NPR Reporters Buy Toxic Asset, Become Stakeholders to Explain Financial Crisis

The Poynter Institute, a journalism think tank in St. Petersburg, FL, posted a piece about two NPR correspondents who bought a toxic asset. Thought some of you might be interested in learning more about it. ACS

Posted by Mallary Jean Tenore at 6:33 AM on Mar. 22, 2010

National Public Radio reporters David Kestenbaum and Chana Joffe-Walt wanted to help the public better understand the financial crisis — an ongoing narrative that they believe gets weighed down by numbers, statistics and seldom-explained financial terms.

So they made an investment as part of a "Planet Money" project. Together, with colleagues Alex Blumberg, Caitlin Kenney and Adam Davidson, they pooled $1,000 of their own money and bought a toxic asset — a sliver of one of the bonds that fueled the housing boom and then lost their value during the bust.

"I feel like we've bought our front row seat to the last quarter of the financial crisis," Kestenbaum said in a phone interview. "We're going to get to watch this thing die."

The purchase has meant that Kestenbaum and Joffe-Walt are stakeholders in the story.

In this case, the reporters said, becoming stakeholders was a low-risk way to get an inside perspective on what toxic assets really are. It has also helped them generate story ideas and gain access to information they may not have otherwise had, such as how the investment status of a toxic asset changes over time. Spending their own money, Joffe-Walt said, helped give them greater ownership of the toxic asset and, subsequently, their reporting on it.

Kestenbaum and Joffe-Walt spoke with "Planet Money" Editor Amy Stevens before making the purchase to ensure transparency and minimize any conflict of interest. Stevens said any money they make from the toxic asset will go to charity — likely one that helps educate people on financial issues. If they lose money, they'll take the loss.

"We certainly didn't want to share in any financial rewards," Stevens said by phone. "We also thought that in this case, once you are an owner, it gives you unique insight into what's inside one of these things."

To resolve the ethical dilemma, they were also transparent about their decision, letting listeners know that they made the purchase and would not benefit financially from it.

"The key thing was we should not stand to gain personally. We just wanted to make sure that we were ethically scrupulous about that," Stevens said. "The financial stake in it is really a journalistic tool. It's a way of taking a look at what's inside the toxic asset, but it is designed so we don't have a financial interest in it. And it's a very nominal amount of money. It's almost like an experiment; it's really a way of studying a phenomenon."

Kelly McBride, Poynter's ethics group leader, said she thinks NPR made a smart decision in being so open about the purchase.

"I like it when journalists put themselves in the place of the consumer, then describe their experience. It's similar to using a product or doing a travel story. You have to be very transparent with the audience," McBride said in an e-mail. "I think it's the perfect way to explain a complicated process to their audience, since most of us don't really know what toxic assets are."

"Planet Money"'s toxic asset has more than 2,000 mortgages in it. Whenever the foreclosed homes in the bond are taken over and sold for a loss, the bond shrinks, meaning the toxic asset will eventually disappear entirely. Whenever a homeowner in the asset makes a mortgage payment, those who own the asset get part of that money.

So far, Kestenbaum and Joffe-Walt have received $406.88 but have no way of predicting whether they'll ultimately gain or lose money when their asset disappears.

"There's some drama in it," Kestenbaum said. "Every month we get updates on how everybody in the pool is doing. There are a lot of human stories there in terms of who owns it and where they are."

Joffe-Walt and Kestenbaum hope to hear from some of the others who own part of their toxic asset, which has lost 99 percent of its value throughout the past few years.

Kestenbaum was reminded of this recently when he attended a toxic asset conference (yes, they have those) to further inform his reporting. While there, he asked one of the speakers, Craig Schiffer, for his thoughts on "Planet Money"'s toxic asset. Kestenbaum reported last Friday on what Schiffer said.

"You bought this personally?" Schiffer asked, a sound of disbelief in his voice. "It's not a very good portfolio, man."

The interactive time line that accompanies "Planet Money"'s coverage shows just how much the value of the toxic asset has depreciated over the past three years.

"Planet Money" added interactive components to the stories, Stevens said, in hopes of giving people an easy way to visualize the financial crisis' impact on the asset.

"The concept of a toxic asset is very, very abstract," she said. "By doing everything from a podcast to an animated Web video to a radio story to a blog post, we feel like we are reaching a broad audience and helping bring to life something that would otherwise be very dense."

One of the challenges Joffe-Walt and Kestenbaum have faced is figuring out how to explain a dense subject in a limited amount of time.

The original version of their story for "Morning Edition" was 12 minutes. They had to get it down to about 7:40. "That's not much time to explain what a bond is and have a whole story with characters in it," Kestenbaum said. "A radio story is like a poem. There's not a wasted word in it."

Joffe-Walt said she pictured telling the story to her mom, aka the average listener. Would her mom, she'd ask herself, understand what she and Kestenbaum were saying?

Their animated video helps break it all down, in a simple sort of way. Instead of referring to the bond by its technical term — "Harborview Mortgage Loan Trust 2005-10" — Joffe-Walt and Kestenbaum call it a "pesky little creature," a blue-haired "pet" that they hope you'll help name. (I voted for "Toxie.")

Their pet, they explain in the video, is sick because people are falling behind on their mortgage payments. They encourage listeners to follow their pet's journey and make a prediction about how long she'll last.

Kestenbaum and Joffe-Walt said they hope their ongoing reporting on the toxic asset will help inform listeners' predictions.

"I think generally we've been trying to do every story in a way that doesn't dumb down the actual details, that's accurate and understandable and, whenever possible, human," Jofee-Walt said. "If we can get people to understand what a toxic asset or a bond is, it'll be a major success."

"Planet Money"'s Toxic Asset Coverage

"We Bought a Toxic Asset, You Can Watch it Die," by Chana Joffe-Walt and David Kestenbaum

"Toxic Assets Market Awaits Rebound" by David Kestenbaum

"Toxic Assets: What You Need to Know" by Jacob Goldstein

Podcast: "We Bought a Toxic Asset!"

Interactive time line: "Tracking Our Toxic Asset"

Animated video: "Meet Our Toxic Asset"

Vote: "Name Our Toxic Asset!"

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