One key part of Goldman Sachs’s defense in the Abacus scandal is that it lost a pile of money on the deal investing in it, so it couldn’t be guilty of deliberately torching it. The New York Times has played a big role in debunking that disingenuous argument.
So it’s weird that it repeats Goldman’s (an Audit funder) misdirection today in a story on how RBS ended up holding the bag on Abacus:
But, almost from the start, Abacus began to fall apart. More than 80 percent of the mortgage securities behind the deal were soon downgraded as the crisis in the housing market spread. Goldman itself claims that it lost about $100 million on the deal.
And it ends there. That’s not cool, man.
There are a couple of different degrees of the he-said/she-said problem. The milder version comes because of time and resource constraints on the reporter. He or she simply doesn’t have the time or wherewithal to determine who’s right, so they simply let each side have their say and leave it at that.
It’s something a lot worse when the news organization knows one side is full of hot air but lets it spew unchecked. For instance, this Times article on the financial-reform bill reporting Republican leader Mitch McConnell’s assertions that the bill would make bailouts more likely, not less:
“This bill not only allows for taxpayer-funded bailouts of Wall Street banks, it institutionalizes them”
Never mind that that’s false.
In repeating the Goldman-lost-money canard today’s story in the Times is committing the worst kind of he-said/she-said. That’s because its own reporters blew it to smithereens two days ago:
Mr. Tourre had been counting on one of the parties in the Abacus investment, ACA Management, to buy the stake that Goldman ended up with. At the last minute, ACA backed out, leaving Goldman holding part of Abacus.
Goldman executives urged Mr. Tourre to sell that stake. And they urged his colleague, Jonathan M. Egol, who is not named in the case, to purchase large amounts of insurance that would pay off in the event that mortgage investments like the Abacus stake lost value. That insurance ultimately offset the losses that Goldman claims it suffered on Abacus 2007-AC1, several former Goldman employees said.
In other words, Goldman, despite its assertions, wanted to get rid of its Abacus stake but got holding the bag as the market collapsed. And anyway, it didn’t even lose money.
Journalists have got to call out stuff like this. Especially if you’re the one who helped prove it wrong in the first place. Zombie lies are hard enough to kill as it is.
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 rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.