It wasn’t the media’s fault

Observations on the financial crisis

This month, four colleagues and myself were summoned before John McFall's Treasury select committee at the Commons to give evidence on the media's role in the banking crisis. In the course of the questioning, Simon Jenkins remarked, to much merriment: "By an extraordinary coincidence you have all five journalists here who predicted the credit crunch."

Despite the irony, Jenkins, the only one of our number attending the 90-minute interrogation who was not a financial writer, was on to something. In the more obscure parts of the financial press, some reporters had expressed concern about aspects of the events that led to what Gordon Brown has since called a "depression".

I first wrote of my doubts about the securitisation of mortgages at Northern Rock - one of the main factors behind the credit crunch - in late 2002. Robert Peston and others giving evidence before the TSC claimed much the same. There was also some boasting of how we pointed out the dangers of a boom fuelled by house prices, credit and government debt.

But there was an air of unreality about some of this. It was not a story written with conviction. As the editor of the Financial Times, Lionel Barber, pointed out, it is not his paper's job to bring about the collapse of the banking system. Far from it, in the good times the FT is the cheerleader for capitalism. The paper's income is highly dependent on full-page ads from the masters of the universe at the investment banks.

The TSC members wanted answers to three questions. Had Peston, the BBC's business editor, been responsible for the run on Northern Rock and the fall in the share price of other banks? Was there a case (as Jenkins suggested) that financial journalists should, like war correspondents, operate under controls? And had sensational press coverage deepened the crisis?

Blaming Peston and those of us who wrote or broadcast about Northern Rock was shooting the messenger. Peston's broadcast on 13 September 2007, disclosing a Bank of England rescue, is often blamed for precipitating the run on the Rock. The truth is that the run in the money markets - where banks lend to each other - had been under way a long time, with big-battalion financiers refusing to fund Adam Applegarth's disastrously run Newcastle bank. Its share price had been in free fall for weeks. The only people out of the information loop were the ordinary punters with their life savings in the Rock.

When Peston let them in on the secret, just hours before the authorities were to announce it, people acted in what Mervyn King, the governor of the Bank of England, has described as a "rational" manner. They wanted to take their money out.

The problem was that the Rock had no contingency plans for such an event. It had few branches and staff and its electronic systems broke down, hence the queues. The press rightly warned savers; the bank, in its arrogance, let them down. But the televised queues, flashed around the world, did not enhance Britain's reputation.

Much that was written about the Rock and the bank collapses and rescues that followed was already in the market. The credit markets had frozen, share prices were plummeting and the professional investors were fleeing for cover. The press had a duty to report the share-price falls, the analysts' reports, the short-sellers' gambling on further share plunges. Not to have done so would have left private investors and savers at the mercy of the big boys.

Certainly there have been times during the crisis when journalists were asked (occasionally by government officials at the highest level) to censor themselves - and we have. But does this mean there is a need for financial "D-notices"? Of course not. That would defeat the democracy of the markets.

But, as the TSC asked, did my colleagues and I make the recession worse by bombarding the public with dismal economic news? I doubt it. It was the IMF in April 2008 which decreed that we were in the worst crisis since the Great Depression; it was Alistair Darling in August 2008 who talked of the worst situation in 60 years; and it was a deputy governor of the Bank of England, Charles Bean, who opined that it was the worst financial crisis in "human history".

Yes, there have been ghastly headlines and it is true that the charts on BBC News bulletins point ever downwards. But we writers could not ignore how industrial output was falling at a record pace, that US unemployment was rising, or that the Japanese economy was in free fall. The truth at the moment is nasty and the financial press is on the lookout for signs of an upturn.

But it will be a long wait.

Alex Brummer is City editor of the Daily Mail. His book "The Crunch" is published by Random House (£7.99)