I should note before diving into this topic that it's related to the post below this one on the financial crises.... but since I haven't posted on the blog yet, I figure this is worthy of its own thread. :)
Through reading news and talking with my roommates today, I learned that last Monday, a report that United was filing for a second bankruptcy made its way around news websites across the U.S. and caused the company's stock to plummet (from $12 a share to $3 a share) in the early hours of market trading on Sept 8. The only problem? United never filed for a second bankruptcy! By the end of the day, the rumor was cleared up and the share closed at $10.92, which was only a 11 per cent loss. But with a loss of $1 billion recorded at one point throughout the day, this clearly shook up both United and the markets. The full NY Times story is here: http://www.nytimes.com/2008/09/09/business/09air.html.
Of course, the big question afterwards was: Who was to blame for all this? The story goes that an Chicago Tribune article (about the first and only United bankruptcy filing in 2002) was posted to The South Florida Sun-Sentinel Web site and included in a report by Income Securities Advisors, a business research firm, on company bankruptcy filings for 2008 (because the date when it was reposted was fresh). This report was posted to a Web page on Bloomberg News, and the headline was included in a news alert (text, E-mail, etc. I'm guessing) for Bloomberg subscribers. I think it's pretty safe to assume that many people on Wall Street did not fact check that headline before plunging into trading action.
I think this example raises a lot of issues with the lightning speed spread of news around the world. I can't even begin to fathom how many minor headlines are picked up each day by Google (thanks to software that aggregates keywords and relevant information) and circulated around the country and world. I've participated in many conversations in past journalism classes about the importance of fact-checking all information before relaying it on to an audience, even if you risk being the last source to report that story or information. (Better to lose a few readers than lose your credibility!) Of course, the Chicago Tribune claimed the 2002 story can only be found in the newspaper's online archives, and nobody has assumed full responsibility for starting the rumor. So perhaps credibility doesn't even become an issue anymore, if the information goes through so many different sources?
Just some things to ponder. The American economy is very sensitive to the news of major U.S. business collapses (sorry, not very savvy with the business/economic lingo!) these days, and rumors like that have the power to do notable damage to the stock market once people accept them as fact... which can happen almost immediately. What kind of power does this give Google? Could this kind of crisis happen again, or have investors and news aggregators/analysts learned their lesson? What impact could a false news rumor like this create in the future? I should probably stop here-- I have a tendency to write a lot-- but thoughts on this are very welcome!