Includes some notes about who got it right.

The Audit wants to know. What role did the press play in diffusing financial warnings in the years leading up to the current crisis?

We can’t answer that question in its entirety—especially not in one post—but we can offer an example for your consideration: the press’s supremely insufficient response to an important 1994 report by the Government Accountability Office, the investigative arm of Congress, warning about the dangers of derivatives—those largely unregulated financial instruments that have played such a central role in the current collapse.

The two-hundred page report, two years in the making, could have resulted in tough derivatives legislation, which is to say needed regulation. But it didn’t. The reasons why are complicated, and the press is certainly not the only culprit here, but it did play a key role. What happened is this: A triumvirate of the financial industry, misguided regulators and a passive press relegated the report to the dustbin almost as soon as it came out.

This despite the fact that the report was remarkably prescient in its strong warning about derivatives—almost a decade before Warren Buffet’s now-famous derivatives-as-WMD comment. […]

Where was the press in all of this? Generally abdicating its imperative to shape the story—to sift through disparate pieces of information and put them in their places—and employing instead a false evenhandedness.

Let us explain.

Some articles merely summarized the report, avoiding the issue of significance entirely. But often reporters brought in opposing voices. That is standard, of course, and not a problem in and of itself. The problem is that reporters seemed at a loss over what weight to give opposition to the report. The result was that they gave it equal time—or more. And so the GAO, which had spent two years making itself an expert on derivatives, became just one voice among many, only to be gradually shouted down by a persistent opposition.

In reality, the GAO was the authority here, and unlike many of its opponents, didn’t have a horse in the race. Some opponents of the bill called the document politically biased in an effort to discredit it. But the problem with that accusation, which seems to have been aimed at Democrats, a few of whose members were at the forefront of the call for legislative action, is that—while solutions may have differed across party lines—concern over derivatives was not entirely limited to one party.

Full Story: Columbia Journalism Review