November/December 2000 | Contents

NEWS IN THE AGE OF MONEY

If you had a spare $1,000 back in August, 1982 and invested it in, say, Hewlett-Packard, you could have sold your shares in mid-October for about $20,000. (Oh well.) The Dow rose some 9,500 points in that remarkable period. The real economy, meanwhile, roared in harmony with the markets, churning out jobs and wealth. the result, for some Americans, has been more job security and expanded dreams and, for those at the top, untold riches. Money, as Cyndi Lauper once explained, changes everything. In the package of stories that follows, CJR explores how well we journalists have covered this age of money, and how it has changed what we do.

BUSINESS REPORTING: BEHIND THE CURVE

BY DIANA B. HENRIQUES

In 1980, I was working in New Jersey as an investigative reporter at The Trenton Times, trying to unravel the local angles of the FBI's wacky "Abscam" sting, in which members of Congress were secretly filmed accepting bribes from undercover agents posing as aides to an Arab sheik. One of my closest friends, Jaye Scholl, was covering Princeton, the Gold Coast of the Times's distribution area. Zoning disputes, election campaigns, corruption scandals, local tax rates, and the battle over casino gambling -- these were the nuts and bolts of hard news as we knew it.

But within the year, more by default than by design, Jaye had become a business journalist. "I knew nothing about business, but they had posted the job and nobody else wanted it," she recalls. Almost overnight, she became business editor, dealing with financially challenged colleagues who would say things like "I've never read a prime-rate story and I never intend to."

At the time, the prime rate -- the interest rate banks charge their best corporate customers -- was skyrocketing. Federal Reserve Chairman Paul Volcker was waging all-out war against inflation. In the resulting recession, local manufacturing plants were cutting back. Labor unions were reeling from job losses. Local department stores were closing, and statewide banks were shaky. "It looked like the plug had been pulled on New Jersey," Jaye says, looking back.

Pretty dramatic stuff. Nevertheless, most of us in that long-ago newsroom still thought that Jaye had lost her mind to give up one of the most prestigious beats on the paper to cover business. To us, business reporters were candidates for retirement or permanent inebriation, whichever came first. Jaye, on the other hand, was young, smart, and ambitious.

And slightly ahead of the curve, as usual. By the end of 1982, I too was a business reporter, covering the Latin American debt crisis for The Philadelphia Inquirer. Jaye, now the West Coast editor for Barron's magazine, and I were part of a migration that began slowly and has since become a thunderous stampede. The media monitor Dean Rotbart estimates there were only a few thousand business journalists in 1980. When his newsletter, TJFR Business News Reporter, first counted noses in 1988, there were about 4,200 of us in the top fifty newspaper markets and at national business publications. And today, at those same newspapers and magazines, on television and on the Web? "Clearly over 12,000," Rotbart says.

Of course, by 1980, some of the nation's giant metropolitan newspapers had already dramatically expanded their commitment to business news -- or, at least, to economic news. Hobart Rowan, recruited from Newsweek by Ben Bradlee, had begun to beef up The Washington Post's meager business section by the mid-1960s. John F. Lawrence, a twelve-year veteran of The Wall Street Journal, became financial editor of the Los Angeles Times in 1968, bringing along a young Journal investigative reporter named Paul E. Steiger to help him (Steiger is now the Journal's managing editor). In 1978, The New York Times unveiled one of the nation's first stand-alone business sections, Business Day, under the direction of John M. Lee, who had been the paper's financial correspondent in London and bureau chief in Tokyo before becoming business editor in 1976.

"There had been a huge explosion of economic news in the 1970s," Lee recalls, citing President Nixon's wage-price controls in 1971, the Arab oil embargo in 1973, and the turmoil on Wall Street after 1975, when regulators banned high, fixed trading commissions. "The ground was ripe for the move."

