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Pointing a Finger at the Press
As a media consultant to a number of large-cap companies, including financial services firms, I've frequently challenged CNBC reporters and producers on the use of anonymous sources and tangled personally with Gasparino.
During that fateful week of March 10, CNBC segments on Bear Stearns were peppered with phrases such as "executives I've talked to," "people whom I trust," "traders are saying," or the catch-all "my sources." Rarely, if ever, did reporters name the individuals to whom they ascribed doubts about the firm's liquidity. In fact, Bear Stearns said it had confirmed its good standing with creditors, even though the stock had been declining for some months.
On Tuesday, March 11, Gasparino reported on CNBC: "This is having a business impact. There are people that are thinking, that are calling up their traders, their brokers at Bear, and are talking about maybe pulling funds from Bear, and that's the problem here. Rumors sometimes create runs on the bank and it builds on itself."
The next day, CNBC's David Faber asked Bear CEO Alan Schwartz: "So when I'm told by a hedge fund that I know well that last night they tried to close out a mortgage credit protection position with Goldman Sachs that they had bought a year ago—Bear was the low bid-and I'm told that Goldman would not accept the counterparty risk of Bear Stearns, you're saying you're not aware that that would be the case?"
Schwartz quickly denied it, but the accusation itself—akin to "When did you stop beating your wife?"—hung in the air like the smell of gasoline.
As Faber himself explained the following day: "Bear Stearns was having a liquidity crisis over the last 24 hours and ... it's simply a matter of confidence, and regardless of the fundamentals of the underlying credit, boy, we've seen that across the board, if people lose confidence they pull their lines."
Now the SEC wants to know who gave out negative information about Bear and how it was disseminated. The agency is keenly aware that short sellers sometimes try to use the press as a conduit; that was the subject of its 2006 investigation of Overstock.com, which had been a target of negative press.
Those earlier subpoenas to financial reporters met with fierce resistance and were eventually dropped. However, as a result, SEC Chairman Christopher Cox set down official guidelines stating that questions to reporters should be limited to the verification of published information and to surrounding circumstances relating to the accuracy of published information.
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stello
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.
Deborah
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.
wasabi
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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