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HENEVER FINANCIAL NEWS turns bleak, investment banks and treasuries issue responses and politicians make pronouncements. The con- tent depends on what kinds of political and economic conflicts are going on, but the message is the same. Politicians either blame their opposition’s failures or attempt to deny bad news by citing evidence of ‘sound’ fundamentals elsewhere in the economy. Occasionally, new incumbents to office may highlight grimness – like President Bush in early 2001, whose negative statements were criticised for creating self-fulfilling prophecies. These edicts show that impressions and the emotions they generate are recognised as having considerable force in finance.Most political and economic leaders urge pundits to ‘talk up’ the economy. Their oldest and most common refrain is to attack the media: if only the press focused on economic strengths, confidence would be restored. ‘Don’t let me hear you not singing’ was a headline after the Menzies government blamed the Fairfax press for Australia’s 1961 recession. Scapegoating is perennial, V. J. Carroll emphasised (18 January 2001). So much for orthodox economists’ concepts of ‘perfect informa- tion’ and transparency in free markets. More seriously, the vital role of journalists in informing different publics about our social promises – institutionalised in money – rarely sees the light of day.
Attempts at press censorship also occur during times of financial optimism, but less overtly, sinceanyacknowledgement of emotion is too dangerous – ‘talking down’ a boom will often be blamed for causing a crash. Here the criticism is the opposite, but still, it is the media alone that are deemed to be emotional. Robert Shiller made the charge, just before the Nasdaq (dot.com) inflation declined in early 2000, that the financial media played a significant role in talking up what he called an ‘irrational exuberance’ into a ‘speculative bubble’. In the same vein, his own book could be held responsible for the bubble’s later collapse, if that is how emotions in finance do operate. But Shiller is of course no Dr Greenspan, the size of whose briefcase, let alone the inflection in his every pronouncement, was treated as an omen back then. Greenspan only used the term ‘irrational exuberance’
once, in 1996, creating temporary panic among traders and gaining disfavour from Washington DC politicians (Hartcher 2003). Thereafter, for the duration of the
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asset inflation he tended to defend the idea of the ‘new economy’. By and large, journalists merely followed, or trusted ‘Dr G’. There is a hierarchy in the credibility and impact of these statements.
This chapter discusses the role of the financial media. The argument does not turn on whether or not the news media, or more so ‘the News’ (Keynes’s term for all financial information) are to blame for volatility. Rather, the concern is with the financial media’s institutional trust role of providing full, fair and accurate financial information to the public, their organisational capacity to fulfil this role, and journalists’ tangential position outside the chain of financial organisations.
To explore these questions, I draw on my interviews with finance journalists. We discussed their constraints, the role of media ownership, and their main sources for providing trustworthy information to the share-owning or speculative public (institutional and individual) and for giving fair assessments to broader publics:
pension fund holders, workers, unemployed populations. Did journalists create the Nasdaq boom, as some argue? Finance news relies on diverse powerful sources, from central banks and government treasuries to publicly listed corporations and their auditors, legal assessors, raters, purveyors of financial assets and PR. The information created daily is voluminous, possibly overwhelming for providing fair and independent, or crucial commentary.
‘ I N T R U S T ’ T O W H I C H P U B L I C S ?
Depicting the finance media as institutional trust agencies is essential for developing my main argument on the emotional underpinning of financial decision-making.
Starting from Keynes’s observations about how ‘the concealed factors of utter doubt, precariousness, hope and fear’ are too often hidden by hypotheses of ‘a calculable future’ (1937: 222), I argue that all financial decisions face uncertainty – an intolerable situation were it not for the anticipatory emotions of trust, confi- dence, optimism, and their opposites of distrust and pessimism. These emotions play an important but little understood role in the collective generation of expecta- tions. Without emotions, future possibilities cannot be envisaged, even calculated (see Chapter 2). Emotions easily oscillate from optimism to fear and constant charges about who is to blame. In attributing blame about which organisation can be trusted or no longer trusted, journalists face multiple audiences and rely on numerous sources, from financial organisations in the core, to semi-peripheral and peripheral ones.
What is the position of finance news agencies? Media corporations are not financial ‘actors’ since they are driven by a different logic from banks, accountancy firms and credit-rating agencies. Even so, media corporations are often owned by, or themselves own, finance and business concerns. While finance news is essential to the financial world, media corporate profits depend on advertisers, ratings and specific audiences, in that order. Journalists depend on finance organisations for their sources, but are in trust–distrust relationships with all financial sectors and populations.