	TIMELINE
1970	Louis Rukeyer starts Wall Street Week on PBS
1971	President Nixon imposes wage-price controls
1972	Money magazine is founded
1973	Arab oil embargo sends fuel prices climbing
1978	The New York Times unveils Business Day
1979	Federal Reserve Chairman Paul Volcker launches his anti-inflation campaign, and recession follows
1980	CNN introduces Moneyline with Lou Dobbs
1981	The Financial News Network goes on the air. Michael Bloomberg leaves Salomon Brothers to start his own financial information service. Nightly Business Report airs nationally on PBS
1982	After more thn a decade of lackluster trading, the stock market begins a historic rally
1983	The Wall Street Journal reveals that regulators are investigating a staffer, R. Foster Winans, for tipping traders in advance to news in the paper's "Heard on the Street" column. Adam Smith's Money World launches on PBS
1985	Winans and two others are convicted on federal fraud charges
1987	The October market crash jolts, but does not deter, a nation of neophyte investors
1989	CNBC is launced, catering to a growing interest in stocks; Bloomberg starts a wire service to compete with Reuters and Dow Jones
1991	Dow Jones Industrial Average exceeds 3,000 for the first time. The Financial News Network files for bankruptcy
1992	Dow Jones and Hearst join forces to publish Smart Money, a personal finance magazine
1995	CNNfn is launched
1996	A record number of new personal finance magazines-- twenty-two of them -- are introduced. Financial news Web site TheStreet.com makes its debut, fuelting the dot-com explosion
1997	CBS Marketwatch is launched
1998	Dow Jones and CNBC announce they will collaborate on business news on overseas television. The Industry Standard is launched, covering the Internet economy.
1999	Dow Jones Industrial Average tops 10,000 for the first time
2000	On August 25, a faked press release about Emulex, a technology equipment manufacturer, is picked up by Bloomberg News and a host of rival news services. The company's shares plummet until corrective news is released. The Associated Press teams up with Cnet.com to beef up its financial news offerings

That may have been evident from Lee's lofty vantage point, but down on the vast prairie of American journalism, it took a few more years before business news attracted much attention. And when change finally came, it seemed to me that a lot of us newcomers were constantly preparing to fight the last war.

Trained on political news beats, we were utterly unprepared to cover the economic legacy of the 1970s. Before we had memorized all the members of OPEC, the next "war" was upon us -- Volcker's campaign to curb inflation. This demanded something new: a vocabulary capable of explaining the deadly mismatch between the borrowing and lending rates at banks and savings and loans, a grasp of the relationship between risk and reward, and at least a rudimentary idea of who regulated banks, S&L's, money market funds, and insurance annuities. It was not our finest hour, to say the least. Extravagant thrifts were a local story; the legislation that permitted their folly was a congressional story; the understaffed agency trying to police them was an arcane trade-press story; and the occasional financial analyst who noticed that S&L stocks were imploding was a Wall Street story. It took us far too long to connect the dots.

And as we scrambled to cover the S&L industry's collapse, the emphasis shifted again and our morning news quiz suddenly was on corporate governance -- hostile takeovers, mergers and acquisitions, all exposing how little we knew about the duties of corporate directors, the etiquette of proxy fights and the rules that governed corporate raiders. Struggling to decipher unfamiliar proxy statements and 13-D's -- and to understand how we ourselves could be manipulated in these takeover fights -- we were blindsided by globalization. How could a sneeze in Bangkok become pneumonia in Moscow or São Paulo -- and galloping consumption in some American mutual funds?

Ready at last to be tested on globalization, we found the exam actually was about the speed-of-light technology that is changing the way people work, communicate, trade stocks, conduct advertising campaigns, buy and sell nearly everything and, incidentally, gather their daily news. (What's waiting to blindside us next? My guess is it will be old-fashioned politics, our long-forgotten starting point, as grass roots movements rise up to challenge corporate power and Congress grows testy over medicine prices, media violence, and unsafe tires.)

The bright side of this frantic, learn-on-the-fly journey has been that each working day brought a new opportunity to stretch and grow. Any journalist who feels stale and unchallenged after covering the last twenty years of business news should consider a new career leading amateur Everest expeditions. But for me, a less satisfying consequence of our odyssey is that we have been constantly climbing up the steep left-hand slope of the learning curve. Our early ignorance made skepticism and independent analysis difficult. And too often, before we could get around to producing the lucid, profoundly informed pieces that are the joy of the learning curve's summit, we were once again in unfamiliar territory.

Technology, most of all, is rocking the boat from which we are trying to cover it. No longer mere journalists, some of us are now "multi-media content providers." In 1980, searching the archives meant leafing through fat envelopes of fragile clippings; today, everybody's old stories are a double-click away. Back then, the only way I could file a story from outside the newsroom was to dictate it over a public telephone to some rewrite person. Today, I dictate my stories to the voice-recognition software installed on my laptop computer and file them by e-mail, checking in on my cellular phone later to see if the copy desk has questions.

