The Most Important Financial Journalist of Her Generation

By Dean Starkman, The Nation. Posted July 9, 2009.

Morgenson was born in State College, Pennsylvania, the daughter of liberal parents. Her father was an academic psychologist who later taught at Wilfrid Laurier University (in Waterloo, Ontario), and her mother was a librarian. Her parents split when she was 10, and she moved with her mom to Oxford, Ohio.

Her ambition as a girl was to be a reporter for the New York Times. After graduating from her parents' alma mater (St. Olaf College, in Northfield, Minnesota), lacking contacts, training or much in the way of money, she nonetheless boarded a plane for New York City and eventually landed a job in journalism -- as a secretary at Vogue reporting to, of course, a tyrannical editor. ("It was 'devil wears Prada,' totally," she says.) She later moved up to a low-level editorial job ("assistant slave," as she puts it), then began to write personal-finance columns. But at a salary of $10,000 a year, she found she couldn't afford her new profession and left for a better-paying job on Wall Street.

Her three years at Dean Witter (now part of Morgan Stanley) taught her a few things about the financial-services industry, none of them particularly edifying. For example, if the office squawk box in the morning announced an "overnight special" on some stock laden with incentives for the brokers, "you knew it would open lower," she says. Another lesson: "You can't trust your research department; that you learn pretty quickly." Her career, such as it was, lasted until mid-1983, when an early version of the tech bubble burst, costing some of her clients a lot of money. "I felt so terrible," she says. "I had this terrible guilt."

Retreating to the relative moral high ground of journalism, she cadged a six-month trial at Money magazine and eventually a job at Forbes, then known for its hard-hitting business investigations. She rose quickly, learning at the feet of Michaels, the magazine's defining personality and editor from 1961 to 1999. A taskmaster (he could be "nasty, frightening," she recalls), Michaels stressed the importance of assembling an armada of facts in reporting and cutting to the chase in writing. Don't leave it to the reader to sort it out, he preached.

It was under Michaels that Morgenson became Morgenson, rattling off a series of investigative coups. A 1993 bombshell that found the entire Nasdaq trading system was tilted to favor stockbrokers over investors led to a historic $1 billion antitrust settlement with Wall Street firms. Another Forbes story took aim at the mid-1990s euphoria surrounding "boiler rooms" -- registered and licensed small brokerages that were in fact criminal enterprises. The firms cold-called and bamboozled thousands of people into investing in plausible-sounding tiny public companies the brokerages secretly controlled. And while all business publications covered the resulting criminal cases, only Morgenson traced the frauds of one particularly malignant firm, A.R. Baron & Company, to its financial backer and back-office services provider: Bear Stearns.

The story detailed an intimate relationship between a criminal enterprise and a Wall Street bank, including unheeded letters from frantic investors pleading with Bear to cancel trades they had never authorized. The piece, incredibly, also traced the relationship between Baron principal Andrew Bressman and Richard Harriton, a top Bear official. Bear later agreed to pay $38 million (and got off incredibly easy) to settle charges brought by the SEC and the Manhattan district attorney, Robert Morgenthau. Harriton agreed to pay $1 million and was barred from the business.

The business press generally goes to great lengths to avoid this kind of straightforward investigative reporting, which is why Morgenson's approach has been so badly needed in recent years. After all, the mortgage crisis was nothing if not the Bear/Baron model writ large. It is generally conceded today that Ameriquest, Countrywide, Washington Mutual, Citigroup -- all the brand names, in fact -- were running boiler rooms underwritten and incentivized by Bear, Lehman, Merrill Lynch and the Wall Street securitization machine. The business press did not cover it then and still hasn't gotten its arms around this phenomenon. If readers are wondering why they were surprised by the mortgage crisis, this is the reason.

Morgenson arrived at the Times in 1998, an ascension that brought an investigative, accountability-oriented sensibility to a highly visible outpost. Reading through years of her work in one sitting isn't an entirely pleasurable experience -- it can feel like you're being pummeled by a sock filled with wet sand. But even so, a reader is struck by her mastery of technical details, the force of her prose and, mostly, the underlying insistence that capitalism be made to work for everyone, not just the big shots. Her work in the run-up to the tech bubble was characteristically skeptical and investor oriented. Common causes of columns and stories include, besides compensation reform: shareholder rights; effective corporate governance; nonrigged arbitrations; anti-gouging; full disclosure in consumer lending; and fairness in bankruptcy, foreclosure and other legal proceedings. Her 2002 Pulitzer Prize for Beat Reporting was officially awarded for stories that plumbed bogus Wall Street stock research and the dangers of off-balance-sheet financing. But in an era of spectacular business corruption (Enron, WorldCom, etc.), I suspect the Pulitzer judges, who were not business news specialists, also appreciated her confrontational approach.

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Dean Starkman is an assistant managing editor and the Kingsford Capital Fellow at Columbia Journalism Review; he runs "The Audit," CJR's online business-press section.

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