Citizens’ watchdog or sensationalists? Striking the balance

Thank you so much for inviting me to speak to you today. You asked me to talk about finding the balance between transparency and responsible journalism. First, as a journalist, I am an advocate of greater transparency. There are instances when we hold back information – like if we know an arrest is about to happen, we won’t broadcast that because it may tip off those involved. In reporting on terrorist organizations, you learn to keep information confidential in the interests of national security. But you make that editorial judgment based on your independent assessment of the big picture. In financial reporting, you learn never to put two words together unless it’s already happening. It’s in every editorial manual. You here should appreciate those two words – bank run. We are very careful in how we use that term. Later on, I’ll tell you why.

Let me answer the question you posed in the conference title: is there cause for alarm? NO. No cause for alarm. There is, however, a need for disclosure – transparency. Why? More information leads to less panic. It leads to more informed decision-making – to people feeling like they’re in control. And in the end, that’s what this whole economic crisis is about anyway, right?  It is about confidence. So information is power that generates confidence.

As shareholder values plunged and trillions of dollars vanished, our world changed dramatically. Is it perception or reality? Well, it’s a little of both. Because the reality is that the perception of instability often creates that reality – particularly in times of crisis. So does that mean we should avoid reporting on unstable situations? Well, that goes against the grain of what makes news news – of what makes it interesting. Think about it. When do you want to watch the news? When you’re not sure what’s going on … or in other words, when situations change or become unstable. So we can’t avoid reporting it!

I did a quick check of reactions to financial reporting in other parts of the world. Interestingly enough, in the Untied States and Great Britain, there is as much written about how the media failed BEFORE the crisis – not by causing panic, but by not blowing the whistle early enough. Will Hutton, the CEO of the Work Foundation and a former journalist, said that journalists were as much to blame as the bankers because they indulged what he called the madness – what an
economist called “irrational exuberance” of these boom years that created the bubble that burst.

Journalist Daniel Schechter published a searing indictment of the modern banking system one week before the collapse of Lehman Brothers. The title of his book is PLUNDER: investigating our Economic Calamity and the Subprime Scandal. Journalists, he said, failed because they protected their vested interests. They were too close to the institutions they were supposed to be examining. Shechter pointed out there was little or no examination of the new breed of financial products like the CDOs and no warnings about the predatory lending practices which led to the subprime crisis.

Journalists are supposed to be the fourth estate, a watchdog for citizens. Many argued journalists failed to alert the public, to hold the financial and banking sectors accountable before this year.

Let’s fast forward to after the subprime crisis sparked an economic meltdown. In September 2007, the BBC broke a huge story: troubled bank Northern Rock was set to get an emergency loan from Britain’s central bank. That caused a bank run the next day, the first run on a bank in Britain in around 150 years.

A year later, that same journalist, Robert Peston, reported that Lloyd’s bank was in talks to buy its rival, and shares in its rival soared!

For these exclusives, Peston – along with other journalists – was called to Parliament to answer questions on their role in the financial crisis and whether journalists should face restrictions during periods like this. Members of Parliament called the BBC “dangerously overdramatic.”

Peston was asked if he was responsible for the run on the Northern Rock. He said, “I have obviously given a lot of thought to this, and the answer is ‘no.’” He said what led to the collapse of Northern Run was not the retail run but what he called the wholesale run – when institutions refused to fund the bank. I think that’s the way most journalists would answer. We tell you the problem, and often, we’re used to being the punching bag if the news isn’t welcome.

Let me give you other examples.

From Britain let’s go to Latvia, where Dmitrijs Smirnov, an economics and university teacher, was detained by police for two days at the end of last year. What did he do? He told a newspaper that the national currency was ripe for a devaluation and he advised people to exchange their lats.

In South Korea, a hugely popular blogger faces up to five years in prison on charges of spreading false information. Prosecutors say that led to a sharp fall in the value of the won.

Let’s go to the United States, where a survey by Opinion Research Corporation found that 77% of he 1,000 adults surveyed said they blamed the media for making the economic crisis worse.

Whether it’s the Asian financial crisis or the subprime crisis which led to the global economic crisis, the core problem is a crisis of confidence. And when people feel insecure, they tend to become emotional and that colors perception.

As a journalist, in the different countries I’ve worked in, I have seen first-hand how perception becomes reality, how moods and feelings – not facts – have shaped the world we live in. And how those moods and feelings can be very fickle and often turn on the messengers – the journalists who are bringing them the news.

I want to give you a concrete example that to me is ground zero of the Asian financial crisis. In many ways, the same excesses happened then.  So let’s go back more than a decade so I can give you a perfect example of how feelings and perceptions can change reality.

I reported on the fall of the Thai baht in 1997. When that happened, I was reporting on an annual ASEAN summit, and ministers there pooh-poohed its effects. Indonesia, in particular, along with the IMF and the World Bank, kept trying to reassure investors – pointing out that there would be little contagion in the region – especially not with Indonesia – because its fundamentals are good. That was echoed by the World Bank and the IMF. Famous last words.

