Who knew that when Bryan Burrough fingered CNBC for helping kill off Bear Stearns Cos., he was starting a minitrend? In the weeks following Burrough's much-discussed piece in Vanity Fair (which, according to the New York Post, earned Burrough angry phone calls from CNBC employees), a whole lot of talking heads -- everyone from politicians to research analysts to, of course, the media -- have been blamed for helping to take down financial institutions. The atmosphere has become so charged, it's a wonder anybody is willing to talk at all and risk becoming the next, say, Chuck Schumer.
Schumer, of course, has come in for a drubbing for letters he released in June about a possible failure of California thrift IndyMac Bancorp. A run, followed by a federal takeover of IndyMac, ensued, and regulators accused the senator of engaging in "incredibly stupid conduct" and giving "the bank a heart attack."
Those words were likely ringing in the heads of bank analysts as they were asked the obvious question following IndyMac's failure: Who's next? Indeed, a report with that very title was issued by Richard X. Bove of Ladenburg Thalmann & Co., which The Wall Street Journal promptly cited as a factor behind a selloff of regional bank stocks on July 14. As stocks tanked, Bove, the WSJ said, was moved to issue a "clarification," noting that the main thrust of the piece was "that the banks are in better condition than is generally perceived."
Bove was widely feted as one of the first analysts to tell investors to bail out of big brokerage stocks last summer. His bearish and prescient calls made him so popular with the media that at one point this spring he told reporters he would no longer be taking their calls. But that ended when Ladenburg, a few months later, took over his old firm, Punk, Ziegel & Co.
"Their message to me is talk to everybody all the time," Bove told TheStreet.com earlier this month.
We're wondering how long that policy will hold, considering that rumor and its kissing cousin, speculation, have been deemed the four-letter words of our current crisis by everyone from the Securities and Exchange Commission to Jamie Dimon. Naming names, as Bove did, is now a risky endeavor, capable, it seems, of causing a bank to have a coronary.
Just ask CNBC's Jane Wells. When Wells reported last week that RBC Capital Markets had a list of 300 banks that could potentially fail, the firm quickly corrected that it had no such list; it simply believed up to 300 banks could fail (while apparently having no idea which ones they were). RBC also supplied Wells with a list of five banks that could be at risk, which she also reported. Later, RBC clarified that while it did give Wells that list, it was based on analysis done by SNL Financial LC using a ratio designed by an RBC analyst. "SNL named the names, not RBC, and RBC wants you to know that," Wells commented on her Funny Business blog. What a relief.
With the exception of Burrough's Bear piece, the media has managed to steer clear of blame for fanning any financial flames, but that's not likely to last. After all, others might engage in rumor and speculation, but it's the media that reports it. And fingers are beginning to point. Howard Glaser, a "media go-to guy" on Freddie Mac and Fannie Mae whom Politico revealed to be on the mortgage companies' payroll, has accused the Bush administration of making up stories about the lenders and leaking them to the press. Glaser was particularly incensed by a page 1, July 11 story in The New York Times that said the government was considering a takeover of the two mortgage giants. "That was an extraordinarily damaging story, and it wasn't true," Glaser told Politico.
It's curious that Glaser would go after what was clearly a catchup story for the Times. One day earlier, the WSJ had its own front-pager on the government making contingency plans for Fannie and Freddie.
Still, Glaser seems more concerned with who is leaking information than who is reporting it. "The circumstantial evidence points to the White House," he told Politico. "Federal officials gave what appears to be false information to The New York Times."
Uh-oh. This sounds like a case for the Securities and Exchange Commission.