Felix Salmon

I got a phone call this morning from one of the judges of the Loeb awards. A Loeb is one of the high-prestige gongs that important business and financial journalists love to award to each other, and it’s a fundamentally conservative animal: the NYT and WSJ always get lots of nominations and awards, and the winners are generally the kind of long-form investigative pieces which, say, the Pulitzer jury loves as well.

So what happens when the Loeb jury tries to drag itself into the 21st Century and honor online journalism? My guess is that it’s going to be in baby steps: the first winners are going to be newspaper brand extensions like Dealbook or Alphaville, and maybe one of those labor-intensive interactive data dumps that the NYT’s digital team is so good at. (Up until now, the Online award has gone to big Flash-based projects on newspaper websites, which isn’t at all what online journalism is really about.)

But if the Loeb jury wants to go further and start honoring new and disruptive forms of online journalism, they’re going to face enormous difficulties. First there’s the difficulty in defining what even counts as journalism in the first place. If the awards need to go to professional journalists at accredited media organizations, that automatically excludes 90% of the internet, including highly-respected blogs — Calculated Risk, say, or Mark Thoma, or Nouriel Roubini. And insofar as a few great bloggers get picked up by larger media outlets (Mike Konczal, Baseline Scenario), that’s precisely because those media outlets recognized them as being extremely good online journalism before they were picked up. It’s silly to restrict your awards to people who feel like they can or should accept an offer of being hosted on a major media outlet’s website.

What’s more, the biggest and most successful game-changers online have been startups: Huffington Post, Talking Points Memo, Politico, and the like. In the business space, TechCrunch, The Business Insider, and many others are setting the pace for what can be done with imagination, hard work, and a lean, aggressive attitude. Yet at the same time it’s almost inconceivable that the Loebs would honor Henry Blodget for his work, given his $2 million fine for securities fraud.

And if they wouldn’t honor Blodget, they’d never dream of honoring a site like Zero Hedge, which has shown what’s possible when you throw out the entire journalistic rulebook and indeed attempt to disintermediate journalists altogether. Zero Hedge is undoubtedly an important game-changer, and is also rather influential, but it doesn’t really belong in a journalism awards ceremony — as I’m sure its founders would agree.

It’s harder than that, though: the problems with drawing the line are dwarfed by two bigger problems. First is the problem of nominations, which are normally, for the Loebs, handled by managers deep within the media bureaucracy. Executives at media organizations nominate their own stories, which are then handed out to the judges; who’s going to nominate blogs? If bloggers are asked to come up with a $100 entry fee themselves, only the most self-aggrandizing will do so, and that’s going to skew the results enormously.

Bigger still is the problem of judging. Blogs are a conversation, and a lot of the value they add lies in their comments sections and in the interplay between each other. The unit of quality for a blog is the blog itself, a living thing, rather than any individual blog entry or even series of entries. The only way to judge blogs is to read them and interact with them in real time. That just doesn’t work in the context of a Loeb jury, which consists of important and busy journalists receiving packages of printed-out entries and then sitting in their armchair reading them in sequence. It’s hard enough to get them to watch all of the broadcast entries; it’s simply impossible to ask them to start regularly reading a list of blog nominees.

So although the sentiment is admirable, I think the Loeb jury should think long and hard before trying to extend its own brand into the online space. If it wants to expand, maybe it should do so in print, by giving awards to punchier, more aggressive business sections — not just the FT, which rarely gets Loebs, but even places like the New York Post. A couple of awards for art direction, in magazines and newspapers, would fit into the ceremony much more easily, and would be a welcome sign that the Loebs award journalism which isn’t just Important but is also accessible and popular and easy to read. Blogs don’t need the Loebs to give them recognition, and any attempt to go down that road risks embarrassing all concerned.

