The WSJ’s Goldman non-story

September 23, 2010
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I’m generally plugged-in enough to various news streams that if there’s a big story one day, I’ll notice it before it gets splashed across the front pages of the newspapers the following morning. So I was surprised to see today’s WSJ, with its huge headline running across the top of the front page: “SEC Blasted on Goldman“. The story itself is a long one, and is the work of no fewer than four reporters, with a fifth writing an associated blog entry.

The story is about David Kotz, the SEC’s inspector general, who appeared in front of the Senate Banking Committee yesterday. Kotz was the author of a 159-page report into the SEC’s handling of the Allen Stanford Ponzi scheme, which was released on the same day that the SEC filed its explosive charges against Goldman Sachs. Unsurprisingly, the Goldman charges dominated the business-news cycle, and the Stanford report, which was highly critical of the agency, was, in the words of Reuters, “largely unnoticed”.

So when Senators asked Kotz about the timing of the Goldman lawsuit, his answer can hardly have come as much of a surprise. “It would strain credulity to think it was coincidental,” he said, adding: “I can’t give you a conclusion right now, but it was suspicious.”

Yet somehow, atop this non-commital non-news, the WSJ has managed to construct a damning indictment of the SEC and its entire case against Goldman. Ashby Jones even went so far as to say that Kotz “basically hinted that there may have been more politics than law factoring into the commission’s decision to sue Goldman Sachs”.

Er, no, he didn’t. Kotz might not have like the timing of the Goldman suit. But he said nothing about the substance of it, and he did not hint that the decision to sue Goldman was a political one. It makes sense that once the SEC decided to sue Goldman, it then decided to do so on the day that Kotz’s report was released, in order to deflect attention from the report. That’s what Kotz was implying yesterday. It does not make sense that the SEC decided to sue Goldman just so that it could have something with which to deflect attention from Kotz’s Stanford report. That’s what the WSJ is implying — and what it says that Kotz is implying.

After all, the dark arts of burying bad news hardly constitute a front-page-worthy news story with four different reporters. And I don’t in any case think that Kotz’s answers yesterday really justify an “SEC Blasted” headline, no matter where it’s placed.

But maybe the WSJ is just going back to its roots in terms of reflexively defending big banks whenever they’re attacked by the government. Back in 1933, the Pecora Commission interrogated Charles Mitchell, the chairman of National City Bank, revealing that he had paid himself astonishing sums, and furthermore had avoided paying taxes on any of it. Here’s how Michael Perino describes the reaction of the press, in his new book about Pecora:

If Pecora’s goal was to create outrage, he succeeded magnificently. The only thing dividing most newspapers was which part of the testimony was more outrageous. The Washington Post went with the bonuses (the paper ran the line “Huge Pay Told” over Mitchell’s picture). For the New York Times, it was the taxes — “Mitchell Avoided Income Tax in 1929 by ‘$2,800,000 loss,'” its headline read… The Wall Street Journal’s coverage was, perhaps not surprisingly, notably different. It thought the most significant aspect of Mitchell’s testimony was his huge purchases of City Bank stock during the crash. The Journal gave only cursory treatment to the bonuses and, as for taxes, merely buried near the end of the article that there had been “temporary transactions in connection with taxation.”

Within days, Mitchell had resigned from National City. But it seems the WSJ has no regrets about spinning stories about big banks in very favorable ways.


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