Prime Time for Subprime
Who is doing the best reporting on this scary story?
Each morning, I tiptoe out the front steps, skin the newspapers from their polyethylene casings, and scan the headlines with unease. Will this be the day that the subprime story turns cataclysmic and I join Merrill Lynch, UBS, Citigroup, HSBC, Bear Stearns, Northern Rock, et al., as a casualty of the credit crush?
Don't get me wrong. I'm not holding billions of dollars' worth of structured investment vehicles that I can't unload because of the credit crunch. Nor do I face foreclosure on my home. I rent. I simply fret about the financial wrecking ball swinging so wide that a reeling economy brings hardship to my family.
I stoke those worries by reading as much of the financial coverage as I can. Better put, I read as much of financial coverage as I can understand. I'm not embarrassed by my ignorance—why should I be? I can't be much more clueless than the masters of the universe who have lost their companies billions in the last two quarters.
As a layman, I've gleaned much from the Financial Times' coverage. A Nov. 5feature by Gillian Tett and Paul J. Davis("What's the Damage? Why Banks Are Only Starting to Uncover Their Subprime Losses") reports that private-sector economists believe that the mortgage problems, which the U.S. government has estimated may destroy $100 billion in value, may actually reach $200 billion or more. But nobody really knows.
I polled a dozen journalists and economic thinkers for recommendations on whom and what to read on the topic. David Warsh of Economic Principals seconds my FT nomination and praises Greg Ip of the Wall Street Journal, writing that Ip "has been consistently more interesting since June on the Fed's response than any other reporter i read regularly."
Slate Editor Jacob Weisberg singles out the FT's Martin Wolf. Slate "Moneybox" columnist Dan Gross writes that the FT's Tett "has done the best job covering it from the capital markets/bank perspective—not the sad sack stories of individual homeowners losing their homes." He admires the way FT coverage has given an international dimension to the story—"the way German banks, Australian hedge funds, and London financial institutions have come undone on this issue."
Washington Post columnist David Ignatius, former top editor of his paper's financial section, applauds the work of the Post's Steven Pearlstein, calling him "my sup-prime hero. He saw this very early, and very clearly." Here's Pearlstein sounding the subprime clarion on March 14:
What we have here is a failure of common sense. With occasional exceptions, bankers shouldn't make—or be allowed to make—mortgage loans that require no money down and no documentation of income to people who won't be able to afford the monthly payments if interest rates rise, house prices fall or the roof springs a leak. It's not a whole lot more complicated than that.
Ignatius isn't the only one rooting for the home team. Wall Street Journal columnist David Wessell says his paper's coverage "began early and has ranged widely from the top (the Fed) to the bottom (a single block in Detroit.) This is a story that demands aggressive reporting to show how the rise and fall of subprime is disrupting individual lives and aggressive reporting and analysis to explain how and why we got here. Just doing one part well isn't good journalism; we've tried to do both." Wessell provides this annotated Journal reading list.
His Journal colleague Alan Murray writes, "This is a case where blogs have really become the leading edge of reporting. I find much of the best stuff on this in the Deal Journal, which Dennis Berman is leading and covers the Wall Street angle, and Real Time Economics, which Greg Ip is leading and covers the policy angle. On the Citi story, Robin Sidel, Aaron Lucchetti and Monica Langley have done a great job, although Eric Dash's story this morning [Nov. 6] on the two Princes was excellent."