Craig Brown channels Gladwell — VF

James Meek meets President Obama in Arlington — NYDN

Thanksgiving feast, circa 1881 — NYT

A gorgeous power-of-ten visualization — Utah

Lou Dobbs, in verse — Newsweek

One advantage of citizenship over a green card: authorities can’t threaten you with deportation to get a plea bargain — WSJ

Those Apple-to-buy-Nintendo rumblings are back! — Deal

ISDA’s attempt to fire back at Dodd is a damp squib. Expect no substantive opposition from this front — ISDA

How Providence, R.I. got rid of a freeway and gained valuable real estate — NYT

Mark Gimein says that we shouldn’t worry too much about the problem of too-big-to-fail, because the alternative to one big bank failing is lots of small banks failing:

What we’ve seen in virtually every crisis is that bank failures and other economic catastrophes are highly correlated, in large part because financial players do not lock themselves up in rooms and gaze at crystal balls. They watch what everyone else is doing and then they do the same thing… The problem of the giant institution that’s an outlier and needs to be bailed out when everyone else is doing fine is one that exists only in theory. What happens in practice is that many banks, large and small, make the same mistakes and fail at the same time. In other words, it tends to be not single banks that need to be bailed out, but big swaths of the whole industry. Breaking up the biggest banks won’t change that.

This misses two key points. The first is that big banks are too interconnected to fail in a way that small banks never are. And the second is that big banks have balance sheets which are so enormous that they can hide all manner of nuclear waste there (as well as in purpose-built off-balance-sheet vehicles) in a way that small banks could never comprehend. Yes, there have been a lot of small bank failures over the course of this crisis. But none of them were a result of those small banks keeping on their own balance sheets a huge quantity of unfunded super-senior tranches of synthetic collateralized debt obligations. You need to be big to be that stupid.

When small banks fail, it’s generally because they make long-dated real-estate loans at high valuations or low interest rates or both. Big banks, by contrast, can fail ways that small banks can never dream of. And when they fail, the consequences for the payments system generally can be disastrous. So yes, breaking up big banks does significantly reduce tail risk in the financial system. No matter what Goldman Sachs says (and they’ve been feeding me the Gimein line for a while now).

Remember the Jon Stewart interview of Jim Cramer where Stewart pulled out a secret weapon to unleash upon his unsuspecting guest?

Stewart repeatedly said Cramer wasn’t his target, but aired clip after clip of the CNBC pundit.

“Roll 210!” announced Stewart, like a prosecutor. “Roll 212!”

Most were from a 2006 interview not meant for TV in which Cramer spoke openly about the duplicity of the market.

No one’s entirely sure where Stewart gets his video clips. But the source for these ones has now outed himself, and it’s none other than crazy short-selling conspiracy theorist Patrick Byrne.

“I supplied a certain video of Jim Cramer to a certain comedy show, that was used in revealing and exposing Jim Cramer,” said Byrne to the WSJ’s Julia Angwin in an interview.

Which is all well and good when it’s used to take down a blowhard like Cramer. But let’s hope that Stewart and his researchers are using Byrne only as a useful source of video. It wouldn’t be good if they were talking to him about the markets more generally.

(Via Weiss)

Goldman Sachs has provided Reuters with a copy of the Goldman Sachs Foundation’s 2008 tax return. Why the NYT didn’t just put it online I have no idea, but in any case here it is, all 297 pages of it.

The bottom line is that the Goldman Sachs Foundation did very badly in 2008. Here’s the way it’s all summed up:

The fund started the year with $269 million in assets, and ended with $161 million. The amount it made in charitable disbursements was $22 million (that’s the last number on line 25 of the first page), which means that the charitable disbursements aside, the fund managed to drop by $85 million. That’s 32% of the amount it started the year with, and almost four times the amount of money it actually gave to charity.

The big losses are a capital loss of $15 million on the sale of assets, and a whopping $75 million unrealized loss on investments. And then, just for good measure, we find out on page 68 of the PDF that the foundation paid Goldman Sachs Asset Management $3,864,540 for “investment management”. Gee, thanks for the service, guys.

