Weltwoche 42/08

Kurt W. Zimmermann asks why journalists are reluctant to admit error

We don’t care what nonsense was spread earlier about the financial market but unfortunately, our readers do.  In the case of UBS, the journalists were always in the know.  They knew, for example, that UBS has an unprofitable weak spot.

“The weak spot,” as the newspaper in Bern (Berner Zeitung) knew, “concerns investment banking.”  The journalists were also always in the know in the case of Credit Suisse.  They knew, for example, that CS’s weak spot was investment banking.  The NZZ realized it was a weak spot because, “the return yields are too low.”

Therefore Finanz & Wirtschaft (Finance & Economy) warned that, “In the future, investment banking will have to contribute considerably more to profits than it does today.”

Naturally, the two major Swiss banks adhered to the clever wisdom of the journalists.  They expanded their investment banking and proprietary trading.  They invested their clients’ money in all kinds of derivatives and collateralized debt obligations on the mortgage market and profits exploded.

The journalists, who had known it all along, felt validated.  Finally, a major bank would be “rewarded for the bigger risk appetite,” as the Aargauer Zeitung finally figured.

Today, it makes for more pleasurable reading to go back and reread the clever wisdom of finance journalists in the years 2004 and 2005. Back then, the journalists knew exactly what the major banks lacked: Our major banks were way behind in investment banking. They were risk-averters and not aggressive enough. No wonder they couldn’t compete with U.S. models like Goldman Sachs and Lehman Brothers.

In media circles, this column is known for its compassion.  Due to this virtue, we are not going to give a detailed account of how various papers today comment on the expansion of investment banking, which they themselves demanded.  We will simply summarize across the board: Back then, only idiots, desperados, blind people, felons and gamblers could have come up with the idea of expanding investment banking.

Why the hell isn’t there even a hint of soul searching among the media?  Why isn’t there even one economic journalist who says: Yes, we too misjudged the prospects and risks.  Yes, we too didn’t understand the financial instruments. Yes, we didn’t warn our readers of the dangers.  Yes, we are sorry.

One reason is that the mindset of a journalist is strictly future-oriented. What counts is only today and tomorrow.  History is somewhat of an obstacle for a journalist’s brain.  “What do I care about the nonsense I spread yesterday?” as the legendary Stern Publisher Henri Nannen stated as a maxim of his profession.  There is no better spot-on definition for the profession of a journalist.

Unfortunately, we, the simple readers, have an elephantine capacity for remembering.  We still remember how the media told us each envelope contained deadly anthrax.  We still remember how the media told us each steak contains deadly BSE.  We still remember how the media told us every pit bull was ready to kill our children.

And we still remember how we were told that UBS and Credit Suisse stocks were a safe goldmine; because finally – per the media’s request – they were practicing investment banking more aggressively. Granted, today we boldly lectured. Therefore, we as well have to face a make-or-break test.  So we claim: In six months, the SMI index will be about 20 percent higher than today. If not, you can come after us.

Translated by: Karin Eberhardt