On good days, I believe that this remarkable twenty-year boom in business news has produced a financial press corps of unparalleled depth and breadth, and that today's technology is simply empowering us to do more, better, faster. Not everyone agrees, of course. Dean Rotbart shakes his head over today's army of business journalists: "There are a lot of unqualified people among that 12,000." Well, let us say, less experienced, at least. Many business publications, especially personal finance magazines and local newspapers, are struggling with the expansion-team syndrome -- there are only so many good shortstops to go around. What do you do? You hire young, and hope. Meanwhile, your seasoned all-stars are getting hired away by the major leagues. The result, says Rotbart, is that "at the upper level, where competition is fiercest, business journalism is the best it's ever been. But on average, it's behind where it was five or even ten years ago because the bottom has gotten a lot worse."

Remembering my own early naïveté, I am somewhat more optimistic. As a Wall Street novice, I once dashed off a quick funny feature about a thoroughbred stable newly listed on the American Stock Exchange without ever reading the financial statements detailing problems that soon put the stable in bankruptcy. In my own defense, company financial statements were harder to come by in those days and my editors were as trusting as I was. But I doubt that many young Wall Street reporters at a major regional daily could get away with a lapse like that today.

But if today's best and brightest are far more savvy about the modern machinery of business journalism, they seem far more naïve about its age-old temptations. Those covering the "new economy" for the "new media" seem especially mystified about why it's such a big deal if they invest directly in industries they cover, or accept cheap insider stock in some industry pal's IPO, or do consulting work on the side for technology companies.

Janelle Brown, writing thoughtfully in Salon in mid-1999, suggested that we need fresh ethical rules "flexible enough to anticipate new issues that will surely arise in this fast-paced industry, where the lives of journalists are increasingly entwined with the people whom they write about and companies that they cover. Or must all technology journalists simply accept that by joining the writer corps they are taking an oath to disavow the temptations of technology riches?"

Well, yes. At least those riches that raise questions about the independence and credibility of their reporting. A technology journalist can avoid unseemly conflicts simply by investing only in broad-based mutual funds. (Of course, those funds may own some technology stocks, silly. But somebody besides you will be deciding which stocks to own and for how long. And yes, those who work for Internet news organizations have a personal stake in the sector whether they own shares or not ­ but it's fully disclosed on your business card, for heaven's sake.)

These are not, after all, "new economy" issues. Selling out has been a temptation for journalists since the Republic was a pup. The congressional investigation of the 1929 stock market crash turned up evidence that market manipulators had paid New York newspaper reporters to tout stocks on demand. Ronald Steel noted, in his magnificent biography of Walter Lippmann, that the legendary pre-war journalist Arthur Krock, while at the New York World Telegram, actually moonlighted as a public relations adviser to the Wall Street firm of Dillon, Read. Maintaining an undisclosed personal stake in any arena that you are supposed to be covering independently and objectively -- whether it's a political movement, a Broadway play, or an Internet stock -- violates pre-Cambrian concepts of journalistic ethics. And in every generation, there have been sincere but misguided journalists who believed that, in their case, it was different.

One of them was, like me, an émigré from local journalism in Trenton. In 1981, he went to work at the Dow Jones News Service and in July 1982, he was hired by The Wall Street Journal to help write the paper's influential "Heard on the Street" column.

His name was R. Foster Winans.

Like today's young technology journalists, Winans found that his life soon became "entwined" with the rich, clever people he covered. He, too, was disgruntled over the stinginess of journalism paychecks. He, likewise, was certain he could invest on the side without "letting my investment alter my judgment at work in any way." Soon after he arrived at the Journal, Winans secretly bought 400 shares in a small, illiquid company, American Surgery Centers, and then wrote positively about the company in his column.

BUSINESS COVERAGE

NEWSPAPER	STAFF SIZE early 1980s	STAFF SIZE -2000	DAILY PAGE COUNT early 1980s	DAILY PAGE COUNT - 2000
Washington Post	18	81	2 pages behind sports	12-page daily section
LA Times	20-25	90	6-7 pages behind sports	14-18 page section
Dallas Morning News	8	54	1-3 pages	12-page section
San Francisco Chronicle	7	27	5 pages	12-16-page section
Tampa Tribune	2	14	3 pages	7-page section
Cleveland Plain Dealer	9	24-25	4-5 pages in another section	8-10-page section
Milwaukee Journal Sentinel	7	19	3-4 pages	6-8-page section
Hartford Courant	3.5	17	3-5 pages in main news section	average 6-8-page section
Rocky Mountain News	6	14	14 pages	16-25 pages

"I knew what I was doing was technically unethical for a journalist," he wrote in his memoir, Trading Secrets: Seduction and Scandal at The Wall Street Journal, published by St. Martin's Press in 1986. But he somehow reasoned that "the ethical question was purely one of appearances . . . . If no one ever found out, no one would perceive a potential conflict and, therefore, I would not have done anything unethical. It was slightly circular reasoning but it got me past the big hurdle."