If the Goldman Sachs Foundation put all its money in cash, earning 0%, and wrote checks over the course of the year totalling $100 million, it would have done better than this. Instead, it managed to give away less than a quarter of that, to recipients like the Foundation for Teaching Economics ($333,333) and $2,550,000 to the Institute of International Education “to support the expansion and enhancement of the Goldman Sachs Global Leaders Program in building a strong platform for the Program’s 10th anniversary activities in 2010.”

The Goldman Sachs Foundation also spent $230,000 on various Davos-related donations, in the form of gifts to the Schwab Foundation for Social Entrepreneurship and the World Economic Forum itself.

Maybe that’s what Lloyd Blankfein had in mind when he talked about doing God’s work.

Ten years ago today:

SEC. SUMMERS: Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come…

It goes on in that vein for over 4,000 words. But the limit of how much I could stomach was much lower than that. Tim Dickinson has some of the most damning quotes; unfortunately I haven’t been able to find a photograph of Alan Greenspan, Larry Summers, and others drinking champagne and eating a large cake upon which was written “Glass-Steagall, R.I.P., 1933-1999″. Maybe that’s just as well.

Go Fed! In a very CFPA-ish move, the Fed has now announced that effective July 1, no bank can impose overdraft fees on its customers for ATM or debit card transactions, unless and until they explicitly ask for that “protection”. And they even come with a quote from Ben Bernanke talking about “an important step forward in consumer protection”, which is not the kind of language we’re used to hearing from Fed chairmen.

One weird thing, though: in the letter the Fed has published as a model for banks to follow, consumers are given two choices at the bottom: the first choice is opting out of overdraft protection on ATM and debit-card transactions, while the second choice is opting in. That’s confusing, because opting out is the default option: if you simply ignore the letter and do nothing, you’re opted out automatically.

Why ask customers to sign and date a piece of paper to opt out of something they’re already opted out of by default? I’d much rather see language saying “if you don’t want us to authorize or pay overdrafts on ATM and everyday debit card transactions, you need do nothing”. But that’s just a niggle: this is an important step forwards.

Update: The Center for Responsible Lending emails to point out all the things which the Fed didn’t do, including capping the number of overdraft fees that a bank can charge per day, and preventing banks for charging far more in fees than the total size of the transaction. So there’s still work for the CFPA to do!

Paul Solman is taking questions for Sheila Bair. If I could ask her just one question, it would be about her actions taking over WaMu and wiping out all its senior unsecured debt. That’s the wholesale interbank market right there, and in the wake of the WaMu collapse, banks pretty much stopped lending to each other, fearful that at any point Bair could step in and wipe out billions of dollars in assets. The ensuing credit crunch was responsible for trillions of dollars in stock and bond-market losses, and Tim Geithner, for one, was furious at Bair for her precipitous decision.

So the question is this: was the WaMu intervention a mistake, given the knock-on effects it had on the broader economy? Or, more generally, is there anything Bair would do differently, in hindsight?

Bair’s a political beast, and I suspect she’ll brazen it out, saying that her WaMu decision was the right one. But that would put her in the dubious company of all the other executives who feel they have nothing to apologize for. Is it too much to hope that she might show a glimpse of humanity or fallibility?

Joe Brancatelli reports on airline fliers’ stubborn refusal to pay even a nominal sum for wifi:

Passengers “want to be connected, [but] they want it to be free,” Doug Murri, Southwest Airlines senior manager of technologies, told a group of airline and entertainment executives this past summer. Alaska Airlines, testing the same satellite-based WiFi system as Southwest, reports that passenger usage plummets when it charges a fee. The higher the fee, the faster the decline. “Even when we charge $1—and we did try $1—we see a drop-off in people willing to pay,” Alaska Airlines executive Craig Chase recently told the Wall Street Journal.

There’s a lesson here for anybody wanting to put a paywall around their website. Fliers are perfectly happy to pay $7 for a copy of the Economist to read on the plane, or even $4 for a copy of People magazine. And I’m sure if they spent their flight on the internet they would claim to value that experience at least as much as the experience of reading a single magazine. But getting them over the hump of paying anything at all for web content is still turning out to be all but impossible.

