Crash

A tone of escalating panic marks the coverage of the financial crisis. After Lehman Brothers collapsed in September 2008, headlines like 'Nightmare on Wall Street', 'Titanic has hit iceberg' and 'The only thing we have to fear is not feeling fearful enough' were common. Phrases like 'financial apocalypse', 'economic armageddon', 'financial tsunami' and 'naked terror' litter reports. Little wonder. The financial system was in fully-fledged meltdown. Worldwide credit had seized up as financial institutions refused to lend to each other for fear of the toxic assets they had on their books. By the end of 2008, global stock markets had plunged nearly 50 per cent, wiping out around $35 trillion in financial assets. All five of Wall Street's investment banks – and many more around the world – had vanished (McNally 2011: 13). For the first time in 70 years, the world was witnessing a fully-blown crisis of capitalism. Governments came to the rescue with hundreds of billions of dollars in bailouts, while central banks pumped in liquidity and cut interest rates to near zero.

Given the sheer scale of the meltdown, journalists and their editors must have been flabbergasted. Probably for that reason, this first phase of the crisis saw the most open media framing. Rage against the 'masters of the universe' appeared alongside attempts to explain the systemic problems with finance. Some coverage even grasped the roots of the crisis in the neoliberal or 'free market' capitalism of the previous three decades. Demands for bankers to be held to account joined widespread calls for financial reform. Full public ownership of the banks was even approved of in some quarters of the press. The global nature of the crisis and its effects was conveyed.

Unfortunately, these explanations and demands were quickly forgotten. Even at this early stage, several of the problems with the coverage that later become all-too-apparent were identifiable. Explanations were too often shallow, confusing or absent altogether. Measures taken by the establishment were too often accepted without proper scrutiny. And the range of debate, though broader than in later stages of the crisis, nevertheless excluded discussion of some of the most fundamental questions about our global economy – questions that a crisis should arguably bring out into the open. In some ways, then, the coverage of this first phase of the crisis is the starting point from which media amnesia is explored in the remainder of the book – it was the coverage from this period that was later forgotten and rewritten in subsequent months and years. However, as will be seen, the elements of media amnesia were already discernible in 2008.

GREEDY BANKERS

The most common explanation for the crash was the bad behaviour of those working in the financial sector, or the 'greedy bankers' frame (Thompson 2009; Schifferes and Knowles 2015). In coverage focusing on the financial crisis, this accounted for 29.3 per cent of explanations given. Headlines blazed, 'Arrogance and greed of bankers lie at the heart of financial meltdown' and 'so many suffer for the grimy greed of a few'. The Mirror referred to 'greedy, immoral bankers' and 'grasping bankers' who had 'infected the system with financial foot-and-mouth' to fund their 'obscene lifestyles' (Maguire 2008b).

The sense of outrage expressed here is perfectly understandable, and there is a good argument that journalists should give voice to public anger directed towards those implicated in causing hardship to millions. In 2007, Goldman Sachs paid its leading employees $20–$25 million each in bonuses, with some traders getting as much as $50 million. Real-life pantomime villains like RBS's Fred 'the Shred' Goodwin made for good headlines. We might wonder where this anger has gone, after years of austerity. Those claiming that there is no 'magic money tree' to fund public services might do well to remember the bankers and their bonuses.

The problem with this approach, though, is that the tales of greed, arrogance and stupidity tend to distract from the more systemic problems with the financial sector. As Steve Schifferes and Sophie Knowles (2015: 48) write: 'the moralizing of the crisis in the press allowed popular anger to focus on individuals, rather than on the financial system as a whole, or on the politicians and regulators who had created the structures that had permitted abuse of the financial system'. While there is certainly a place for anger, then, a more systemic understanding of the crisis is necessary.

SUBPRIME AND SECURITIES

The majority of media items failed to provide these systemic explanations. Nevertheless, they were the second most frequent category of explanation for the crash, representing 24.4 per cent of the causes mentioned. Some journalists made a valiant effort to explain to their audiences in plain English what was going on, no easy task in the small space available in the conventional news format. In the Telegraph, Edmund Conway explained the issue in some detail during the Bear Stearns collapse in March 2008. It is worth quoting at length:

Quite simply, we have borrowed too much over the past decade or so. Individuals and businesses alike are guilty. When banks ran out of money to lend to their customers, rather than closing the floodgates they came up with an ingenious solution. They found they could continue to lend mortgages and loans if they sliced up the debt and sold it on to other canny investors. They did so, and it was this 'securitisation' that helped drive house prices ever higher both here and in America ...

The only problem was that those investors weren't as canny as they thought. They paid massive prices for these bundles of debt, despite the high probability that a certain proportion of the debtors would default. When house prices in America started to fall, inevitably, after so many years of break-neck inflation, all too many investors found themselves landed with these toxic packages, no longer worth much more than the paper they were written on ...

Unsurprisingly, as a result of all this chaos, banks have pretty much given up on securitisation and this is where our rather vulnerable economy comes in ... until recently mortgage companies were relying on this funny money for almost a third of their lending ...

The fact that none of the banks has any idea how badly their competitors have fared has only served to intensify the crisis. The interbank lending markets – the oil that lubricates the financial system – have been all but frozen for months (Conway 2008).

This article lays out concisely the problems with banks overborrowing and overlending, securitisation and the subsequent collapse of confidence and liquidity. Other journalists also detailed the failures of the regulators – the Financial Services Authority (FSA) in the UK to spot the problems. Regulatory failure was the fifth most frequently mentioned cause of the crash.

Unfortunately, Conway begins his article by blaming ordinary consumers for borrowing too much. In one respect, blaming consumers makes...