Mainstream media didn’t hide the housing bubble — They didn’t see it. They were too busy writing puff pieces on celebrities making millions on their mansions

Mick Gregory

I really do like to say “I told you so,” once in a while, especially to liberal Californians in the mass media. My family and I moved from the Bay Area to Houston, Texas three years ago at the peak of the housing bubble. We were watching the market trends and came to our own conclusion well before the “experts” in the media. Our neighbors, both attorneys, had also noticed the growth was hitting 30 percent a year in our San Francisco suburb. Those stats come in every month by realtor associations; polished up by their PR departments — they are finally picked up by journalists and edited neatly following the AP style book. There are a lot of hacks in the industry who think that’s what makes good journalism. No analysis, just following the rules of serial comma usage and the very important difference (in their minds) between that and which.

Never mind that the price per square foot was over $350 and there were multiple offers coming on homes. The time spent on the market wasn’t measured in days, but hours.

Three years ago, there were very few reporters at the LA Times or SF Chronicle looking at the historic, unreal climb in prices. “This is California, there will always be a market for a piece of paradise,” we’ve seen in various versions in the entertaining Homes sections that ran every Saturday and Sunday.

Reports on the housing bubble and wobbles were rare. How could you expect anything better? Business reporters don’t have the resume to get an administrative assistant job at Fortune 500 companies or with developers. They don’t have the ambition to sell real estate, or the skill to be a property flipper.

More important than that, journalists are tied to their home town newspapers or TV stations. They can’t be objective in reporting bloated housing prices or comparing the quality of housing between markets such as LA and Houston.

The free fall of California real estate is finally front page news. Now that foreclosures are equal to home sales in some California neighborhoods. All this sudden analysis is 2.5 years too late for the thousands losing their homes.

Back then, the “executive editors” promoted cute columns called Hot Properties with features on how celebrities were tripling their prices on Bay Area and Malibu homes.

The party is over. That was the last time newspapers made windfall profits off of 5 pound Sunday newspapers.

Here is an excellent look at the media circus from Dan Gillmor’s blog on citizen journalism is among the best in the blog biz. Gillmor gives journalists too much credit. He should know some 94.5 percent didn’t even take Economics 101.

Housing Bubble Coverage: Defending the Indefensible

Editor & Publisher: Newspaper Biz Editors Defend Mortgage Crisis Coverage. Did the growing mortgage credit crisis, which took a huge turn with last week’s collapse of Bear Sterns, get enough early coverage from newspapers? Top business editors at several of the nation’s major papers say yes, although a few admit some of the more complicated elements may not have been broken out enough for readers.

“What tripe. The newspaper industry almost totally failed to do its job, and the public got screwed once again.”

Citing a story here and there, as several editors do in the E&P piece, is not evidence of newspapers doing their job. It’s quite the opposite.

When an economic catastrophe of this sort — and entirely predicable one — is building, journalists are failing to do their jobs when they don’t harp on it.

As I said in a previous posting, newspapers and broadcasters were raking in billions in advertising from the real estate and banking industries as this bubble inflated. I do not believe this is a coincidence. I also don’t believe it was deliberate malfeasance; but you just don’t see lots of tough coverage in media of the people and companies paying the bills.

Many if not most papers have special weekly real estate pages or sections where you would find little hint of the potential for trouble. I know I looked for it in the papers I read. That’s where the discussion belonged — as well, of course, as Page One — not solely in the occasional business page stories. Hundreds of references to bubbles, most in the past year and not when there was a chance to slow down that train, were dwarfed by comparison to the buying advice that dominated coverage of real estate overall.

Oh, sure, there were extremely infrequent stories containing warnings in a few publications — and occasional quotes from skeptics in the prices-just-keep-rising stories that overwhelmingly dominated the coverage. But the reality is that journalists mostly didn’t have a clue, or didn’t want to have a clue. I don’t know which is worse.

Some bloggers, and some economists, did shout warnings. They were ignored, or worse, insulted by wishful thinkers and (I suspect) people who stood to gain from the continuing bubble.

Again, from a previous post, here are some questions the media all but ignored until too late:

Where were the stories we should have been seeing, noting that “buyers” — a word that is ludicrous in context –were running headlong toward a financial cliff? What happened to the coverage of a housing market that fewer and fewer people could afford to enter except with no-interest or no-down-payment loans, where home prices were so far out of sync with the economy that there was no precedent for such imbalance?

Where were the stories pointing out that the secondary (and far beyond) mortgage markets were salting hugely risky debt all through the American economy? You think your bank or pension fund doesn’t have some of this garbage somewhere in its books? Think again.

The media also bungled by not fingering the makers of this bubble apart from foolish “buyers” who proved to be such suckers. This boom was fueled by people who knew it couldn’t last: brokers, bankers and, above all, Wall Street’s ever-clever wizards who risk other people’s money for gigantic fees.

This is another journalistic scandal. It’s not quite on the order of the bended-knee, pre-war coverage — stenography of government officials’ lies and deceptions — that helped steer America into the Iraq war, but only because it’s not killing people in large numbers.

