Audit Notes: Clayton Bull, Bloomberg News, Cohan and Consumers

Shahien Nasiripour continues to bird dog the Clayton Holdings story, reporting today that, under pressure from the folks on Wall Street who pay its bills, the company is now backpedaling from its former president’s testimony to the Financial Crisis Inquiry Commission.

But Clayton is pushing back against Johnson’s testimony after various market participants reached out to the Connecticut-based firm and expressed concerns with what Johnson — and by extension Clayton — was sharing with the public, according to its letter and people familiar with the matter. Now under pressure, Clayton is trying to undo whatever damage the public release of its data and testimony of current and former executives may bring to past, current and future clients, people familiar with the matter say.

Nasiripour calls bull on Clayton in the way I wish more reporters would. He quotes their statements and then systematically rebuts them with their own previous actions and words. I’m going to quote liberally here to get that point across:

However, Clayton was trying to sell the service that produced the reports it’s now attempting to back away from. The firm dominates the due diligence market for residential mortgages. It claims to have developed a reputation as the “go to” firm for risk analysis, according to its website.

But even if those reports were bogus, Clayton never indicated that during public testimony, despite ample opportunities. During the hearing, Johnson testified alongside Beal in an almost conversational format in which both frequently spoke up and offered testimony while the other was being questioned — a different setting than the commission’s typically more formal hearings in Washington. Beal was flanked by legal counsel for Clayton.

At no point did Beal or a Clayton attorney interject and try to rebut Johnson or challenge his claims.

And Johnson, like other witnesses typically before the commission, had previously been interviewed by the panel’s investigators. In past hearings, when commissioners caught inconsistencies between the testimony provided in private versus public, they drew attention to it and asked witnesses to explain.

Nothing of the sort occurred during the Sept. 23 hearing for Johnson.

And according to Clayton’s letter, the commission interviewed several current and former Clayton employees. In past FCIC hearings, when employees of the same firm or agency gave conflicting testimony, commissioners would likewise raise it publicly and demand clarification.

Nothing like that occurred during Johnson’s hearing, an indication Johnson’s claims were in lockstep with Clayton data and the information provided by Johnson’s former coworkers.

Love it.

— It’s hard to tell how Bloomberg journalists should take this news in today’s New York Post. Keith J. Kelly reports that the wire is starting a push to have its news division pay for itself.

That would be a dramatic departure for Bloomberg News, which is subsidized by the billions in cash thrown off by Bloomberg’s lucrative terminal business. The question for Bloomberg is whether it will do a better job of monetizing its existing stuff or whether it will be introducing new cost controls on its news budgets.

Obviously we’d rather have the former.

But I don’t think this logic from Dan Doctoroff really holds up, coming as it does a couple of paragraphs after a Bloomberg spokeswoman says the terminal is no longer the primary news-breaking platform:

Said Doctoroff, “We want to gain a greater audience for Bloomberg News, which translates into greater influence, which translates into more market-moving news, which enables us to sell more terminals.”

Hard to see how you’re going to use news to sell more $20,000 a year terminals if you’re dumping more of the same news on your Web sites for free.

— William D. Cohan questions the very idea of protecting consumers over at The New York Times Opinionator blog.

In Cohan’s perfect world, everybody ought to be a lawyer with great eyesight who can read and understand thirty pages of fine-print legalese constructed to befuddle people:

In addition to committing us to creating an entire new bureaucracy at a cost of $500 million (and rising) a year, her brainchild gives us all yet another excuse to avoid taking responsibility for our own actions. Instead of being prudent with the amount of personal debt we take on, instead of reading carefully the documents we sign — be they for new credit cards or new mortgages — and instead of learning how to live within our means rather than light years beyond them, we can now continue to blame others for our own failings.

And then there’s this completely unsupported statement:

Yes, some people who have lost their homes were victims of fraudulent mortgage brokers and shady lenders. But the vast majority of those who held the billions of dollars in mortgages now foreclosed on knew exactly what they were doing.

How does Cohan know this? He just assumes it. Meanwhile, here’s a stat that belies that: 61 percent of subprime borrowers in 2006 actually qualified for prime loans but were shunted into the high-interest-rate ghetto. Think they “knew exactly what they were doing”?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.