TALKING BIZ NEWS EXCLUSIVE
The federal government has a responsibility to disclose to the public how it used tax dollars to bail out Wall Street firms during the economic crisis, said the editor in chief of Bloomberg News on Wednesday.
“What people don’t want us to know, we go out and find it,” said Winkler.
The government has argued that to disclose this information would lead to a panic in the markets. The case is likely to go to the U.S. Supreme Court.
Winkler, a former Wall Street Journal reporter, founded the Bloomberg news service in 1990. That news organization now has more than 2,300 journalists around the world.
“Around 2007, at the height of the exuberance over the debt market that had expanded exponentially from nothing in 1989 to trillions of dollars in the new decade, started to show cracks,” said Winkler. “The appetite for these securites was diminishing.”
Mark Pittman, a Bloomberg reporter, began looking into this unraveling debt market, noted Winkler, even though he didn’t understand much about it. “I don’t think he would know a bond if it bit him in the nose,” said Winkler about Pittman when he was hired by Bloomberg.
“The only thing he was interested in was getting the story,” said Winkler. “He was a big bear of a man, and he couldn’t resist schmoozing with anyone who would pass on a tip or two.”
In the fall of 2007, the Federal Reserve began taking action in the debt market to prevent an economic collapse. Pittman, noting that the credit market had collapsed and people were unable to get loans, began to question how the Fed was stepping in to rescue financial institutions. The agency, in turn, refused to give him the documents he requested, which led to the lawsuit.
“All of this was done with taxpayer dollars,” said Winkler. “And all of this, for all intents and purposes, was opaque.”
If the Supreme Court denies to hear the case, then a lower court’s ruling in Bloomberg’s favor will require the Federal Reserve to open its records.
“None of this is in vain,” said Winkler. “It helps make our markets safer and more secure.”
When asked by an audience member whether Bloomberg reported the imminent demise of the credit market, Winkler replied, “Yes, we did.” He noted an entire issue of Bloomberg Markets magazine in 2007 discussed the “toxic debt” issue.
“We did see it coming, and we did try to outline why it was so pernicious,” said Winkler.
Winkler was also asked about the current exemptions to the FOI law for the Securities and Exchange Commission passed earlier this year by Congress as part of the financial regulation overhaul.
“We’re against” the exemptions, said Winkler. “We find it incredible that the SEC, of all institutions, which is meant to protect investors from all of the hazards of the financial markets, that it would be exempt from disclosing what it’s trying to do to protect investors.”
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Winkler is correct that Bberg focused (some) on toxic debt in 2007. However, BusinessWeek put "How Toxic Is Your Mortgage?" on the cover in early 2006. Earlier, better, more comprehensive, better-written. It's also true that Bberg reporters were under orders to mention credit default swaps prices whenever possible in 2007, even in routine company news stories, in order to seed the market for CDS data the company wished to sell. Relatively little, if any, coverage focused on how speculative the CDS market was, or on its disconnection from any otherwise insurable interest of investors. Gretchen Morgenson would later set the pace on that part of the story, as nearly as I can tell.