And this is contentious, because whenever the finance media treat finance actors as an aggregate of equals, their trust role with various audiences is already
compromised. The most organisedcoresegments of finance (Baker 1987) try to maintain the power to define what is money. In contrast, populations of small rentiers are patronised as ‘mum and dad’ shareholders. These least organised, most peripheral asset-holding populations cannot define money at all, often having precarious opportunities to make money with their life savings.
The consequence of finance journalists’ reporting responsibilities is that their audience is no longer the finance sector and a small wealthy elite. Today’s finance news agencies are in trust relationships with widely varying audiences. Some of these trust roles are mutually contradictory. Not only has the audience for finance news grown considerably, but so have the potential dangers. High levels of house- hold debt in English-speaking countries go with higher share-owning (half the adult population in the USA, Canada and Australia directly own shares) and heavy involvement in pension funds and property speculation. How the finance media deal with these differences in influence and powerlessness is a crucial question, as is the phenomenal growth in data collection which financial journalists must report.
While I draw on specialist news media literature, my focus is the institutional trust role. Asking the experts – self-styled sceptical journalists – about the po- tential for professional journalism is a way to explore whether the financial press can be effective in its reporting responsibilities, which involve such different au- diences. National variations in journalists’ independence and sources of news, as well as reasons for growth in specifically financial PR firms, are set against Shiller’s counter-argument inIrrational Exuberance(2000) on the major role he ascribes to the finance media in influencing the Nasdaq boom. He is a prime example of the blame-laying approach in the financial arena. His criticisms of the press are clich´es about media rhetoric and ‘emotionalism’. This contrasts to the ways that sceptical finance journalists see their roles. The contrast enables me to show that the impersonal trust roles of the press are primarily economic relationships – not a temporary intrusion of the irrational into them, as argued by orthodoxy.
Keynes, as we will see later, was far more perceptive on the role of ‘the News’ in speculation.
P R O F E S S I O N A L S C E P T I C S I N T H E F I N A N C E P R E S S
Between 2000 and 2002 I interviewed experienced practitioners of professional journalism from relatively independent news agencies in the UK, USA and Australia. Television journalists are only excluded because the USA has only one underfunded public television broadcaster (PBS) with highly respected standards of news reporting, so fairness dictated talking only to professional print journalists.
Independence for journalists means that corporate conflict of interest and related managerial interference in what professional journalists may write (say, about a company owned by their firm) are limited. Generally, institutional defences of
‘fourth estate’ independence for professional journalism are not strong when fourth estate and/or democratic ideals of free speech must contend with media corpo- rations that often treat news reporting as just another business. In the case of newspapers, media specialists propose a range of remedies such as a revised code
of ethics and/or the incorporation of editorial autonomy into company articles (Jones 2000: 245). Further remedies emerge from my evidence.
The interviews compare independence with typical pressures. All are doubters of various kinds, rather than merely ‘bearish’ during a bull market. Even in 2000, before the major corporate and finance scandals became public knowledge, most were brutally frank: in most sectors of finance there are lies, cheats, spin doctors and ‘quiet corruption’. If journalists are vulnerable to such sources (Tiffen 1989:
197), is it possible for finance news agencies to fulfil their trust role to the public?
These informed sceptics expressed concern about the media’s roles.
On the question of trust, they are mainly concerned about professional standards in bringing questionable practices and dubious claims to public light, and providing contextual analysis to inform citizens. For a British journalist onThe Economist, professional, expert explanation is one key role:
Ingham: In the case of markets, explanation is one of the biggest tasks a journalist can perform because very few people understand what markets do . . . and the relationship, if you like, between the individual behaviour of market participants and the cumulative impact of that . . . You look at the financial market and it’s peopled largely by men and women under the age of 40, often under the age of 30, and I think that’s increasingly true of that area of journalism. You get very few people now who have been through a recession. (15 March 2002)
The ideals of professional journalism are expressed in terms of fiduciary duties to the public, by a finance journalist on the general magazineTime:
Kadlec: A journalist’s role is not to say what’s popular . . . If we’re talking up the market because the market’s going up, then we’re failing in our duty. Throughout the internet boom I think that there was some healthy scepticism. I know that I personally was sceptical . . . There were columnists inNew York Timesand in Newsweekwho were sceptical.Barronsare almost sceptical to a fault. They have decided that they are going to be the voice of sour thinking . . . that’s the role they’ve adopted, and it’s not a bad role. (26 February 2002)
A daily newspaper, The Guardian, accentuates a very similar account. For the financial editor, Larry Elliott:
Elliott: The press asks the questions that the general public want to have asked, which should be the role of the journalist. We act as an agent of the public and hold up corporations or public institutions to account. We have the access that members of the public don’t have, so as a result . . . we are expected to ask searching questions and not just accept whatever they tell us. That . . . [is] the theoretical ideal, although the press doesn’t always live up to that, you know, in practice. (5 October 2000)
These ideals of trust are not always met. Although the media are blamed for a bull market, the logic of journalists’ news values would suggest that uncovering a scandal is highly newsworthy. Yet sceptics all stressed how their critical commentary
is barely heard during a bull market when the agenda – or ‘the issue’ – overwhelms these news values, and standards generally. It undermines accuracy and, in worst cases, plain honesty. Can this responsibility rest only with reporters?
