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Pointing a Finger at the Press
Financial reporters have been playing a significant role in hastening the demise of a number of companies. Should they be called to account?
With the Quasimodos of Wall Street hauled down from their corporate bell towers this week to Washington by a vengeful Congress and leering media, it may seem as though justice is finally being done. But for all the zeal in the press for the corporate perp walks, it's regrettable that members of the media aren't being put in the dock themselves and questioned about their role in this financial disaster.
Whenever an aircraft crashes into American soil, federal officials send a rapid response team to examine the debris and determine the cause. When a consumer is sickened by tomatoes or a leaf of spinach, the feds trace the contaminated food to its source with the fervor of a SWAT team.
But what happens when calamity befalls an investment bank, and the precious cargo is shareholder equity, which plummets to earth at alarming speed? Should the federal government investigate the cause of such a catastrophe, distinguishing deliberate negligence from simple human error?
The accusation itself—akin to "When did you stop beating your wife?"—hung in the air like the smell of gasoline.
On March 16, Bear Stearns lost nearly all of its book value and had to be sold at rock-bottom prices to JPMorgan Chase. The Securities and Exchange Commission is now examining the days leading up to this event to determine whether Bear's collapse was in some way precipitated by investors betting on the bank's failure.
SEC enforcement officers are investigating whether any of 50 hedge funds made false statements with the intent to undermine public confidence in Bear. That, of course, is a felony, classified generally as securities fraud.
But the larger, much thornier, issue involves the reporters who disseminated those statements. If they knew the information was wrong, their actions could also be construed as crime (aiding and abetting), and so too would a refusal to discuss their sources with federal authorities (obstruction of justice).
In Bryan Burrough's seminal account of the Bear crash in the August issue of Vanity Fair, he described it as an unprecedented bank run, caused in large part not by a criminal indictment or some mammoth quarterly loss but by rumor and innuendo that, as best one can tell, had little basis in fact. Burrough identified one financial reporter in particular, CNBC's Charlie Gasparino, as the bane of Bear Stearns.
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Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
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Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
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Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
Good article, but this raises a ton more questions. Does the SEC have internal guidelines for issuing a subpoena to members of the press like the DOJ does for investigations and grand juries? Something tells me that if they were investigated it would end with no conviction other than a shameful perjury akin to the Plame/Libby scandal.
Jim MCCarthy a thousand thanks for this important article. It's about time this area of the problem is getting some attention. I know people who worked at Bear and there was much contempt illustrated by those reporting at CNBC, as well as sophomoric antics such as ridiculing men and women after the tragedy had occured.
Thank you again.
I'm just a humble wasabi farmer and don't usually chime in on financial or public affairs, but this piece hit a nerve and begs questions: Does influence these media pundits supposedly exert not require direct complicity by willing choosers amongst myriad media channels, to achieve any real credibility? Or are you implying we public are little more than lemmings, incapable of independently distilling conclusions from cacophonous input, and therefore need interpreters, but that the interpreters need more oversight to assure supposed objectivity? Come on now...
This is indeed a thorny and pithy issue. While I concur with your premise that reporters need be accountable to high standards, your implied solution over-reaches. What we don't need right now is more witch hunts and/or perp walks. While the media should not be allowed to operate unchecked, laying blame at their feet for swaying public opinion and causing demise is a reach. Implying via innuendo potential criminal complicity ("If they knew the information was wrong"), you further compound the problem and commit the very sin that you accuse them of.
Despite wide viewership and a reputation as credible dispenser of economic news, CNBC (nor any single media) deserves status as the primary influencer of public opinion. While animus for Charlie Gasparino may partially explain your rant, taking Faber to task in the bargain misses the mark. Amongst financial news reporters, his well researched insights and deep-keeled intellect are well-respected. Compared with his peers, his opinions are generally balanced and delivered with an eye towards the very professionalism you laud as essential. More egregious and easier targets abound, so, if credible culpability is your quest, level equal angst and scrutiny at Times, Fox reporters, et al., as well as a complicit public for being duped by complacency.
The nexus of these messes is not as simple as errant opinion(s). Caveats to the public, however delivered, to carefully discern opinion from facts, are certainly in order, but not witch hunts.
Thank you.
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