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Panic in an interconnected world: the media and Northern Rock

Panic in an interconnected world: the media and Northern Rock. Gillian Tett, Financial Times. The financial crisis on YouTube.

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Panic in an interconnected world: the media and Northern Rock

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  1. Panic in an interconnected world: the media and Northern Rock Gillian Tett, Financial Times

  2. The financial crisis on YouTube • The role of the media in the recent financial crisis has grabbed plenty of attention…not least from the media itself. First crisis played out in real-time, on YouTube, on blackberries. What does that mean for how crises develop and regulators respond? • What does it mean for media’s role – and how they disseminate information?

  3. The financial iceberg • Media traditionally looked finance through cash equity prism. But this is outdated. • Biggest growth in financial arena in recent years has been debt and derivatives world. But this is barely covered • Financial system thus like an iceberg – media has just focused on tip

  4. The secret life of CDOs • In practical terms, this means there has been very little coverage of CDOs, structured finance (and all the other things at heart of NR tale) in recent months • There has thus been a growing information gap between City and rest of the political world and society • This creates a risk of a backlash – rebound…and this is exactly what has occurred

  5. The backlash • One way to see the events of this summer is as a case where the information gap has suddenly been breached • Institutional investors have suddenly woken up in a shock; so have retail investors…. • And so has the media; shock horror: NR was doing securitisation! CDOs are taking over the world! Backlash takes over..suddenly there is blanket coverage of securitisation…SIVs everywhere…!

  6. News travels immediately..everywhere! • Sense of panic builds; fuelled by media reporting the panic…a self-reinforcing loop • Immediate nature of the information distribution adds to panic • Information is now spread instantly around the world. First financial crisis for the you-tube generation; first crisis fought on the beach with blackberries..

  7. Policy Implications? • Regulators need to realize they are operating in a youtube world; crises can erupt immediately all over the world • Financial world needs to rethink the way they deal with the press; if you keep structured finance secretive, it will rebound on you one day • Media needs to think about how it report on crises (what is responsible reporting?) and how it covers financial system more broadly (how do we avoid the iceberg syndrome?)

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