This article was originally published at Going Concern.com on April 15, 2010.
I was in New York City last week for a conference at Columbia University, “Facing The Fracture: Media and Economic Understanding.”
“Journalists are under intense pressure to analyze and explain the fast-moving events of the Great Recession, yet do so while their own future and business model is up for debate.”
“This unprecedented situation has produced extraordinary reporting and raised questions about the role that the business press needs to play in order to fulfill its duties as the Fourth Estate.”
Panels included luminaries from print and online journalism as well as a very bold-faced name from economics, Nobel laureate Joseph Stiglitz. Globalization and Its Discontents, published in 2002, has a prominent place on my bookshelf. Stiglitz’s book helped me understand my experience working for KPMG/BearingPoint and JP Morgan in Mexico and South America 1997-2001.
The conference was co-sponsored by the Roosevelt Institute and the Columbia Journalism Review (CJR). CJR has been especially supportive of my work on the financial crisis lately. Roosevelt Institute has a great compilation of thought leadership on regulatory reform, Make Markets Be Markets. I’ve quoted Lynn Turner often as another fierce critic of the audit industry and its consistent disregard for the true client, the shareholder. He has an article there with Professor Frank Partnoy on off-balance sheet accounting.
I enjoyed the speakers and listened rather than taking copious notes. There’s a Twitter stream that includes some of my Tweets.
I also finally met “Yves Smith,” the author of the blog Naked Capitalism. Her panel included bloggers and online journalists and focused on the role of non-traditional media during the financial crisis. The consensus was that bloggers served a very important role because we are quick out of the gate with breaking news, able stay on a story like a dog on a bone, are less constrained by institutional and corporate conflicts, and are often subject matter experts – real practitioners of what we write about rather than generic j-school graduates.
Bloggers and other non-traditional media have the disadvantages, though, of fewer resources, no editor, and the reputation for being irresponsible and scurrilous. We think that last charge is undeserved. The financial “blogosphere” acts as a collective editor, filtering out and demoting inaccurate unfair and irresponsible accounts, and promoting useful, inventive and original content in a collaborative way that mitigates each of our own limitations.
The panel I really came for was a lunchtime discussion between Martin Wolf, chief economics commentator at the Financial Times and Nobel laureate Joseph Stiglitz. My question to Mr. Wolf and Professor Stiglitz :
“Two themes I don’t think were addressed by the media during the financial crisis were: 1) Fraud by financial firm executives, and 2) Aiding and abetting of fraud by the auditors of failed and bailed out banks. Until the Lehman Bankruptcy Examiner report was issued on March 11th, there was complete silence on the accounting fraud behind the crisis. Auditors have yet to be called to account for their role in not warning us about or mitigating fraud. Why do you think this is?”
They both responded. I am loosely paraphrasing:
“Writing about accounting fraud is too hard for most journalists. There are exceptions, but there’s a perception that accounting is not as exciting or sexy as finance. Without obvious smoking guns, journalists reach for explanations that are more palatable to business readers. General finance and economics experts give better quotes and copy than auditors. It takes a 2,200-page report with pointed language from a bankruptcy examiner to bring accounting topics into the discussion. Journalists are now forced to work harder to explain what’s happened and to interpret solutions.”
Unfortunately, my experience writing about the accounting industry matches their comments. I don’t wish for a crisis or a major fraud to make my point, but I’ll take it. I’ve said throughout the subprime crisis that morphed into the financial crisis that fraud played a role and the auditors were, at least, negligent and potentially complicit in that fraud.
Earlier this week I was quoted in the New York Times saying that again. I hope it’s the start, not the end, of more intense focus on the auditors’ role in the crisis.