Why does the press no spot monsters?

Today capitalism is confronting a crisis. It is now plain that the profits made by many of the world's largest companies are no more than a fiction. It may be that events on Wall Street and in London over the past few months will precipitate a vicious economic downturn. Or it may all blow over. It is impossible to say.

But one thing is for sure. Recent events at WorldCom, Enron and Tyco represent a catastrophe for financial journalism. For none of these seismic developments was foreshadowed in the press. If anything, quite the opposite.

For the better part of a decade, corporate leaders such as Bernie Ebbers of WorldCom or Denis Kozlowski of Tyco have been worshipped and adulated by a sycophantic media. The business press have not only failed to sniff out the stories. Just as bad, they have helped create a climate of opinion that has allowed fraud and excess to flourish. It is not just Arthur Andersen whose reputation is in ruins after WorldCom and Enron.

It is time for a debate which goes wider than just accounting standards and business ethics. The simple competence of the financial press on each side of the Atlantic must be questioned. City editors and reporters must ask themselves the brutal question that they are posing about business leaders. Have our own lax standards played a role in impoverishing pensioners, undermining public confidence and enabling fraudsters and con men to flourish?

Last week, at a private seminar at City University, Richard Lambert, former editor of the Financial Times made some devastating remarks. He asked an audience, which included new Times editor Robert Thomson and Ben Bradlee, legendary editor of the Washington Post during the Watergate Affair: "Where were the media while all these scandals were brewing?" He accused financial journalists of "the willing suspension of disbelief ". He said that newspapermen were "actively exploited by all these companies" and, yet more damningly, "were complicit in their behaviour".

Lambert asserted that "entre-preneurs by their nature take risks. They push the rules to the limit and they are always looking for new and original ways of making money. There were plenty of ways of doing that in the US in the late 1990s, and some of them were very dishonest.

"None the less, all these characters were feted as national heroes on the covers of business magazines, interviewed in the Sunday sections and - most egregiously of all - puffing up their share prices on CNBC." Lambert added that the British press was more cynical and adversarial and that this had prevented us from making the same mistakes as the US.

There is no question that Lambert's contribution is as timely as it is fearless. He deserves nothing but praise for opening up the debate. What is at issue is whether the British press is as professional as he seems to believe. Very few of the big scandals and corporate catastrophes of the past 15 years have been uncovered by journalists. The Guinness scandal, for instance, came as a bolt from the blue. It owed nothing to research by City editors, many of whom had happily ramped Ernest Saunders's reputation as a City wunderkind. Michael Gillard at Private Eye drew attention to the skulduggery at BCCI (Bank of Crooks and Conmen International) on a fortnightly basis. But few others joined in.

Very few of the major corporate collapses of the 1989-92 recession were foreshadowed by financial reporters (though the Economist did find out about Blue Arrow). The reporting of the Maxwell debacle was particularly shameful. British papers steered clear, partly for fear of writs, partly because of the proprietors old-boy network, and partly out of sheer idleness and inertia. No paper got close to the Equitable Life calamity of the late 1990s. British financial journalists were just as guilty as their US counterparts of building up the reputation of characters who later turned out to be duds. Just read a handful of early profiles of George Simpson, the destroyer of GEC, one of our very greatest industrial companies. Read up on Chris Gent at Vodaphone - before the share price went into freefall.

I was a financial journalist until 1992, and I am just as guilty as anyone else. The reason for our failures is complex. It is partly that most of us are financially illiterate and simply lack the technical skills to see through the accounts of an Enron. It is partly because in the bull market that has dominated the adult lives of anyone under 50, you simply miss the point if you are always looking for the knocking story. It is partly because financial journalists are far too dependent on PRs.

One really well-researched scandal story takes weeks, if not months, to prepare; it costs a fortune and then runs the risk of a crippling libel

suit. It is much simpler to go down the easy path, get to know the chief executives and PR men, drink the champagne and keep the stories coming.

In the circumstances, it is surprising that we have done as much as we have. Most City editors are in nobody's pocket. Many of them saw through the dotcom boom - Anthony Hilton at the Evening Standard was warning against it three years ago. Neil Collins at The Daily Telegraph has maintained a terrifyingly astringent commentary on events for years. The days of the celebrity City editors, with their tables at the Savoy Grill and private Swiss bank accounts, have gone.

But the current generation of financial journalists must come to terms, just like everyone else, with the bear market. It calls for a new set of skills and, with a few very honourable exceptions, we have yet to acquire them.