Andrew Ross Sorkin has a good column this morning exposing yet another misleading campaign affiliated with the Chamber of Commerce.
A Chamber-backed group commissioned a report from an outfit called Keybridge Research to show that derivatives legislation would cost jobs. Keybridge dutifully did so, coming up with 130,000 jobs that “could” be lost if firms are forced to put up collateral for derivatives trades.
Dow Jones wrote a news story on it and The Wall Street Journal‘s Real Time Economics blog wrote a blog post headlined “Study: Strict Derivatives Regulation Could Cost 130,000 Jobs.” That one is pretty much a case study in why you shouldn’t do one-source blog posts on studies commissioned by vested interests that have predictable and sure-to-be-disputed results.
Yesterday, MIT’s John Parsons eviscerated the report, convincingly noting that it didn’t make any sense on a couple of levels (RTE updated its post with his argument).
Parsons’ colleague Simon Johnson noted Parsons’s post and added this insight:
But I would go further.
This is the “end-users coalition” at work again – a notorious lobby group for the derivatives industry that had great negative impact on the reform process in the past 18 months. And it is backed in this instance, apparently, by the full might of the Chamber of Commerce and its “Center for Capital Markets.”
The Keybridge document itself is pure lobbying masquerading as research.
Sorkin delivers the final blow this morning, reporting that Keybridge says it has, in Sorkin’s words, “an all-star roster of academics, including Joseph E. Stiglitz, a Nobel laureate in economic science; David Laibson, a professor of economics at Harvard, and Stephen P. Zeldes, a professor of economics and finance at Columbia’s Graduate School of Business.”
That didn’t pass Sorkin’s smell test and he called them up. Laibson and Zeldes said they aren’t advisers and Stiglitz says he hasn’t done any work for Keybridge since May 2009.
“This is the first I have heard about it,” said Mr. Stiglitz, who just returned home on Sunday after a five-week trip abroad. He said he was surprised to be listed on the group’s Web site. After reading the study, he said, “It’s not a very good report.”
Sorkin uses this quote from Keybridge’s president as a kicker:
When I told Mr. Wescott of Keybridge about Mr. Stiglitz’s comments, he replied that “the client had asked us” to put the report together. “It was a hypothetical study.”
“Hypothetical study,” huh?
So, to sum up: Corporate lobbyists want to keep derivatives, which were central in the collapse the financial system, as unregulated as possible. They give money to a research firm that boosts its credibility by listing several luminaries as advisers who either aren’t or haven’t been in some time. The research firm writes what corporate lobbyists want. It’s rewritten by The Wall Street Journal on its website and Dow Jones on its newswire.
The good thing is: This fell apart due to the vigilance of bloggers and a major columnist. The bad thing is: You know this stuff happens all day every day and most of it doesn’t ever get this kind of pushback.
Yves Smith on that:
It’s high time that reporters start lifting the veil to look at exactly who is behind the “research” put out by think tanks. Even drug company research, which many members of the public now know to view with some doubt, at least has an actual investigation of some sort underpinning it (the doubts about them usually involve study design and/or interpretation of results). Think tank end product should be taken with even more salt, since it too often is the intellectual equivalent of a CDO: taking junk ideas and dressing it up in a structure and a brand name so that most people will regard it as AAA-rated thinking.
Keep that in mind next time you’re tempted to write about that study in your inbox.
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.