Still, in the next few months, investors’ confidence began eroding, and the tipping point was the unveiling of the second IMF package in Jakarta. The rupiah had weakened, but it was holding. Everyone was waiting to see what was in this pkg. The head of the IMF, Michel Camdessus himself, was going to announce it. I was at the press conference, one of many journalists who had an open line to their head offices because as soon as anything was announced, we would go live.

But it wasn’t easy to make a quick call because there was no easy announcement. Instead, aides started going around the room, handing out a 35 page document that outlined the entire package. In the world of instantaneous 24 hour news, there’s just no time for reading and thinking.

I started skimming the brief during the press conference. But before I could even get half-way through, Atlanta started screaming in my ifb – it’s the earpiece where you hear the anchor, producer and director. They started telling me to go live because this financial wire service – which you all know and respect – but which I won’t name – crossed with one line. That line had three words: “IMF PACKAGE DISAPPOINTING.”

Shall we go with it – they asked repeatedly. I immediately said NO. No way. Let me finish

going through the package. Atlanta told me no, you don’t have time. You’re live in five minutes. I ran outside to do the live shot but before that, I told the producer I would give highlights from the top of the package – the parts I’d read but that I would not make a judgment.

But before I was done, my cellphones – and my producer’s cellphone began ringing wth calls from Morgan Stanley, JP Morgan … is it true, the bankers asked. Is the package disappointing?

Before the press conference ended, the rupiah dropped 30%. I was doing my best to contain CNN – to hold our network to the facts and not to rush to judgment. From what I had read, I felt the package was comprehensive. It had tried to identify and stem potential problems. I filed a CNN wires and talked to the supervising producer to make sure we weren’t contributing to the fall of the rupiah. We were sticking to the facts.

But that one line from a business wire was enough to topple the precarious balance Indonesia was trying to find. Within weeks, the rupiah went from 2,400 to the dollar to 17,000 to the dollar. It triggered an economic meltdown and began the contagion in Asia.

I was furious, incensed – so I went back to find this reporter who pushed that one line out prematurely. He’s a 27 year old American with a chip on his shoulder, a kind of arrogance that comes from not knowing how little you know. He was relatively new to Indonesia. I asked him how he could say the IMF package was disappointing when he couldn’t have read the whole package by the time he filed the wire. I know! He said he only looked at ONE section – that on corporate debt. I looked through it with him. Under that heading, it said – DETAILS TO BE ANNOUNCED.

That was his basis for saying “IMF pkg disappointing.” And the world reacted. Millions of Indonesians lost their jobs. Nearly 90% of Indonesia’s companies became technically bankrupt. And the fall of the Thai baht turned into the Asian financial crisis.

I tell you that so you understand how important one reporter and one news organization can be in how events unfold. Once the dominoes start to tumble, it’s hard to stop it from going down the line – like hot money pulling out when investors panic.

Let me fast-forward to today in the Philippines. First, we’re in a relatively good position – meaning that no one seems to dispute that there will be growth this year. In fact, for the first time ever, mature economies will contract and the only growth globally will happen in developing nations like ours. The government says GDP will hit 4%, the IMF says about 2.8%. The worst case scenario still predicts growth.

ABS-CBN is the only TV newsgroup that has its own business desk and dedicated business reporters. We started doing economic stories when the first of the subprime stories broke in the US.  We are pushing transparency and accountability – the initial story is which banks have exposure to CDOs and subprime? We found the ones which did and got statements from them. We broke the stories on the pre-need industry and its precarious position. When layoffs began to happen, we reported them. We also reported when job openings happened because we knew
our viewers would want that crucial information. We tried to balance the bad with the good to create an accurate picture of reality. We continue to push to get accurate data and numbers – not partial reporting but numbers that give a sense of the whole – not manipulated by vested interests.

It is – so far – not a difficult balancing act, but as times get worse in the United States – and our exports are affected and more OFWs lose their jobs, it may get harder. We try to keep focus: when people’s livelihoods and savings are at stake, we raise the bar and take more steps to ensure the quality and accuracy of the information.
It’s a daily battle to reflect reality rather than let perceptions and mood recreate reality. That remains our constant challenge.

In the end, our job is to take your jargon, your NPLs, your balance of payments, the words we’ve thrown around today and make our viewers understand why these numbers should mean something to them – show them how it affects their lives. In the end, we simplify and tell the story of greed and vested interests – the core of the subprime crisis – of corruption and the cover-ups – the core of Bernie Madoff’s pyramid scheme. That is why we will continue to ask you questions because we are the citizen’s watchdog.

At the same time, we are not your enemy. The system of checks and balances is an amazing thing. You need us to do your jobs well, and we need you to give us the information to do that. Because only then can we give the public the information it craves so our people can remain confident that their money is safe, that our financial system is sound. Remember, our economic problems stem from a crisis of confidence. Information is power which allows you to feel like you’re in control of your decisions. If you feel in control, you are necessarily confident.

(Speech during Bank Marketing Association of the Philippines forum, “The Crisis in Perspective – Is there Really Cause for Alarm?”)