the audit

The real problem with that Dealbook conference

In a reputational transaction between Wall Street and a newspaper, guess who wins?
December 20, 2012

The discussion around the corporate star-studded Dealbook conference last week was good, but I don’t think it got to the main issue.

And since this is supposed to be the first of an annual event, and since conferencing is establishing itself as an important journalism revenue source, I want to take one more run at it.

I mostly agreed with Margaret Sullivan, who put her finger on the issue of indebtedness. America’s most important newspaper hosts a group of A list executives from companies the paper covers—Goldman’s Lloyd Blankfein, JPMorgan Chase’s Jamie Dimon, Google’s Eric Schmidt, Blackstone’s Stephen Schwarzman, Pepsi’s Indra Nooyi—that The New York Times covers. Having organized similar, mini-versions (without money; we don’t charge), I know that these are value exchanges that involve a much more intense degree of collaboration between news organization and source than is found in the normal journalism give-and-take. There are approvals to be gotten, logistics to work out, press-release wording to be checked, ground rules to be laid. The people who speak to the function are the attraction that others are paying up to $1,500 a head to hear. They are doing you a favor.

But still, that’s not the main issue. The idea that the Times will be more reluctant to now go after Google, JP Morgan, or Goldman if a story arises is hardly out of the question, but also far from a given. If a good Goldman story comes up, I think the Times does it and just doesn’t invite Blankfein next year (here’s hoping!). As for Nooyi, I see little risk of the Times turning down a big expose of Sierra Mist Cranberry Splash or Funyons.

I liked Felix Salmon’s sensible take that a.) these conferences are profit centers for news organizations which don’t have many of those these days, and b.) that access journalism, which is what this conference is all about, has its place, even if, as he admits, no one expects any news to come out these. And, right on schedule, it didn’t.

I also agree with Felix that these panels and interviews aren’t meant to be interrogations—quite the opposite. He says the main point for attendees is to meet each other, and to get the right attendees, you need A list speakers. I hadn’t thought of that. Smart point.

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But wait.

Gerald Marzorati, the editor who organized the event, provided a clue to a deeper problem when asked by Sullivan about the problem of the paper being indebted to leaders of powerful institutions it covers.

“I can understand that question, but I see no evidence of a problem,” he said, other than one of “the optics” – that is, the appearance as opposed to reality. Once on stage, he noted, the journalists did their part admirably and The Times’s news coverage of the participants has been tough-minded.

In the end, what’s in it for the audience is “a great show and the chance to mingle with one another,” Mr. Marzorati said. What’s in it for the headliners is “not about cozying up to Times journalists, but the ability to talk about things other than their day jobs” – like matters of public policy.

And it is true that the Times coverage of Goldman was particularly tough, especially during and after the crisis. It was the Times that first alerted the nation that the AIG bailouts were actually about Wall Street, namely Goldman Sachs. And it was the Times that advanced the Abacus story that was part of the dynamic that forced Goldman to settle civil fraud charges with the Securities and Exchange Commission for $550 million, which is what passes for justice these days when it comes to white-collar prosecution on Wall Street. Still, that’s Eric Holder’s problem. In fact, it was the Times that did the best job calling out Holder, who is now well on his way to becoming one of the sorriest attorneys general ever. The paper did it so well that we put it in The Best Business Writing 2012.

Those stories were written by Gretchen Morgenson and Louise Story, who don’t work for Dealbook. But that’s part of the balancing act that big institutional news organizations must do.

And yet, “the optics” weren’t right, were they?

And here’s the reason: It is one thing to invite Eric Schmidt and Indra Nooyi, and even Steve Schwarzman. They didn’t crash the financial system.

But Dimon and Blankfein are leaders of institutions that every one knows, and major government investigations have confirmed, helped to cause one of the greatest financial catastrophes in history, one that shook the entire world, tipped 10 million into foreclosure, 23 million into joblessness, set back whole neighborhoods, whole communities for a generation or more. And on and on.

Forget that JP Morgan now owns Bear Stearns, one of the very worst of the worst, and Washington Mutual, so rife with corrupt incentives, banished whistleblowers, and predatory lending practices that it merited its own chapter in the meticulously documented Levin-Coburn report. Just a couple of stats: an internal review found fraud of one sort or another on 71% of loans sampled and “discrepancies or other issues” in appraisals. A second internal sampling turned up “excessive levels of fraud” in 42% of the files. Other reviews found evidence of fraud in 58%, 62%, and 83% of loans issued by various offices, the Levin report said (page 84).

But never mind that. As Ryan Chittum pointed out in pushing back against Dimon’s famed sense of victimhood, JPM itself is knee-deep in muck:

JPMorgan are the good guys, you see. Just ask Jefferson County, or talk to the lawyers in Chase’s mothballed debt-collections department, or the investors who lost hundreds of millions of dollars while JPMorgan profited big on a SIV, or the Lutheran nonprofit defrauded on a CDO that JPM built for Magnetar, or illegally foreclosing on and overcharging hundreds of troops while they were abroad, or the homeowners who got trampled in the foreclosure scandal, or the former who regrets the $2 billion in toxic loans he made in 2007 under “pressure from the top,” or the consumers who get screwed by Vertrue, etc. etc.

As for Goldman, do we really have to go through this? Apparently, yes. Besides those civil securities fraud changes (and doesn’t that count for anything?), it merits a huge chapter of infamy in any honest crisis history, and gets one in Levin-Coburn:

The Goldman Sachs case history shows how one investment bank was able to profit from the collapse of the mortgage market, and ignored substantial conflicts of interest to profit at the expense of its clients in the sale of RMBS and CDO

But forget derivatives. How about how Goldman funded predatory lenders, like New Century, for years. And who remembers Litton Loan Servicing LP?

I mean, was it so long ago?

And by the way, if you want to learn more about any of this, one of the few crisis books in which you will not find it is Too Big To Fail, the blockbuster crisis book by Andrew Ross Sorkin, the Dealbook chief and engine behind the conference.

Eric Schmidt and Indra Nooyi head large publicly companies that the Times must cover. That’s one thing.

But The New York Times—published by a midcap company of uncertain prospects, reviled in some quarters—still retains (let’s face it) enormous prestige globally. JP Morgan and Goldman are tainted in a way the Times is not, never really has been, and will never be.

That’s why Dimon and Blankfein were there. Both CEOs and their institutions benefit from their association with the Times, which has allowed them center stage at a conference on public policy to discuss things other than their day jobs. (If it were about their day jobs, they’d never have agreed to go. And if they had agreed to go, all the seats at the Times Center would be taken up by their lawyers.) That they were allowed to headline a Times event is meaningful.

Conferences are fine. But the particular problem business-news organizations face now is that not only are they, like the rest of the news business, facing their own big financial problems, they are doing it in the wake of the meltdown of their central beat. They’re vulnerable, and they need the one thing that Wall Street can bring. It starts with “M” and rhymes with “honey.”

So, the banks gained by association here; their rehabilitation into the broader society advances, even if a bit. Their reputations came in for some, if not laundering, certainly freshening up. Here was the Times treating them just like normal companies, like Pepsi.

But, as I’ve said, on Wall Street, nothing is ever for free, especially conference coin.

And my “dealbook” on this reputational transaction between the banks and the Times says it was definitely zero-sum.

Dean Starkman Dean Starkman runs The Audit, CJR’s business section, and is the author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.