Wall Street and the media that covers it

I received a copy of “Wall Street vs. America: The Rampant Greed and Dishonesty that Imperil your Investments,” a new book by former BusinessWeek writer Gary Weiss, during the weekend, and went through the book and found some good points about business journalism.

Here they are:

1. Anything that was not covered by The Wall Street Journal and the New York Times was considered by other media as unimportant, particularly during the height of coverage about Enron, WorldCom and other financial scandals. Writes Weiss, “Even such grave and recurring investor issues as fraud involving microcap stocks — which still savaged thousands of investors every year, and which had once been large bore — had shrunk down to small bore in 2004.” Weiss’ editors at BusinessWeek passed on such a story. p. xx.

2. The medi a attacked NYSE chairman Dick Grasso in 2003 when his large pay package became known as retribution for bad treatment by the exchange in previous years. “It is fair to say that well into the Grasso era, the NYSE was still roundly despised by a great many people whose emploers bought ink by the barrel. Relations did not improve when the NYSE devoted a section of its Web site to press goof-ups. It was used as a bludgeon to bawl out such hotbeds of left-wing extremism as the Wall Street Journal and the New York Post. Such unauthorized use of the First Amendment was not to go unavenged.” p. 10.

3. Mutual fund companies have had a relatively unscathed relationship with the financial media until recent years. “The mutual fund industry was so virtuous in the eyes of the media that the Strong mutual fund group (later pilloried in the fund scandal) and the ICI both sponsored journalism awards for years and no one in the press blinked an eye. No brokerage could have gotten away with putting its name on a journalism award. Mutual funds were different. Every financial journalist knew that mutual funds wre virtuous, scandal-free, boring.” p. 56.

4. When former SEC chairman William Donaldson began to back off some of his reforms after Wall Street began to balk, his flacks went on the offensive, and the business media still gave him fawning coverage. “This produced the usual glowing coverage and a particularly orgiastic outburst in Business Week. The nation’s leading financial weekly was so overjoyed by its access that it went a little overboard. BW portrayed Donaldson in the kind of terms no flack would dare to use, as it would be too embarrassing: ‘crusader,’ ‘activist agenda,’ a ‘zealous enforce’ who ‘set a blistering pace,’ and last, but not least, the man who ‘cleaned up the mutual-fund mess.'” pp. 105-106

5. Microcap fraud had been ignored by the financial media throughout the 1990s. “The low point in the media’s coverage of 1990s microcap fraud was probably reached in December 1995. The Wall Street Journal wrote about Wall Street boiler rooms — then at their peak — as if they were kind of a cute, Runyonesque, slightly overenthusiastic bull-market phenomenon,” writes Weiss. p. 168.