How the New York Times Hides the Truth About Wall Street's Catastrophic Misdeeds
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Why should the U.S. taxpayer, through the implied backstop of insured deposits, help JPMorgan make its rich clients richer or eat the losses when the bets go wrong?
Insured deposit banks were meant to function as lenders to individuals and businesses and provide the foundation for stable economic growth in the country. Today, as the recent blowup in the Chief Investment Office of JPMorgan Chase demonstrates, surplus insured deposits which are backstopped by the U.S. taxpayer are being deployed in exotic, illiquid derivatives. And these high-risk gambles are likely to blow up the system for the second time in a decade while the New York Times and Sorkin pedal egregiously bad data to the public.
Sorkin goes on in the article to make another factually indefensible statement:
“Citigroup’s problems are probably the closest call when it comes to whether Glass-Steagall would have avoided its problems. It gorged both on underwriting bad loans and buying up collateralized debt obligations…But Citi’s troubles didn’t come until after Bear Stearns, Lehman Brothers, A.I.G., Fannie Mae and Freddie Mac were fallen or teetering — when all hell was breaking loose.”
By taking Citigroup out of the lead role in the crisis, Sorkin also marginalizes the Glass-Steagall Act. But he’s dead wrong, again.
Bear Stearns got its emergency infusion from the Fed on March 14, 2008 and was bought out by JPMorgan Chase on March 16, 2008. Lehman failed on September 15, 2008; AIG, Fannie and Freddie were all rescued by the government in September 2008. Citigroup’s dire problems began as early as the summer of 2007 according to the Office of the Comptroller of the Currency, regulator of its national bank, and the press was writing about its drastic need for a bailout fund, proposed to be called the SuperSIV, in the fall of 2007. I wrote extensively about its desperate situation in November 2007.
Sorkin wrote the 2009 bestseller Too Big to Fail, a 600-page epic on the 2008 crash. How he researched the book without discovering these pivotal players owned insured deposit banks is mystifying.
According to Gabriel Sherman in a 2009 piece in New York Magazine, the book party for Sorkin, age 32 at the time, was attended by the titans of Wall Street: Jamie Dimon; John Mack, former head of Morgan Stanley; Steve Rattner, a former New York Times reporter who went on to become a Wall Street investment banker and private equity honcho; Ken Griffin, head of the behemoth Citadel hedge fund; and other luminaries.
Sherman reveals in the piece that one of Sorkin’s former editors at the Times called his work “thinly reported or loosely written.” That may not be a big deal if you’re writing gossipy stuff about Wall Street. But when the public has finally gotten the attention of Congress on the topic of restoring the Glass-Steagall Act to save the country from a potentially more apocalyptic meltdown, putting out a spectacularly inaccurate assessment of the role of Glass-Steagall undermines the safety and soundness of the United States.
The N ew York Times has financial writers who have been delivering consistently reliable information about Wall Street to the public for more than a decade; Gretchen Morgenson stands out in particular. It’s time to let those accurate writers weigh in on the Glass-Steagall Act.