Reporting on the Sausage Factory

I read far too much financial reporting for my own good.Inside the Sausage Factory

Part of this sentiment springs from my own dislike of economics (I entered college as an economics major, learned why it is called the “dismal science,” and changed majors). Part of this sentiment is a reflection of a reality: there may be no journalist currently writing who has mastered the troika of the what I call the sausage factory: finance, economics, and politics.

For example, Gretchen Morgenson does some very important journalism for the New York Times, but she often gets ridiculed by financial types because she gets tripped up by the arcana of the financial world. Felix Salmon (one of my fave bloggers) pillories her for messing up on credit default swaps — and he is one of her defenders! Matt Levine, a relative newcomer to Dealbreaker, also gives to her on the issue of municipal derivatives.

Here’s the thing: Morgenson gets the “big picture” issues. She really nails them.

Here’s another thing: when the Wall Street-Washington axis drafted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 while pondering the evils of derivatives and proprietary trading, it all seemed so easy. Derivatives and proprietary trading help run the economy off the rails! However, in 2011 when actual people and financial wizards tried to implement protections, they had trouble even defining derivatives and proprietary trading.

Here is another (long-winded) example:

When members of the new Obama Administration joined with Congress to make some sausage (otherwise known as laws, rules, and regulations) in 2009, a lot of attention was given to a book called “Team of Rivals” by the (famously liberal, Red Sox-loving) historian Doris Kearns Goodwin. Goodwin studied how Abraham Lincoln recruited and managed his greatest political rivals to make sausage on the eve of the Civil War. The book was received with great acclaim (and it took me two months to wade through its 750 pages).

Two years later, a book with a similar theme was published, likewise capturing the attention of the Washington and Wall Street cognoscenti; however, not always in a good way. Ron Suskind’s “Confidence Men” focused on the Obama Administration’s attempts to address the country’s economic collapse.

The attack hounds launched into a frenzy of criticism (here and here) based on the assertion that Suskind did not understand the work of Wall Street or economics or he exaggerated on occasion and therefore, by extension, his work should be discredited. OK, the criticisms may have validity, but the book is absolutely, positively worth reading because it give us an idea of how the sausage is getting made in Washington these days. I believe there is great value in getting inside the room during the discussions. When Rahm Emanuel famously tells the president’s senior advisors to “shut the fuck up,” well, that’s priceless insight into the inner workings (or dysfunction) of our government at the highest levels.

Sure, economists and financial wizards might find that stuff dull, but it has an impact on all of us and the economists and financial wizards better pay attention.

Here’s the other thing: granted, some of our better journalists can get details wrong, but we cannot discredit them. The value of covering stories like the backdoor creation of MERS — an attack on the very notion of our property rights — cannot be overstated. Likewise, the value of getting a peek inside the Obama Administration policy machine – no matter how one-sided the narrative plays out – carries tremendous weight.

So…don’t give Morgenson or Suskind the Pulitzer Prize, but keep reading them to stay informed on how the sausage gets made.

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About Stephen Dedalus, Jr.

I am trying to awaken from the history of my ancestor's nightmare to comment on my Holy Trinity of Interests: art, literature, and music. Oh, and thoughts on dysfunctional families, which is to say families.
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