Read more about Wall Street's ongoing crisis.
"When financial institutions are suffering a crisis in faith about themselves, journalists are inherently a little bit more prudent and cautious."—Marcus Brauchli, newly installed executive editor of the Washington Post, as quoted in the Sept. 21 New York Times.
The turmoil in the financial markets may occasion prudence in financial journalism, most especially at the Wall Street Journal, where during the previous 24 years Brauchli worked his way up from copy editor to foreign correspondent to managing editor before being squeezed out by Rupert Murdoch. But it's a sign of Brauchli's newbie status in Washington, where he has never previously worked, that he should think reporters at the Washington Post feel anything other than schadenfreude about Wall Street's tumble in fortunes. They can't help it—they're Washingtonians. Washington is a city that glories in Wall Street's misfortunes.
"Isn't this exciting?" Rep. Ed Markey enthused to me on Oct. 19, 1987 ("Black Monday"). A young congressional correspondent for Newsweek with nary a stock or bond to my name, even I was taken aback by Markey's undisguised pleasure. When you stop and think about it, though, it makes perfect sense. Modern Washington owes its very existence to the 1929 crash, which occasioned a vast expansion of the federal government under President Franklin D. Roosevelt. A legacy of the increase in federal power during that era, largely undiminished during a 28-year electoral backlash against big government, is that Washington became Wall Street's principal rival when it came to running the world. Which wielded more power—the financial markets or the government? Uncle Sam had the world's largest military, but Wall Street had all that goddamned money. The mansions in Greenwich, Conn.; the trophy wives; the private jets—by comparison, the people who wielded power in Washington—including most presidents—were petits bourgeois. Even libertarian conservatives resent, on a personal level, the Wall Street swells whose interests they fight for daily. There aren't a lot of millionaires working at the Cato Institute.
For Wall Street, a way of life may be coming to an end. For Washington, a new era of government activism has already begun. Treasury Secretary Henry Paulson, after presiding over an unprecedented sequence of receiverships, bailouts, and liquidations, is urging Congress to commit up to $700 billion to unfreeze the credit markets. The CEOs of once-powerful investment banks will be called down to Congress and subjected to humiliating questions. Journalists will sign six-figure contracts to write books about the events of what is already being dubbed "Black September." Think-tankers will hold conferences to fight over the proper role government should assume in the new financial world. The Washington Post—which, like all big-city dailies, has been experiencing some circulation difficulty—will sell more papers than it would otherwise. Presidential candidates are already demanding, and will probably receive, curbs on CEO pay as a condition of restoring liquidity to Wall Street. (Paulson, who's more a Wall Street guy than a Washington guy, resists this because he fears it may limit CEOs' willingness to sell their bum loans to Treasury. What he doesn't realize is that once Congress grasps that these CEOs would literally rather see their companies fail than take a pay cut, it will answer as one: "All right, then. Fail away.")
Let me put it in terms a smart financial journalist like Brauchli can readily understand. On Wall Street, financial crisis destroys jobs. Here in Washington, it creates them. The rest is just details.