Making a mountain out of a mole hill

TheDeal.com executive editor Yvette Kantrow has a critique of the New York Times’ recent coverage of the subprime mortgage lending industry issues, noting that criticism of one analyst by reporter Gretchen Morgenson may be a bit overblown.

Kantrow wrote, “The New York Post Tuesday reported Bear’s contention that Morgenson’s characterization of Coren’s research ‘was a complete misrepresentation.’ And it backed this up. Coren, the Post said, ‘had made a series of gutsy calls on the subprime mortgage sector.’

“And that ‘upbeat report’ on March 1 that Morgenson was so bothered about but provided little information on? Coren upgraded New Century from ‘underperform’ (aka ‘sell’) to “peer perform” (aka ‘hold’), hardly an endorsement. Plus, as Associated Press and MarketWatch pointed out in Galvin stories, the upgrade contained caution: ‘Given the roughly symmetrical risk/reward profile, we’d stay on the sidelines for now until we are able to see a complete and restated set of financial statements and management opens up its communications lines again,’ Coren wrote.

“Not exactly the second coming of Henry Blodget.

“Of course, anything is possible. Galvin may find e-mails in which Bear execs bully Coren to go easier on New Century to please its mortgage-trading desk. But as of now, it appears Coren is being vilified for being slightly wrong. Post-Spitzer, if an analyst makes a bad call, he must be corrupt.

“What’s also odd here is Morgenson’s fixation on turning the subprime meltdown into a retail investor-conflict story. (Her piece Wednesday on mutual funds that hold mortgage debt struggled to prove that ‘everyday investors are among those that will probably be hurt.’) After all, there’s a lot to legitimately pin on Wall Street in this mess; the investment banks supplied the cash that kept subprime lenders humming, then eagerly purchased their loans for securitization. But rather than explain all that, it’s simpler to blame “villains” — analysts — that her readers, including pols like Galvin, already know. Galvin’s investigation ensures that Morgenson won’t be off this story anytime soon. In that way, it’s the same playbook Morgenson and the Times followed in the Pequot-John Mack insider trading “scandal.” It’s ingenious. Write a casually accusatory story that prompts an investigation and then use that investigation as proof that your accusations are spot on. Even if they aren’t.”

Read more here.