Traditional journalism organizations as a matter of practice eschew and even sometimes demonize the work of independent journalists who document apparent high-level collusion against the broader public interest.  “Conspiracy theory,” they sniff. Yet with the fast-changing media landscape, even the most cautious enterprises are suddenly suffused with the spirit of the muckrakers, who were unafraid to routinely document the extent to which the playing field was tilted against the public. With the New York Times, we see increasing examples of this bracing wind, typically but not exclusively in columns and “analysis” pieces. One such example is Andrew Ross Sorkin’s “advice” to the new Financial Crisis Inquiry Commission looking into what the heck went so badly wrong these last few years. Here’s a taste:

Mr. Blankfein, your firm [Goldman Sachs], and others, created and sold bundles of mortgages known as collateralized debt obligations that it simultaneously sold short, or bet against. These C.D.O.’s turned out to be bad investments for the people who bought them, but your short bets paid off for Goldman Sachs. In the process of selling them to institutional investors, however, your firm lobbied ratings agencies to assign them high ratings as solid bets – even as your firm planned on shorting them. Could you explain how Goldman bet against these C.D.O.’s while simultaneously trying to persuade ratings agencies and investors that they were good investments?…should we continue to allow transactions in which you’re betting against what you’re also selling?…

This one is for the entire group. All of your firms are involved in some form of proprietary trading, or using your own capital to make financial bets, not unlike hedge funds and other private investors. As the recent crisis has shown, these bets can go catastrophically wrong and endanger the global financial system. Given that the government sent a clear signal in the crisis that it would not let the biggest firms fail, why should taxpayers guarantee this sort of trading? Why should the government backstop what amounts to giant hedge funds inside the walls of your firms? How is such trading helpful to the broader financial system?….

Again, for the group: Over the last year, your firms have actively used the Federal Reserve‘s discount window to exchange various investments (including C.D.O.’s) for cash. You probably have a better idea than most about what those assets now sitting on the Fed’s balance sheet are worth. Given the growing calls for regular audits of the Fed (an idea being resisted by the likes of the chairman, Ben Bernanke), do you think the demands for such audits are warranted?…

This question is for Mr. Mack [John Mack of Morgan Stanley]. In November, in a surprisingly candid moment, you publicly declared, “Regulators have to be much more involved.” You then added, “We cannot control ourselves.” Can you elaborate on those comments? Is Wall Street inherently incapable of policing itself – a view contrary to what most of your peers have argued?….

Mr. Blankfein. Your firm, like other banks on this panel, was paid in full by the American International Group on various financial contracts, thanks to the government’s bailout. You can understand how this has whipped up no small amount of fury and questions over why A.I.G. and the government did not try to renegotiate those contracts. Because your firm was the largest beneficiary of the government’s decision, did you or any of your employees lobby the Fed, Treasury or any other government agency for this “100 cents on a dollar” payout? If so, enlighten us about those conversations….

It’s a safe bet, based on past such inquiries, that the commission will not unearth the full dimensions of the problem, nor propose sufficiently bold solutions. And if it does, it is likely to be ignored. Journalism itself is far better equipped to get to the bottom of things-and to stay on the case until meaningful changes come to pass. Here at WhoWhatWhy, as we ramp up into a full-blown investigative news organization, we’re eager to get onto this particular trail.


  • Russ Baker

    Russ Baker is Editor-in-Chief of WhoWhatWhy. He is an award-winning investigative journalist who specializes in exploring power dynamics behind major events.

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