Starting with honesty, during 2000, two London journalists were fired and some of the aces covering Wall Street were caught for accepting payments for rigging the market. In Sydney, serious payments were paid by Australia’s ‘big four’ commercial banks to two leading radio talkback hosts, to temper their listener-led criticisms of bank policies. But none of this is at all new, as a former editor of theAustralian Financial Reviewsaid:
Carroll: In the 1870s, theFinancial Timesfinance editor was accepting money from the promoters of Dunlop, and shares, and pushing the shares. It was the done thing. It only came out in bankruptcy proceedings. (18 January 2001)
Aside from plain ethical standards (also among the bribers), the prevailing issue agenda can easily pre-empt values of newsworthiness. Rodney Tiffen links the prevalence of an issue to an ideological inconstancy in the news media (1989:
196). Switching sides is only tangentially related to journalists’ usual or routine conservatism, because of professional news values. In Tiffen’s view, the news is nor- mally ideologically conservative because the newsworthy are the influential figures, whether bank CEOs, neo-classical economists or investment analysts. However, journalists must compete for fresh unexpected stories. If scandals are uncovered, the prevailing news-frame can suddenly shift, whereupon many more journalists will uphold professional notions of watchdog and adversarial roles and question received wisdom (1989: 196). In the normal course of things it is difficult to maintain consistent professionalism in the face of this ideological inconstancy, if not promiscuity.
Interviews compared reporting standards, often those of sports reporting with finance news, which are a more relevant and professional analogy than may appear at first sight. These journalists had written sceptically when the bull market was raging. They appear to express a sense of existential isolation. For those reporting Wall Street in 2000 even as the bull market declined, nothing could alter the prevailing news-frame, no matter their high standards of reporting.
Hale: We’re not really so much [expressing] words of caution, I wouldn’t say wisdom. It’s more like we’restanding thereand we’re watching the game. And we’re saying, but no that team’s not winning when everyone else is saying they’re winning and I see that team has scored four goals and that team hasn’t scored any when that isn’t true . . . The reason people say we’ve got a perspective, and say that we’re cautious is because we’re not going with this huge flow; it’s that we’re not being just shills for the system. (13 September 2000)
Hale refers to ‘shills’, confidence trickster’s apprentices. For Anya Schiffrin, with seven years’ experience onDow Jones(the subscription ‘wire’ service for the banks and trading houses), the experience is similar. She seems like a distant spectator of a game of cynical trust:
Schiffrin: The way I feel is that it doesn’t matter what the reality is, it’s all based on what other people think anyway. So when I used to cover the foreign exchange market, there were very predictable reactions [forex traders’ comments are invari- ably reported]. If there is some problem in Europe, everybody would buy the Swiss franc and everybody always had pat rationalisations, even though they made no sense . . . The whole point was that everybody knew that the market would work in a certain way, and it’s interesting how people are socynicalabout it . . . [However,]
it seems just more like a game to them and everybody plays along, and it doesn’t matter what the reality is, as long as everybody follows the rules. So in that sense trust is important, but if someone said ‘Hang on, this is ridiculous’ . . . that would be breaking a rule in a way. (19 September 2000)
Journalists can rarely dispute this game; few have financial expertise. At the height of a boom, reputable newspapers seem to have difficulties in hiring expert financial journalists. Alan Abelson, former editor ofBarrons, suggests a number of reasons:
Abelson: Even with the expansion of the economy and the markets, it’s hard to find people. Journalists are not interested in the economy and finance. They’d much rather do something grander – politics, let’s say, drama criticism, foreign- country reporting. Financial journalism seems like pretty grungy kind of work, and it is in some ways. I mean, looking at balance sheets and income statements.
