need the help of hedge funds to figure out that something was seriously wrong in British banking.
Alex Brummer: There is no doubt that in the period leading up to that date - have I got the date right here? Hopefully I did September 17th, we would have been asking questions as Robert would have been, as all the journalists on this table would have been, about Halifax Bank of Scotland. There was a known weakness in the way that bank was run, in its book, its exposure to the mortgage market, and in particular its corporate loans, which we all knew about. So we will have reported on some of those problems, and indeed we will have reported about some of its toxic debts and laid that out in the paper because we were getting numbers on a regular basis, so we may have fuelled a knowledge which this short sellers latched onto.
Stan Correy: In recent months, the short sellers in the global market have achieved almost mythical status. So who are they and what do they do? To keep it very simple, they're investors who are hoping that the price of a company will fall. They sell shares in order to drive down the price, and then they buy back the shares at a lower price. Now there are endless variations to this practice and it's driving international regulators mad as they try to control it.
One of the big questions is, are the short sellers, if they belong to a hedge fund, good, bad, or just smarter than the average investor?
Alex Brummer.
Alex Brummer: I actually think the short sellers were probably almost certainly ahead of us in many ways. Many of them took out their short positions months before we knew information about HBOS. I think if you go back to March of that year, I think some of the short positions were set up. March, 2008. So what they have been doing, and I've spent time with hedge funds for instance, on this issue. I went to one hedge fund based overlooking Buckingham Palace actually, almost overlooking Buckingham Palace, where they had an analyst who laid out to me over a luncheon, the pecking order of banks which he thought were in trouble. He'd been through their credit books and he laid it out. And this guy was absolutely right, the pecking order he had of who would go first and in what order. It went Northern Rock was already gone. It went Bradford and Bingley, Alliance & Leicester, HBOS, RBS. That was the order, and he was bang on the money, and their positions were out there on that piece of analysis. They were doing the analysis which the regulator should have been doing, Financial Services Authority, and never did.
Stan Correy: The US banks like their British counterparts also blamed the short sellers. Here's a report from Bloomberg Business News. And there's a warning, it's full of jargon.
Bloomberg Report.
Presenter: Morgan Stanley, one of the big-name financial firms has seen its stock plunge today, and CEO John Mack says short sellers are in part responsible. Short sellers, who essentially bet against the stock are also been blamed for contributing to the collapse of Bear Sterns and Lehman Brothers. Today the SEC said it's adopting a zero tolerance policy against one type of short selling, they call it naked short selling. And Jesse Westberg covers the SEC for us here at Bloomberg. He joins me now here in the studio to talk about this SEC action, and Jesse, first of all thanks very much -
Jesse Westberg: Sure.
Presenter: Remind us what is naked short selling.
Jesse Westberg: Well most of us know what a legitimate short sale is, it's when you borrow stock from your broker, you sell it to someone, and then you buy it back, hopefully buy it back at a lower price, return the shares to your broker and pocket the difference.
Presenter: Nothing wrong with that.
Jesse Westberg: Nothing illegal, nothing - no manipulation there. A naked short sell is different in the sense that you never actually borrow the shares from your broker. Hypothetically you can turbocharge your short sales if you're not borrowing the stock, you can just flood the market with sell orders, and the more sell orders that come in, obviously a stock price goes down, so that's the theory anyway about naked short selling.
Stan Correy: If you find that report as clear as mud, you're not alone.
A few days after the collapse of Lehman Brothers, several Western governments including Australia, banned short selling of shares in financial institutions. Explaining all this at a press conference was Treasurer Wayne Swan, who was between a rock and a hard place, as he had to evade a direct answer to persistent questions by journalist Peter Martin of The Age.
Wayne Swan: Many people in the market then and now, have been lobbying the government and regulators about these issues. There is absolutely nothing unusual about that. In fact, it's the way you would want it to be. You would want decisions that are taken like this to be decisions which have been discussed at length with industry.
Peter Martin: So you said, just to be clear, Macquarie was one of those organisations?
Wayne Swan: I spoke to a large number of organisations ...
Peter Martin: Including Macquarie?
Wayne Swan: I'm not buying into who I spoke to over the weekend. I spoke to a large number of organisations over the weekend. In any one week since event commenced on 1st January, I would have had regular conversations with CEOs of most of the major financial services corporations in this country, and I'll continue to do it.
Peter Martin: You see the point of the question that they're the only beneficiary, they're the only big beneficiary of the short selling.
