By Rob Wells
One of the improbable tales of the savings and loan crisis involved a small financial newspaper, the National Thrift News, which beat giant newspaper rivals at exposing the Keating Five affair, one of the seminal influence peddling scandals of the 1980s.
This episode illustrated what a lot of Wall Street insiders already knew: that Stan Strachan, editor of the National Thrift News, was a force in financial journalism during this period. Strachan’ s scrappy trade newspaper uncovered how a notorious banker, Charles Keating Jr., got five US senators to pressure regulators to ease enforcement against Keating’ s Lincoln Savings. This episode— nearly two years ahead of reporting in The Wall Street Journal and The New York Times— would later be the focus of congressional hearings and cap Keating’ s downfall. Lincoln Savings later collapsed and cost taxpayers an estimated $ 3.4 billion. Keating eventually was sent to prison for 12 years on securities fraud and other charges.
This story also fit an unusual narrative about Strachan and his newspaper: it was yet another article that would anger powerful advertisers and subscribers of the National Thrift News. Strachan’ s ability to cover the industry as an insider and push to clean it up made the National Thrift News an unusual and important publication in business journalism. This small newspaper also influenced American finance, particularly as it highlighted corruption in the mortgage bond markets, which grew rapidly during the 1980s.
Strachan died in 1997, but this financial watchdog legacy remains relevant for today’ s business journalists, and journalists of all types, as the news industry tries to find its way in the age of Twitter and Facebook. He carefully walked the line between industry insider and outside watchdog, a difficult balance for any contemporary journalist. Strachan showed that smart beat reporting of companies and industries can lead to significant insights and yield investigative reporting that can serve
Financial journalist Stan Strachan, circa 1960s, prior to his position at the National Thrift News. the general public. The National Thrift News was ignored by larger news organizations but eventually won the recognition it deserved, not only within the genre of trade journalism, but also within the broader field of journalism. For example, it won a George Polk Award for financial reporting in 1988 for its coverage of the savings and loan crisis; the New York Financial Writers Association gave Strachan a lifetime achievement award in 1990.
This recognition was slow to come, however. National Thrift News was a trade newspaper, a genre of publications that cover specific industries and typically do not feature sports, entertainment or crossword puzzles. In the past, mainstream journalists have dismissed the trade press for failing to take a tough, watchdog stance in their reporting, as well as for failing to frame their journalism in the broader context of society. The limited scholarship in this field shares this critical view. James Ross wrote in Columbia Journalism Review,“ Trade publications have long been consigned to a netherworld somewhere between journalism and public relations.” In other words, trade newspapers historically have been low in the media industry’ s pecking order.
This lack of respect may be why Strachan and his reporters had to wait nearly two years to see any impact from their reporting about the Keating Five event. The senators were Democrats Don Riegel of Michigan, Alan Cranston of California, John Glenn of Ohio, Dennis DeConcini of Arizona and Republican John McCain of Arizona. Keating gave campaign contributions estimated at $ 1.3 million to the five. Major news media ignored the National Thrift News scoop, even though it described behavior that would lead to ethics charges against sitting US senators. At first, Strachan wrote,“ Nothing happened.”
It wasn’ t until Lincoln collapsed in April 1989 did the major papers begin reporting on Keating’ s efforts to get Congressional leaders to intervene in the regulatory process. By the fall of 1989, wallto-wall press coverage made Keating a household name, synonymous with the savings and loan debacle, a banking crisis that cost taxpayers an estimated $ 125 billion to clean up.
Mainstream media may have ignored the National Thrift News, but they could have learned a lot from it. While general business news publications( those that serve both consumers and business people, such as The Wall Street Journal and Fortune) have evolved from the trade press, they are criticized for sharing the same worldview as the people they cover. Intellectual capture and excessive reliance on industry to frame what is and is not news remain significant problems for general business journalism. This was one reason why some news organizations didn’ t pick up on warning signs ahead of the 2008 financial crisis, noted Dean Starkman, author of The Watchdog That Didn’ t Bark: The Financial Crisis and the Disappearance of Investigative Journalism.
National news media clearly failed to sound the warning about the savings and loan crisis until it was too late, many media historians say. A 1993 federal commission named to study the savings and loan disaster, the National Commission on Financial Institution Reform, Recovery and Enforcement, wrote:“ The news media were largely silent during the period when most of the damage was being done. The news media missed one of the most costly public debacles in US history.”
The National Thrift News didn’ t miss the story. It had a strong following among mortgage bond traders, regulators and housing journalists in the 1980s.“ They were fearless,” recalled Christi Harlan, a former Wall Street Journal reporter who contributed to National Thrift News in the 1980s.“ They were not afraid to take on the industry and the players who were buying subscriptions” to the paper, she added.
One of Strachan’ s best sources and closest friends was Lewis Ranieri, the legendary Salomon Brothers executive and pioneer of the mortgage-backed securities market. Ranieri said Strachan did not seek out to write critically of his friends and business associates, but he did not shy away from it.“ He didn’ t do it on purpose, but it didn’ t stop him. Stanley could like somebody a great deal and be very critical of him,” Ranieri said.
Years after his death, Strachan left a strong impression on his reporters. Several described how Strachan pressed them to
www. MoAF. org | Spring 2017 | FINANCIAL HISTORY 21