Audit Notes: Newspaper of the Year, Leverage, Wemple vs. Wolff

In 2011, The Guardian had one of the best years any paper has ever had.

Its reporting on the systemic corruption of the News of the World, The Sun, and the authorities gravely wounded the Murdoch empire, once virtually invincible in the UK.

So the British press gets together to hand out awards every year, as the press anywhere is wont to do. And the Newspaper of the Year award goes to… the Daily Mail.

Remember how pathetically much of the rest of the British press, particularly the tabloids, covered the story—particularly until it could no longer be ignored?

— Bethany McLean reports for Reuters that one common explanation for the financial crisis— a 2004 SEC move on capital ratios that some experts said allowed banks to overlever—doesn’t hold water:

There’s just one problem with this story line: It’s not true. Nor is it hard to prove that. Look at the historical leverage of the big five investment banks — Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs and Morgan Stanley. The Government Accountability Office did just this in a July 2009 report and noted that three of the five firms had leverage ratios of 28 to 1 or greater at fiscal year-end 1998, which not only is a lot higher than 12 to 1 but also was higher than their leverage ratios at the end of 2006. So if leverage was higher before the rule change than it ever was afterward, how could the 2004 rule change have resulted in previously impermissible leverage?…

The funny thing is that this is a mistake that no one has corrected. Although Erik Sirri, who was then the director of the SEC’s division of trading and markets, rebutted the claim in 2009, the New York Times didn’t cover it. Lockner says he wrote to a handful of economists; only Niall Ferguson responded and was chagrined to find out he was wrong. Of the people I cited earlier, only Blinder, Johnson, Kwak and Susan Woodward responded to my calls or emails. Blinder now says: “It’s true that very high leverage was a big source of the problem, but the net capital rule does not appear to have changed that much.” (The New York Times hasn’t issued a correction to his op-ed.)

Good stuff.

— The Washington Post’s Erik Wemple takes down Michael Wolff for his ridiculous Guardian column on the Michael Daisey affair. Wolff wrote that journalists cling to pesky things like facts because they can’t write, and that writing trumps telling the truth.

Wemple gets the line of the day (emphasis mine) in a post headlined “If only we all could write as well as Michael Wolff”:

Indicting an entire profession as poor stylists carries a hefty glass-house quotient. Though by no means his worst outing, this piece has plenty of the distractive prose that makes so much of Wolff’s writing difficult to hack through. He is the Foxconn of the pointless, comma-laden aside. My favorite of all time comes from his biography of Rupert Murdoch:

(Petronella Wyatt would, like Murdoch’s daughter Elisabeth, become, in a generation’s time, the talk of London.)

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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: , , , ,