Thursday, August 30, 2007

The Subprime Mess From Mount Olympus

My quick look for commentary on climate-change advocacy journalism at the Columbia Journalism Review got sidetracked by The Audit's column of the above title, commenting on James Grant's New York Times Op-Ed, which we linked to on Tuesday because of its climate reference:

"...Late in the 1880s, long before the institution of the Federal Reserve, Eastern savers and Western borrowers teamed up to inflate the value of cropland in the Great Plains. Gimmicky mortgages — pay interest and only interest for the first two years! — and loose talk of a new era in rainfall beguiled the borrowers.

High yields on Western mortgages enticed the lenders. But the climate of Kansas and Nebraska reverted to parched, and the drought-stricken debtors trudged back East or to the West Coast in wagons emblazoned, “In God we trusted, in Kansas we busted.” To the creditors went the farms."

From Dean Starkman at the CJR:
Why James Grant’s long view comes up short

This Op-Ed piece in the Sunday New York Times by James Grant makes a good point about the Federal Reserve being too quick to intervene to let irresponsible risk-takers off the hook in the subprime collapse. He applauds, rightly, Fed Chairman Ben Bernanke’s resistance to demands for broadly lower interest rates:

Maybe he is seeing the light that capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.

But on the way, Grant lets the main actors in the debacle, lenders and regulators, off the hook and perpetuates a bogus business-press truism that unscrupulous conduct is inevitable or somehow even necessary for our economy to work. I also feel that this view from 30,000 feet provides a too-convenient perspective for a business press that is often too busy cranking out flattering profiles to hold bad corporate actors to account.

Every time we have one of these meltdowns, the business press will tell us that they knew those mortgages (real-estate limited partnerships, analyst reports, tech shares, Bernie Ebbers, Adelphia, etc.) were trouble all along, everyone knew it, in fact, and besides, you know, ‘twas ever thus, or something—anything other than introspection....

That's enough on media for one day. It's a tough business.
I still can't get over Vogue having 727 pages of ads though.