If you’ve missed Bloomberg columnist Jonathan Weil’s work over the past year, you’ve missed a lot.
Early to sniff out AIG, Washington Mutual, and Wachovia, Weil was first to raise important questions about Lehman Brothers’ off-balance-sheet doings. And Weil ripped on Fannie Mae and Freddie Mac for months before they were nationalized.
Weil is at home around a balance sheet as we are smoking our Meerschaum pipes at the Columbia Club.
After years of covering the beat, Weil writes about accounting with an authority few in the field possess. As a writer, he is about as subtle as your average meat ax:
If MBIA Is AAA, Britney Is Snow White
At The Wall Street Journal, where he reported for several years, Weil was the first reporter to raise questions about Enron’s accounting.
He spoke to The Audit about covering the financial crisis:
The Audit: How do you get your column ideas?
Jonathan Weil: A lot of it’s reading 10-Ks and 10-Qs and proxy statements. A significant piece is getting tips. Most of it is seeing things that other people just aren’t seeing, and that’s because I’ve been doing this for about ten years and watching a lot of these companies I’ve been writing about the past year for just as long.
So it’s not so much that I suddenly discover that Fannie Mae or Freddie Mac’s financial statements are a crock. It’s that I’ve been watching these guys for five and six years and covered them way back when and there’s some institutional memory that builds up after awhile.
But if you know how to read financial statements it goes a long way to helping any reporter or anybody else not have to rely on official pronouncements from the people running these companies or the regulators who protect them.
TA: Do you think that’s a skill that’s in short supply in journalism?
JW: (It’s in short supply in) journalism broadly. I don’t think it’s in short supply at Bloomberg, and I’m not trying to be self-promotional when I say that. But at most news organizations, even at a lot of very prominent so-called business publications, understanding financial statements is considered a sub-specialty.
TA: That seems to be 101.
JW: Not only that, but I still feel like after all this time that my understanding is pretty basic. There was one bank I was looking through their 280 page 10-Q that they filed about a week ago or so, and when I read most of the things that are in there I think to myself either I don’t understand this because of me or I don’t understand this because of them.
TA: How do you see these things?
JW: Well, just as an extreme example, if a company is trading for less than its book value, one of first things I do is look at the balance sheet and I see if there’s any individual asset that supposedly is worth more than the company’s market value. You can get a lot of columns that way.
TA: Like the newspapers and goodwill (Weil wrote a terrific column on newspapers’ comically bloated balance sheets in July).
JW: Yes, exactly. Classic. Or if there’s a single asset there that’s approximating a company’s market value. When I wrote about Lee Enterprises, it wasn’t just goodwill, it was customer lists.
TA: (Laughter; The Audit enjoys a good accounting joke.)
JW: So … [the customer lists are] worth more than the whole company. It’s when you can get people to laugh that you realize that you’ve got one.
TA: Accounting is one of the least interesting subjects to many people, but you turn it into something interesting. How?
JW: I look for the reaction where the person reading it says “They want me to believe what?!”
Unless there’s something really revealing or instructive or just huge news, I’m not looking to write about a company that failed yesterday or last week. There’s enough to write about in the category of forward-looking, “look out” type of stories. I generally do not write autopsies; I look for biopsies.
TA: Whenever you have a panic there are going to be crimes. People trying to cover things up and save themselves, and this is the mother of all panics.
JW: Look back to Ken Lay—he got in the most trouble from a criminal liability standpoint because of the things he was saying on conference calls in October 2001.
TA: Is it your hunch that we’re going to see a wave of prosecutions?
JW: We have to see who gets appointed Attorney General, chairman or chairwoman of the SEC, and we have to see what type of people President-elect Obama puts in to run the country.