Thoughtful piece by James Robinson about why even the specialist media were taken aback by the banking crisis.

Should City editors and economics correspondents have predicted it?

Alex Brummer, the Daily Mail’s experienced City editor, believes they should have done. He argues that, although City journalists covered the problems of some individual companies creditably, few grasped the enormity, or scale, of the situation.

‘They were slow off the mark originally,’ he says, pointing out that young journalists who weren’t working during the last financial crisis in the 1970s did not have the foresight to realise that a problem at one institution can quickly become a problem for all. ‘That has something to do with the age profile. They’ve been brought up in a period of non-stop output and growth. I cut my teeth as a financial journalist in the white heat of the 1976 financial crisis, when 25 banks went under. Having lived through all of that you learned a [crisis] spreads from one institution to another and [governments] need to do something very quickly to stabilise the system.’

Brummer’s historical perspective is something only a few share. Jeff Randall, a business journalist and the Daily Telegraph’s editor-at-large, has been warning about personal debt and an unsustainable housing boom for years, and others have voiced similar concerns. Yet few identified the sub-prime market, or the credit crunch, as triggers that would push the world to the brink of recession, and senior figures at the FT admit they should probably have done better in that regard. Dan Bögler, the paper’s managing editor, says: ‘We believed the bankers when they said derivatives were making the world safer by spreading risk. But in reality it became a game of pass the parcel and the parcel ended up in the hands of those who least understood it. We take our share of the blame for that.

‘Why didn’t we spot it? Unfortunately, financial journalists – and the FT has better-trained financial journalists than others – don’t really understand this stuff, and they join a long list of people that starts with bank regulators, central bank regulators and money managers.’