Is the media to blame for the credit crisis?

A few years back, business news was deemed so boring that it was usually confined to the back pages, or down bulletin. But ever since “sub-prime” entered the general vocabulary, most reporting has been taken out of the hands of the specialist, rather closed world of business journalists – with, some say, rather mixed results.

Daily events continue to underline that the single most valuable global market is the one in business information. And the new digital world, with information pouring out of every pixel, blog and hotlink, has amplified every contagious moment of the crash. Unsurprisingly, then, the role of the media in all this is coming under the spotlight, so let’s look at the main accusations on the charge sheet.

The first is that journalists were caught napping (along, it must be said, with most financial regulators, politicians and governments). A few stars have shone more brightly than others, notably BBC business editor Robert Peston, Newsnight’s economics editor Paul Mason and the Financial Times’ associate editor Gillian Tett.

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Tett, an expert in the alphabet soup of financial instruments in which the deregulated City of London specialises, was one of the few to spot the early warning signs. She recounts a story about her trip to the Davos economic forum last year. At the end of a well-attended lunch, a high-profile and influential figure stood up and waved one of Tett’s articles about, accusing her of “unhelpful doom-mongering”. The article in question predicted the problems at Northern Rock.

So what sort of a crash does Tett think the media have had? “There’s been some shrill reporting, some sensationalism. On one level, that’s really understandable, as the media has had to play extreme catch-up. There are real questions to be answered, such as why the media wasn’t more of a watchdog, why it didn’t raise questions about the rise of easy credit and the way money goes round the world.”

Part of the problem, says Tett, is that business has traditionally been relegated to the back pages, where it doesn’t receive wide enough readership; no wonder, she argues, that people felt ill-informed and didn’t spot what was coming.

The second charge is that, far from being slow, journalists have hyped stories and created panic. Peston admitted last week that the media played a role in building up unrealistic expectations about house prices, but dismissed suggestions that it was somehow responsible for the banking crisis.

Hype or not, there is evidence of a substantial appetite for explanation and analysis, as I’ve found with Credit Crash Britain, on BBC2, which has attracted almost 2 million viewers to its first two episodes. Michael Tuft, who made the series, says: “These were quite dense and challenging films, and easily outperformed the average audience at 7.30pm on BBC2. Certainly not what I’d expected, as these sorts of business programmes can get audiences half the size.”

Jeremy Hillman, boss of the BBC’s business news unit, recognises the trend. “The financial crisis has driven record audiences,” he says. “Not only have audiences on the main national bulletins grown by up to 25 per cent |on key days, but it’s online where audiences have really exploded. Page views to Robert Peston’s blog rocketed to a staggering 3 million in one week in October.”

I’m writing this in New York, where there seems to be much the same sort of appetite for financial news. Rupert Murdoch recently launched the Fox Business channel to capitalise on this, as well as buying Dow Jones, publisher of The Wall Street Journal. Together, they will allow him to take on the two existing Goliaths in the highly lucrative world of financial information: Thomson Reuters and Bloomberg.

As Americans were casting their votes on 4 November, we had the chance to ask Murdoch why he had invested in The Wall Street Journal when other newspapers seemed to be in straightened circumstances. High in his News Corp eyrie overlooking Avenue of the Americas, Murdoch hinted at the potential he sees in his latest purchase. “We bought a very big news organisation called Dow Jones, and about half of that is the newspaper – a bit less, probably – The Wall Street Journal. It’s one of the great newspaper brands of the world, and one of the great newspapers of the world. We intend to make it a lot greater.”

So to some it might be hype, but to others it is feeding a genuine and growing public hunger for business information.

Third on the charge sheet against the media is that its general financial ignorance has helped spread confusion, at least in the early stages of the credit crash. There’s no doubt that the crash has exposed some lack of understanding about the way the financial world has evolved, but has the media made things worse? “It depends which media,” Newsnight’s Paul Mason says. “I would be critical of the broadcast financial channels, not for the quality of their reporting but for creating an almost incoherent babble about something that hardly matters in modern finance: the stock market.”

Confused start or not, the media is now doing a rather more thorough job, and there’s more to come. Tonight sees the start of The Ascent of Money, Niall Ferguson’s series on Channel 4, while BBC2 has a season of programmes on business and finance in January, including a series from Evan Davis on the City.

The fourth charge is that reporting financial stories has the power to move markets. The impact of journalism was surely ever thus, and can hardly be censored, like, say, the temporary ban on short selling. The power, though, is undoubted. Peston says of his Lloyds-HBOS scoop: “Once I had broadcast, there was a rush on to conclude the deal, because given the volatility of the share price, given the concerns that depositors would withdraw money, they couldn’t afford to delay the deal. They had to get it concluded. Because not to conclude a deal in those circumstances would be extremely dangerous.”

Peston doesn’t have much optimism in the short term. “The world’s banks have to be weaned off some £5tn of financial support. The imperative of paying that back will restrict the amount of credit available for years to come, which is what’s tipping much of the world into recession, and may make a future recovery pretty anaemic.”

As for how the media should react, Peston says that, in these circumstances, “the imperative for business and economic journalists is be on green-shoot alert, to report when there are genuine signs of an economy on the turn for the better, but to be wary of false optimism”.

Dominic Crossley-Holland is an executive producer at the BBC