Landon Thomas‘s story on dodgy shipping loans has some absolutely astonishing numbers, the biggest of which is simply the size of the market, which he pegs at a whopping $350 billion.

The story is pegged to Eastwind Maritime, a shipper which went bust this summer owing $300 million on a fleet of 55 ships. That’s about $5.5 million per ship, which isn’t very much when the average five-year-old vessel was valued at about $88 million as of June of 2008. But things are different now:

Aozora Bank, a Japanese bank that in addition to being one of Eastwind’s top lenders is a major creditor of Lehman Brothers, found to its dismay that the value of the 12 Eastwind ships it now controlled was considerably lower than its $77 million exposure.

The biggest at-risk bank is German state-owned lender HSH Nordbank, with $50 billion of shipping loans. So far, it’s provisioned just $800 million of those, although it’s also received $19.4 billion in support from its shareholders, the regional German states of Hamburg and Schleswig-Holstein.

The problem is that the collateral on these loans is the ships themselves, and many of these ships are simply worthless given the glut of newer ships coming on to the market. So far, the shippers have been making their interest payments, which has helped the banks to avoid writing down the loans. But if the business dries up, the banks aren’t going to be happy with their security. It’s not a pretty picture for anybody concerned.

Talk about alternative asset classes: Venetia Kapernekas, a New York art dealer, has traded her claim to part-ownership of two Damien Hirst works in return for custody of her 8-year-old daughter. Need I add that one of the Hirsts is entitled “In this terrible moment we are victims clinging helplessly to an environment that refuses to acknowledge the soul”?

(Via Maneker)

Geraldine Fabrikant gets her hands on the 2008 tax filing for the Goldman Sachs Foundation today, and it’s pretty astonishing stuff:

The latest tax filing for Goldman Sachs’s foundation is as thick as a phone book. The list of trades is more than 200 pages, single spaced. Goldman, it seems, invests like no other, even for its own charity.

“I have never seen anything like it,” said Verne O. Sedlacek, president of Commonfund, when shown the 2007 filing, which was nearly three inches thick. He has a good overview from the Commonfund, which manages more than $25 billion for universities, foundations and other not-for-profit groups.

What good does all this extreme trading do? Not very much, it would seem, according to Fabrikant’s numbers:

• Goldman has given $501 million to the Goldman Sachs Foundation since 1999
• The present size of the foundation is $404 million
• The foundation gave away $12.6 million in 2007 and $22 million in 2008.

Goldman doesn’t reveal the foundation’s investment returns, but clearly they’re negative: the amount of money in the foundation is lower than the amount donated to it, even after accounting for the sums it’s given away.

What’s more, Goldman seems to be giving away only the bare minimum of the foundation’s assets each year: just 5%, the level below which the foundation would lose its charitable status.

I’m going to take a wild guess here and say that the foundation’s counterparty, on its phone-book-sized list of trades for just one year, was always or nearly always Goldman Sachs*. And when Goldman Sachs trades with anybody, be it a client or the Goldman Sachs Foundation or anybody else, Goldman Sachs makes money.

Meanwhile, the foundation itself, as we’ve seen, has been losing money.

And who are the charitable recipients of the foundation’s funds? Entities like the Asia Society, on Park Avenue, which is a talking shop where Goldman bankers can schmooze important international clients. Or big universities like Johns Hopkins and Duke, which take charitable gifts and keep them in the market by adding them to their endowments and investing them rather than spending them.

All in all, the single biggest beneficiary of the Goldman Sachs Foundation would seem to be Goldman Sachs itself, while the amount of money which trickles down from it to genuinely needy charitable cases is minuscule. Goldman should turn its foundation into an arm’s-length institution, charged with giving money where it can do the most good, and allowed to give much more than 5% of its total assets if it sees the need to do so. Because right now the foundation looks mostly like an exercise in self-dealing.