It’s kind of like the salt mines of journalism. It’s hard to get people to begin with.
The second thing is that people who are really interested in this stuff – I mean, think of it – why should they, at best, make $50 000 or $60 000 or $100 000 when they can make millions? (21 September 2000)
Journalists with financial expertise, perhaps impressed by status symbols, interview major players on fabulous salaries. There are plenty of openings during a boom, and unless they were sceptical – even ‘impelled’ by professional journalist ideals – they are unlikely to stay in journalism. The same in Sydney:
Carroll: Towards the top of the boom, journalists get lured away by the temp- tations of the big rewards to be had from going into merchant banking . . . So, a decline in reporting standards occurs inevitably. I remember in the late 1960s during the nickel boom, theFinancial Reviewwas heavily criticised because it tried to be sceptical of all the claims . . . And we were criticised for ‘missing the boom’.
That itself showed the state of mind of the critics; they didn’t see that it was our role to be sceptical in the boom. Fortunately, the Australian Stock Exchange had a sceptical chairman, Jim Cooper, who tried to bring some element of commonsense and sanity to the market, but it’s hard when the hysteria takes over, as it has in our market now with cyber stocks, for what, six years? (18 January 2001)
Thus far, the evidence does not support the idea the profession creates the issue.
They mention leadership elsewhere in the financial world – private and govern- ment – with far greater influence in creating the issue and fostering a specific emotional climate. Media corporation policies also have a significant role.
M E D I A C O R P O R AT I O N S A R E T H E E M P L O Y E R S
Criticised by Right and Left for having ‘power without responsibility’ (see Curran
& Seaton 1997), many media firms these days are diversified conglomerates. Here I compare the professional independence that the big conglomerates may give to journalists with the explicit and implicit aims of the business of news. Media outlets are segmented towards various publics – to the finance elite themselves (Financial Times andWall Street Journal), to ‘educated publics’, class segments, and age or status groups. Commercial media use many techniques for attracting audiences – generally not the largest but those with the greatest amount of money for spending on consumer goods (Burns 1977: 66). Although audiences rise in booms, financial newspapers now have consumer and lifestyle supplements to broaden circulation for attracting advertising revenue: status envy, greed, laziness and hopes for security are emotional appeals to reap gains from the ‘wealth effect’.
None of this is connected to professional journalism or public trust, but to news as just another business.
Finance news agencies are politically conservative (mostly) and politically powerful. Their profitability is about market share. Many news corporations have a patchy record for fostering professional journalist ideals of free speech or acceding to journalists’ demands about their public responsibilities to inform citizens (Curran
& Seaton 1997). In a boom, corporate standards of trustworthiness, reliability and ‘sanity’ tend to slip – everywhere. Headlines are dramatically emotional, and can be dramatically incorrect. The front page ofEsquireof October 1998 asked,
‘What Did You Do After the Crash, Daddy?’ – an ugly broken china head was the accompanying picture – suggesting fear and insecurity. But 1998 turned out to be a financial hiccup. So what is the role of media corporations in the finance world?
The Enron-type scandals of 2002 had been corporate secrets, so any press story would previously have been libellous. These scandals, therefore, could hardly be attributed to the financial media’s direct actions or investigative failures but, before then, criticisms tended to support Shiller’s position that the media talked up the
‘bubble’. Among journalists turning on their profession or their media corpo- rations (more rarely), Howard Kurtz, inThe Fortune Tellers: Inside Wall Street’s Game of Money, Media and Manipulation(2000), attacked ‘the media’ for ‘mind- lessly trumpet[ing] each prediction’ made by ‘aggressive’ analysts from investment houses like Merrill Lynch, Morgan Stanley and Goldman Sachs. Whenever a recommendation turns out ‘spectacularly wrong’, it is suddenly ‘old news’ with
‘zero accountability’ (Kurtz 2001; PBS Newshour 2000). Later, when American investors were suing stock analysts for ‘systematic fraud . . . on an industry-wide basis’, media corporations tried to repair their own damaged reputation of trust.
Bullish analysts were derided as ‘false prophets’ by the very ‘media that publicised them’ ( Jackson 2001). This hypocrisy suggests that the finance media are far from irrelevant to stock price movements and finance generally.
Media corporations, even the most reputable, do not always recognise their longer-term interests in gaining broad access to publicly available information