Media in the dock
By Ian Dunt
A committee of MPs have grilled financial journalists today on their behaviour during the economic crisis.
To read analysis of the issues surrounding reporting restrictions click here
To read arguments from a journalist and a shareholder click here
The Treasury committee called Robert Peston from the BBC, Lionel Barber from the Financial Times, Alex Brummer from the Daily Mail, Simon Jenkins from the Guardian and Jeff Randall from Sky and the Telegraph to appear before them this afternoon.
With market volatility at unprecedented levels and the UK slipping deeper and deeper into recession, shareholders, bankers, politicians and journalists themselves have been asking questions about the role of the media during the crisis.
A leak to Mr Peston about the imminent collapse of Northern Rock, for instance, led to massive queues outside the bank which eventually forced the government to guarantee people’s savings.
Asked today if he was responsible for the run on the bank, Mr Peston said: “The answer is no.”
He then went on to argue that the tone of his broadcast was not “excitable”.
“At the risk of sound pompous, there is public interest in letting millions of people know about their banks.
“If banks are weak, there is a public interest.”
He added Northern Rock had an unsound business model, and if he had not broken the story, very little would have changed.
Jeff Randall said: “In the case of Northern Rock, it was a deeply flawed bank with a broken business model. It didn’t collapse because Robert revealed it was – it was a bust business.
“Too few of us rang the bells.”
Mr Peston added one reason Northern Rock was that it had 1.3 million savers and only 50 branches.
“Northern Rock was a story I was following for years. In 2003 I first covered Northern Rock as a bank growing too fast. For years I looked like a plonker,” he said.
He said after the story broke, savers went online for more information and when the website went down they went to the limited number of branches and found fellow customers queuing.
“When Bradford & Bingley was faced with similar problem, they flooded branches with staff and ensured servers could handle visitors.
“Other important point, which led to collapse, was the run on the wholesale markets. Northern Rock would have collapsed irrespective of the retail run,” Mr Peston said.
“Plainly it was big story at the time, but it was not what did it for Northern Rock.”
He also criticised Northern Rock for only issuing a complex statement to the stock exchange to explain its situation and not engaging customers.
Mr Randle said: “The source of this [whole crisis] was debt and not enough information. Right up to very top, people did not understand what was going on.”
MPs asked whether there should be restrictions on financial journalists’ reporting during periods of market turbulence, or whether they should exercise more restraint.
Asked if he has any contacts close to the Treasury, Mr Peston said: “You would not be surprised that the one area where I am uncomfortable is about sourcing of any sort.
“Over the years I’ve benefited from private conversations with members of this committee and I think it’s unlikely they would want me to divulge any of those chats.”
There were also questions about whether journalists have sufficient expertise in financial issues, an issue particularly relevant as financial issues move from the inside pages to the front.
