Audit Notes: DealBook on JPMorgan excuses, Journal-Sentinel, AngelList

Dimon's in a world of hurt of his own making

The New York Times’s Peter Eavis has another excellent story for the paper’s often-Wall Street-friendly DealBook on JPMorgan Chase and its legal woes.

Eavis methodically dispenses with several arguments about why it’s supposedly unfair for JPMorgan to pay for the crimes of its acquisitions, specifically for Washington Mutual and Bear Stearns:

But JPMorgan may not be the martyr some think it is…

The bank was interested in acquiring Washington Mutual months before it collapsed, but was rebuffed. JPMorgan had also considered Bear Stearns before it bought it. What stood out was Bear Stearns’s prime brokerage unit, a business that provides services and loans to hedge funds…

Another feature of the JPMorgan-as-victim narrative is that the bank simply didn’t have time to properly size up the true risks of buying Bear Stearns and Washington Mutual. The argument goes like this: To help save the financial system, JPMorgan rapidly took on hard-to-spot risks, for which it is getting unfairly punished after the fact.

But JPMorgan executives made comments at the time that cast doubt on that interpretation. “We’ve known Bear Stearns for a long time,” Michael J. Cavanagh, then JPMorgan’s chief financial officer, said when justifying what looked like a short due diligence period. “There are always uncertainties in deals,” Mr. Dimon said after the Washington Mutual deal. “Our eyes are not closed on this one.”

— Nieman Lab’s Adrienne LaFrance takes a really good look at the Milwaukee Journal-Sentinel, which has preserved as much of its watchdog/investigative prowess as it could.

As a result, she reports, it has retained its central place in the community in a way that gutted papers have not (emphasis mine):

But despite the ongoing financial pressures, the focus on watchdog work remains in place. Earlier this month, the paper revealed that it would challenge the local government for access to records in a closed judicial investigation. The probe involves a secret email server that was set up in a county executive’s office so high-level staffers could communicate outside of the regular government email system…

Readers notice. At a burger joint half a mile from the Journal Sentinel, Juston Calvert, 25, says he inherited the print habit from his dad. Now, he and his four roommates subscribe. “It just doesn’t feel right to read online,” Calvert said. “They do a good job. I gotta say, I think it’s unbiased. It’s just information”…

But managing editor Stanley thinks conditions are warming. The paper is doing well enough today that he says he’s “very hopeful” it will soon be able to grow its staff again. And although it has found some success during a difficult time for the industry, it hasn’t solved the question of what kind of business model will sustain its journalism in a post-print-advertising world. No one has.

That’s blockbuster news coming from the newspaper industry these days.

It seems a little optimistic, though, looking at Journal Communications securities filings. Operating profit jumped 25 percent in its publishing division in the first half of the year, but revenue dropped 5 percent. And the operating margin is small, at 5.3 percent, though I should note that the publishing division includes smaller papers and shoppers, not just the J-S.

— Valleywag’s Sam Biddle shows how easy it is to scam the JOBS Act-enabled AngelList:

Just think: all the wisdom and accountability of Kickstarter, only aimed at the far more stable world of tech ventures. There’s no chance that anyone will get burned, because, as AngelList buries in some fine print, you have to be an “accredited investor” in order to join a syndicate.
Except you don’t, because I just signed up, and I promise you, those sentences do not describe me! But thanks to lax federal policy and a gold rush mentality, no one really cares who I am, what I’m worth, or if I’m remotely qualified to even think about investments—let alone make them…
It’s not hard to imagine what could go wrong here, were I not very obviously a make believe bullshit investor, but someone with seedy motives. With essentially zero screening process, I could fabricate the profile of a reputable VC, or at least someone who aspires to be a reputable VC. AngelList gives me a simple, clear way to proposition strangers, to beckon group investments based on virtually nothing.

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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. Tags: , , , ,