Wayne Swan: I'm sorry, that is a completely absurd characterisation which doesn't reflect well on your good self. The fact is that this was a very substantial decision about the integrity of our market. In an environment where serious regulators around the world were moving to take very substantial decisions, and they were markets in which Macquarie Bank or any of our banks were not big players. So these were decisions being implemented around the world.
Stan Correy: The Treasurer, Wayne Swan, responding to questions on banning short selling of shares in financial institutions.
Those bans were lifted recently in the US and Britain, but will remain in place here for a few more weeks.
Macquarie Bank said last year that market rumours that they were having difficulty refinancing $45-billion of debt were false. And ASIC, our financial regulator announced that it was looking into those alleged false rumours about a number of companies, including the Macquarie Group.
Ian Rogers, editor of the banking newsletter, The Sheet.
Ian Rogers: Macquarie Bank was certainly extremely upset about that at the time. But one antidote to that is for Macquarie to address the rumours and to respond to what's being reported in the media. At the time it irritated them, but I think they managed to respond and put their side of the story.
So the difficulty is that if there were an attempt to limit what recognised I suppose media outlets were able to report, for example, in the Macquarie type episode, that would still leave hundreds or thousands of others who are involved in the market who would be familiar with the rumours. So that kind of regulatory approach serves to create a privileged class of recipients of information and to deny a wider audience access to that information.
Stan Correy: Ian Rogers.
The market has many audiences and lots of competing messages, and those messages are not getting any easier to understand. The complexities and volatility still remain.
Back in London, at the UK Parliamentary Committee, Simon Jenkins of The Guardian says the media is working within two polar extremes in reporting the financial crisis.
Simon Jenkins: I just think this whole conversation is about an organic whole which is called a market. At one end of the market is the Chancellor of the Exchequer. At the other end of the market is a crowd running down the street screaming, 'Panic'! And we're all part of that, including the press, if you're asking me would I rather trust the Chancellor of the Exchequer or the mob running down the street shouting 'Panic!', I'd rather trust the mob, because it's more likely to be telling the truth. And the closer you get to the mob, and we are quite close to the mob, I frankly believe we're more likely to be telling you the truth. If you want to sit here and ask the Chancellor of the Exchequer all these questions, I don't think you'd get a very clear answer.
Stan Correy: The answer may be more complicated when it comes to talking and writing about money.
Satyajit Das.
Satyajit Das: I think there's a lot of groupthink in financial markets and in popular media. And I think there's a very, very interesting dynamic that plays out here. I think generally as a society, we want to portray certain things in certain lights. We think about ourselves as an advanced civilisation which can control things, and I think that in the last 15, 20 years in financial reporting, I think we've tried to always give the idea of a glittering, very sophisticated, masters-of-the-universe type of picture. And that, I think, has seduced everybody, seduced certainly the people in the industry, seduced investors, it certainly seduced the journalists and it's even seduced the regulators. So I think there's a lot of groupthink, and it takes somebody quite exceptional to stand outside that and scream repeatedly that the emperor has no clothes on, and I'm sure certain people did that. But also they're often ignored. The other issue here which is kind of important to put into context, particularly for non public broadcasters, banks have contributed enormous amounts of advertising revenue, so in many ways basic coverage of that particular set of products, or a particular set of transactions has been completed, as very important to enhancing the actual status, the position of a particular financial institution. And obviously they've advertised happily in these papers and so forth. So under those circumstances, there is some degree of commercial pressure in terms of the editorial coverage. I'm not saying it's in any way corrupt but there is pressure. And so you try to embrace or you tend to embrace the group thing a lot more easily and readily. And frankly, it also has something to do with the times. I think Walter Bagott once remarked that people are most credulous when they're making money, and you're now talking about a period of time, and the good times are well and truly rolling, and everybody is making money. Under those circumstances, I don't think anybody really questioned very much, at least the bulk of people didn't.
Reporter: ... Frankfurt is down by 9%, the Paris market down by 9%; Austria which was briefly suspended earlier on in the day, is down by nearly 11%.
Reporter: This market is as volatile as you'll ever see.
Reporter: Traders say this is the craziest day they have ever seen in these markets. Veteran traders ay they've never seen anything like it. The movement is ...
THEME
Stan Correy: Background Briefing's Co-ordinating Producer is Linda McGinnis. Research by Anna Whitfeld. Technical producer, Mark Don. The Executive Producer is Kirsten Garrett. I'm Stan Correy and this is ABC Radio National.
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