Update: One other thing: why on earth couldn’t the NYT have either linked to the tax filing, or put it online? Most annoying.

*Update 2: Goldman phones to say that the vast majority of trades at the Goldman Sachs Foundation are not with Goldman Sachs.

Warhol’s ‘200 One Dollar Bills’ Fetches $43.8 Million — Bloomberg

The editor’s revenge — Torontoist

“Thain let out a gutteral animal howl. Half-rising from his chair, he lunged toward Pandit. “BRAINS!” he moaned.” — NYM

Resignation video from Lou Dobbs — YouTube

Zagat takes 24 months to update its DC guide — WCP

Helmeted NFL players are about 25% more likely to sustain head injuries than unhelmeted Aussie-rules players — WSJ

$1.5 Million In Blatant Insider Trading Profit Following 3Com Acquisition — ZH

Conde Nast lost 8,359 ad pages in 2009. That’s a good $1B in revenues right there — NYT

CBO chief Elmendorf sums up deficit dilemma in a single sentence — WSJ

Learn about syllepsis, then refuse to stop employing it — Stickley

Rock supergroup, or Jubilee 2000 campaign? — Wikipedia

If you’ve been looking for a 4,800-word article on parking in Miami, here’s a great one — MNT  

“Feeding primary school kids less fat, sugar and salt, and more fruit and vegetables, has a surprisingly large effect” — FT

Treasury Dept. charging $522,886 for a single FOIA request — Wired

The incestuous New Museum — NYT

Learning About Outsourcing Via Craigslist — Mediabistro

Why is the Washington Times installing armed guards on the floor where management works? — TPM

A huge incentive to fire now: Bloomberg’s not responsible for paying severance to laid off BusinessWeek staff — TBI

America’s best-performing cities for job creation — Milken

The idiolects of lego — TMN

The art of comment-trolling — Doghouse

Ezra Klein, on what he considers a vicious cycle in credit cards:

The problem is that the people who migrate toward debit cards are the people who have enough money not to need much credit and are responsible enough to not want it. The good risks, in other words. The people left in the credit card market will be disproportionately bad risks, which means rates will go up and standards will tighten, which will in turn drive more people out of the market, starting the cycle over again.

I’m not convinced that this is a bad thing. Credit cards are useful payment devices, but atrocious borrowing devices. (Steve Waldman has a great post explaining the distinction further.) We want to move to a world where people use charge cards for transactional purposes, and personal loans for credit purposes. The way we’re going to get there is, essentially, by taxing the stuff we want less of — and that means increasing the interest rates and annual fees on credit cards.

Sometimes this is going to happen in an underhand and less-than-honest way: Odysseas Papadimitriou has a great blog entry on how Bank of America is denying that introducing a $50 annual fee constitutes a repricing of its credit cards, for instance. But the big move, away from credit cards and towards alternate means of payment and sources of credit, is surely to be welcomed.

The sad aspect to all this is that millions of people hold large credit card balances and have no ability to refinance them with personal loans, or even any particular notion that such a thing might be possible. They’re going to be harmed by this move. But over time, if things go right, their numbers will naturally dwindle, and we’ll be left with a much healthier system of consumer finance.

Something has happened on the right-to-rent front! It comes from Fannie Mae and it’s called deed-for-lease, and I’m basically in full agreement with Dean Baker on this one: it’s a step in the right direction, but it’s still a far cry from what should be happening. Not only should the lease be for more than 12 months, but the program should be rolled out to all mortgages, not just those owned by Fannie Mae.

In the meantime, it’ll be fascinating to see just how popular this program is. Lots of bright ideas get rolled out and fail to gain traction; Fannie Mae should keep a close eye on this one, and make it more attractive if people aren’t making use of it. And Freddie Mac should in any case try to one-up them, perhaps with a three-year lease. Let’s keep the momentum going!

(Via Indiviglio)