The Media and the S&L Crisis

Going to journalism school does nothing to prepare journalists to write on economics and finance, and not surprisingly, it is exceptionally difficult to find people who are both excellent writers and knowledgeable about economics. Henry Hazlitt is of course a notable exception (he never went to college) as is James Grant. (Grant, by the way has a new book due out later this year on the Depression of 1921.) In today’s Mises Daily, Dale Steinreich mentions how one of the main obstacles to understanding the S&L crisis is the fact that most of the people in the media who worked on the issue were incapable of understanding the problem as anything more than a failure to regulate (as in government regulation) the economy properly. In the minds of people with no significant economics training or knowledge (i.e, most journalists) economies can be made to do whatever people want them to do, simply by issuing government edicts. So, if more mortgages should be granted in low income neighborhoods, the government shall simply issue a command that it shall be so. What could go wrong? If something does go wrong it is because people didn’t follow the regulations or because government agents weren’t vigilant enough. Speak to most journalists (especially ones who like to cover political beats) about the problem of economic calculation or the role of the price system, and you’ll receive a blank stare. A perfect illustration of this is a little book about the Silverado Savings and Loan.  Remember that one? It was notable for two reasons: when it defaulted, about $1 billion disappeared, and back then, that was a lot of money, and it marked Silverado one of the biggest S&ls to collapse. The other reason Silverado made headlines was Neil Bush was a member of the board.