Another explored the corruption of mortgage-industry culture with a profile of a mortgage boiler-room operator who with the profits underwrote an action movie starring his fiancee in which a $1.2 million Ferrari Enzo is crashed into a concrete barrier. The story says Wall Street funded it all, including this detail:
Sadek [the boiler room operator] says that with the support of Citigroup, which funded the loans, he pioneered lending to homebuyers with credit scores of less than 450. Citigroup spokesman Stephen Cohen said the bank doesn’t comment on its relationships with clients.
Another revisited ratings-firm collusion:
Rating Subprime Investment Grade Made `Joke’ of Credit Experts
The series, which won a Loeb Award, ended with long, jumbled account that tries to tie it all together—from the boiler rooms to the I-banks, to the raters, to a broke Icelandic city that invested in junk CDOs to, yes, a six-year-old girl who lost her bike during a foreclosure in Dorchester, Massachusetts.
Savannah got her first bicycle for her birthday in August, pink with streamers dangling from the handlebars. She decorated the present from her grandmother with stickers of Dora the Explorer, her favorite animated character. When sheriff’s deputies emptied the house and changed the locks, they left Savannah’s bike behind.
Schmaltzy? Sure. Does the story work? Not entirely. But does it have heart? Yes, it does.
Another story, more than a year old, asked a central question: How much of the defective securities did Goldman sell on global markets while the future Treasury secretary was running it?
Notice the language in the headline (my emphasis):
Paulson’s Focus on `Excesses’ Shows Goldman Gorged
Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that “yesterday’s excesses” aren’t repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.
Paulson, 61, doesn’t mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.
The story, among other things, notes that Paulson opposed a bill that would make Wall Street firms responsible for what they sold:
One provision would make firms that package and sell subprime mortgages liable for damages if loans violate certain minimum standards, including ensuring a borrower’s reasonable ability to repay. Paulson criticized the liability idea in an Oct. 16 speech at Georgetown University in Washington.
“We need to ensure yesterday’s excesses are not repeated tomorrow,” Paulson said. Penalizing Wall Street for packaging mortgage loans “is not the answer to the problem,” he said.
This is accountability reporting, pure and simple, although Pittman’s calculation of Goldman’s toxic CDO share took an unusual degree of sophistication.
Given that Bloomberg has more than 2,000 journalists on staff (compared to 110 business journalists at the Times and 750 at the Journal as of last summer), it could do a lot more. But still, someone over there understands the business-journalism game has changed.
And note this headline:
Evil Wall Street Exports Boomed With ‘Fools’ Born to Buy Debt
—October 27, 2008.
No, this is not Mother Jones. It’s Bloomberg.
Yes, the Journal has done fine work that offers glimpses of what is possible. The irreplaceable Ellen E. Schultz discovered that as much as $40 billion in bailout money could go to pay for executives’ specially crafted pensions and deferred compensation (my emphasis).
The government is seeking to rein in executive pay at banks getting federal money, and a leading congressman and a state official have demanded that some of them make clear how much they intend to pay in bonuses this year.
But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces. (3)
The paper nailed the story of the strange bird who ran the Reserve Primary Fund, the supposedly ultra-conservative money market fund that managed to lose money, or “break the buck” and sent financial markets into deep freeze.