It’s a massive enough scandal, though. There’s plenty of pain left in this deflation, possibly including an outright tanking of the economy.

The journalism craft should take a long, hard look at what it’s failed to do, yet again, in the housing bubble. It has failed to warn — as loudly and incessantly as it did in promoting the housing bubble — that a financial crunch was on the way.

There’s plenty of blame to go around in this mess. The finger-pointing has barely begun. But when it gets going for real, I hope that journalists who do some of that pointing will at least look in a mirror.

“I can remember the yards of copy written about new developments and real estate sections filled with puff pieces promoting house buying, with no hint of any risks involved with these investments. For the few stories you cite, what about those that quoted the National Association of Realtors about how this was the right time to buy a house, and that house prices have never declined. Remember how we were told house prices were supposed to be “sticky” and that when there was a downturn, the prices would stick rather than fall precipitously. Where were the investigative pieces about how low-income people were being ripped off by subprime mortgages? Both the New York Times and Wall Street Journal you cite ran endless stories about high prices for New York apartments, with appropriate pictures of the luxury amenities that came with them. In my lifetime, newspapers have missed the S&L excess of the 1990’s, and they dropped the ball on this one, too. And what about the culpability of Congress in this? Where are the investigative pieces of House and Senate banking legislation that opened the door to easy lending, no-document loans and giving mortgages to people with lousy credit reports — including illegal aliens working day work construction jobs? From what I’ve heard on CSpan, Sen. Jon Kyl has reams of information documenting how Congress contributed to the collapse now happening, but no reporters seem interested.” Home page

44 thoughts on “Mainstream media didn’t hide the housing bubble — They didn’t see it. They were too busy writing puff pieces on celebrities making millions on their mansions

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  7. Nice job on this one, Mick. Hard to fault a word you wrote.

    Newspapers hardly ever do a good job of reporting business and economic news. For one thing, most journalists don’t understand it. If they took Econ 101 back in college, that’s as far as they got. You start talking about total credit market debt, bond ratings and economic bubbles, their eyes glaze over. Come to think of it, they are not unlike most other Americans in that respect.

    You also have a systemic problem I can illustrate with my own experience. Back in the late ’70s when I was a working reporter, I spent my spare time for more than a month going through all the records of our city’s Codes Department to determine who the landlords were who were failing to properly maintain their property. Surprisingly, there were about 10 people who had the most codes violations and were the biggest slumlords in town. I quickly learned, afer turning in my story, that about half of them were major advertisers and the rest were good friends of either the editor or publisher of my newspaper. Needless to say, I am still waiting for that story to run so I can collect my Pulitzer Prize.

  8. Ken, thanks for the nice words. I knew from your comments you were a professional word smith. We have become a semi-educated, mass marketed, mass consuming society, vulnerable to propaganda and the current “crisis.”

  9. The truth is finally coming out
    Look at this report from the National Review.

    Not much is booming in the American economy these days, but there’s a bull market in blame. All over the media, people are pointing fingers at those who supposedly got us into this mess. Some say that Alan Greenspan did it. Others fault, variously, President Clinton, President Bush, Congress, and, of course, Wall Street. And let’s not forget the foolish people who took out all of those crazy mortgages in the first place.

    When the major print and broadcast outlets look into the roots of the financial crisis, as they’ve been doing lately with verve, their own work doesn’t figure prominently in the discussion.

    But there’s one culprit the media don’t mention much: themselves. This is a little strange because the news business has become quite good at publicly whipping itself for all kinds of sins. Many outlets employ columnists whose sole duty is to scold colleagues for their errors.

    Yet when the major print and broadcast outlets look into the roots of the financial crisis, as they’ve been doing lately with verve, their own work doesn’t figure prominently in the discussion. “Who Caused This Nightmare?” asked The Times of London last week. Answer: “The culpable are spread across the whole gamut of America’s political, economic, and banking infrastructure.”

    “What Created This Monster?” The New York Times asked four days later. The answer was more detailed but essentially the same.

    At the bottom of the Times of London story, as it appeared online this week, the first reader comment was from an S. Andrew of Croydon: “Blame is easy and useless. Journalists might have investigated if they had understood. Why did they not find out what was going on and publish [earlier]?”

    By William Powers, National Journal
    © National Journal Group Inc.
    Friday, March 28, 2008

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  11. It’s too bad people are reaching for regulation and not letting this all shake itself out. Paulson’s proposal of consolidating regulators and bailing out the failed investors is the worst of both worlds: it increases public exposure without any concomitant increase in regulatory authority over the high risk investors and investments involved. Plus, it would likely delay the liquidation process, which can function efficiently and quickly if everyone didn’t run in horror from the word recession. We need a recession to shake out all of this monetary-policy induced malinvestment. And housing prices need to drop. Foreclosures need to happen. And political opportunists need to STFU.

  12. Mr. Roach, people are looking for Big Brother/Big Sis to do everything for them. I am laughing about how basic the mainstream media is in its business coverage.

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