In a move that should surprise absolutely no one, Rupert Murdoch installed his pal Robert Thomson as the top editor of The Wall Street Journal, ending weeks of silly speculation that he might promote from within the paper.
The Journal fronts the news on its Marketplace section in an admirably forthright story, while The New York Times drops it inside Business Day. What could Rupert see in this mini-Murdoch? The Journal explains:
More importantly, Mr. Murdoch could trust him to implement his vision for the paper. Aside from the six years working together on the London paper, the two men have much in common, though Mr. Thomson is 47 and Mr. Murdoch 77. Both are Australian natives, have Chinese wives and are raising young children. They have vacationed together and even share the same birthday, March 11.
The crack “editorial-independence” board, shocked and awed by the Brauchli blitzkrieg, folded on this one, too, approving Thomson’s appointment unanimously.
The appointment means the fox isn’t just guarding the henhouse (Thomson was already as publisher), it’s running the damn thing now. Expect to see more front pages like today’s, with a four-column, top-of-the-page splash on a completely non-business news story about Ted Kennedy’s cancer. Now there’s a story you won’t be able to get anywhere else.
The Times’ Richard Perez-Pena continues his good work on the Murdoch/Journalstory, scooping that:
Going forward, Mr. Thomson will make cosmetic changes to The Journal soon, and will expand the newswires staff, particularly the number of reporters overseas, according to a person briefed on his plans, who insisted on anonymity because the News Corporation had not approved the release of the information.
And editors, prepare your resumes!
He and Mr. Murdoch have also told colleagues that they see The Journal as having too many editors relative to the number of reporters, so a shift in that balance is expected in the newsroom.
The Times also nicely calls out Murdoch for lying a year ago in an interview when he said he didn’t plan to install any of his people as editors at the WSJ.
And our Sleeping on the Job Quote of the Day, from Thomas Bray, who gets paid $100,000 a year to work on the “editorial-independence board”:
Since then, “the committee had some intensive discussions and did some research of its own,” (Bray) said. “The committee was created to protect the editorial integrity of The Journal, and that would include from pressures from both News Corporation and other sources that would be considered undue pressures,” he said. “We wanted to satisfy ourselves that Robert would, in fact, stand up to protect the integrity of the Wall Street Journal.”
The Guardian has it figured out better from across the pond. Its headline: “Murdoch Tightens Control of Journal.”
Moody’s knowingly boosted unworthy securities
Time to learn a new acronym.
The Financial Times splashes a very interesting scoop on page one that credit-ratings firm Moody’s gave AAA ratings to unworthy securities, called constant-proportion debt obligations, because of a computer bug. The paper got hold of documents that it says show the company knew about the problem with CPDOs in early 2007, but didn’t downgrade the securities until early this year. Instead:
On discovering the error early in 2007, Moody’s corrected the coding glitch and instituted methodology changes. One document seen by the FT says “the impact of our code issue after those improvements in the model is then reduced”.
Ouch. Looks like Moody’s was covering up its coding bug by changing the rules to justify its ratings of the products. The FT says the downgrades this year came amid the cover of “general market declines.” Moody’s tells FT it is now investigating the matter.
The securities should have been rated four notches lower—and that’s by the already massively flawed standards the firm (along with its competitors, though Fitch Ratings did dis CPDOs) was using to rate derivatives. The investments have lost up to 60 percent of their value, an incredible amount for such a highly rated instrument.
Inside, the FT goes deep with a separate story that looks at how CPDOs came to be in the fevered credit bubble of 2006 and includes a graphic showing how they worked. It notes that it quotes plenty of analysts at the time who questioned how the debt securities, which paid an extremely high premium, could be rated so high.
Excellent work by the FT.
Countrywide’s Mozilo is tone deaf
Countrywide Financial CEO Angelo Mozilo didn’t need any more bad press, but he gets it today in the form of a Los Angeles Times story.