Soon, Winans had agreed to tip a broker in advance about stocks that would be mentioned in his "Heard on the Street" columns, in exchange for a share of the profits. He made about $30,000 on the deal, more than he made in a year at the Journal. The outraged Journal reported on March 29, 1984, that regulators were investigating the scheme. In June 1985, Winans was convicted of various federal mail and wire fraud charges; he was later sentenced to eighteen months in jail. In 1987 the U.S. Supreme Court upheld his conviction.

Although Winans insisted to the end that he had not violated any laws, he knew what he had done to his fellow journalists. He had "confirmed the suspicions of many investors about stock market writers -- that they take personal advantage of the information they gather. Realizing this hit me pretty hard."

Looking back after sixteen years, I still feel that the Winans affair put all the fearsome temptations of modern business journalism into razor-sharp relief for me. How could anyone mistake these for fuzzy-edged issues? But Matt Welch, a trenchant young media critic for the Online Journalism Review, told me recently that he is convinced that Winans's sins, if committed today, would not provoke one-tenth the media outrage expressed in 1984. When a Silicon Valley gossip columnist accepted cheap pre-IPO shares from a local technology mogul, he noted, many supposedly sensible professionals wondered aloud whether she had done anything wrong. "Journalists see all these people getting rich -- including other journalists, back when online content was worth something," Welch says. "And a lot have really lost their bearings."

I can only hope that he is wrong. If he isn't, no matter how rich today's young journalists become in this great business-news bazaar, journalism itself will be poorer beyond measure.

OTHER MEDIA	1988	1999
Number of business magazines	358	694 (1998)
TV networks weekly minutes of business coverage	1,179	1,377
TV networks weekly minutes of NYSE/NASDAQ coverage	152	296
CNBC household audience growth	88,000 (1992)	339,000 (2000)

But let's assume, under the influence of some persuasive Chardonnay, that most of us will attain the rocky promontory of intelligent skepticism and dig in there for the duration, regularly producing lucid, hard-headed business coverage. And let's further predict -- yes, please, just another splash of that wine -- that most of us will do so with our honor and reputations intact. We would still just be talking about what kind of people we are. And ultimately, this boom in business journalism is not really about us. Rather, it is about our relationship with those we're trying to reach -- whether we call them readers, viewers, or (heaven help us!) "eyeballs."

My friend Jaye Scholl reminds me that most new business writers back in 1980 instinctively and perhaps wrong-headedly approached local business news from the perspective of the workers involved -- after all, we were workers ourselves, with a healthy mistrust of what passed for management in the newspaper business. As the 1980s rocketed along, our "readers" became "consumers." As the 1990s unfolded, those "consumers" morphed into "investors." And today, some of us are speaking only to investors who also own computer modems.

A sad thing has happened along the way: as our intended audience has gotten narrower, so have we. Business news today rarely sounds the sonorous chords or heart-lifting themes of great journalism. Most of it simply buzzes and squeaks, a reedy clarinet against a rhythm section of cash registers and ticker tape. The men and women who scrambled to explain the economic turmoil of the 1970s -- the gas lines and the shuttered factories and the apparent erosion of American competence -- were not writing for consumers or investors. They were writing for citizens, for people who cared deeply about how this nation turned out. They assumed an audience whose concerns stretched far beyond the performance of their 401(k) and the leasing arrangements on their Jeep Grand Cherokee.

I don't know about you, but I'd rather be writing for those people again. I suspect that nothing we achieve in terms of competence and integrity as business journalists in the years to come will matter very much, unless we do.

Diana B. Henriques, a financial writer at The New York Times, is the author of two business histories, Fidelity's World: The Secret Life and Public Power of the Mutual Fund Giant and The White Sharks of Wall Street: Thomas Mellon Evans and the Original Corporate Raiders.