December 3, 2009
Just a week before the Senate banking committee was to begin confirmation hearings on President Obama’s nomination of Ben Bernanke to a second term as chairman of the Federal Reserve, one of the most important watchdogs of the Fed died at the age of 52. Mark Pittman was the reporter at Bloomberg News whose work was responsible for the lawsuit, brought under the Freedom of Information Act, against the Federal Reserve, seeking disclosure of the identities of those financial firms benefiting from the Fed’s eleven emergency lending programs. The suit, Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, (U.S. District Court, Southern District of New York) resulted in a ruling last August by Judge Loretta Preska, who rejected the Fed’s defense that disclosure would adversely affect the ability of those institutions to compete for business. The suit also sought disclosure of the amounts loaned to those institutions as well as the assets put up as collateral under the Fed’s eleven lending programs, created in response to the financial crisis. The Federal Reserve is pursuing an appeal of that decision.
Since September of 2008, we have been overexposed to the specious claims by politicians, regulators and other federal officials, that the financial crisis was “unforeseeable”. The veracity of such statements is undercut by the fact that on June 29 of 2007, Mark Pittman provided us with this ominous warning from his desk at Bloomberg News:
The subprime meltdown is sending shock waves through the capital markets in part because mortgage bonds are the world’s biggest debt market, according to the Securities Industry Financial Markets Association.
Pittman’s groundbreaking work on the havoc created by the subprime mortgage-backed securities market resulted in his receiving the Gerald Loeb Award in 2008, which he shared with his fellow Bloomberg reporters, Bob Ivry and Kathleen Howley, for a five-part series entitled “Wall Street’s Faustian Bargain”.
On November 30, Bob Ivry wrote what many have described as the “definitive obituary” for Mark Pittman. Ivry disclosed that although the actual cause of death was not yet known, Pittman had suffered from “heart-related illnesses”. In addition to providing us with his colleague’s impressive biography, Ivry shared the reactions to Pittman’s death, expressed by several prominent individuals:
“He was one of the great financial journalists of our time,” said Joseph Stiglitz, a professor at Columbia University in New York and the winner of the 2001 Nobel Prize for economics. “His death is shocking.”
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“Who sues the Fed? One reporter on the planet,” said Emma Moody, a Wall Street Journal editor who worked with Pittman at Bloomberg News. “The more complex the issue, the more he wanted to dig into it. Years ago, he forced us to learn what a credit- default swap was. He dragged us kicking and screaming.”
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“He’s been on this crisis since before the crisis,” said Gretchen Morgenson, the Pulitzer Prize-winning financial columnist for the NewYork Times. “He was the best at burrowing into the most complex securities Wall Street could come up with and explaining the implications of them to readers of all levels of sophistication. His investigative work during the crisis set the standard for other reporters everywhere. He was a giant.”
Congressman Brad Miller of North Carolina wrote an informative remembrance of Pittman for The Huffington Post. This statement is one of the highlights from that piece:
The financial crisis is a result of a failure of every institution of our democracy. Regulators failed. Congress failed. And the financial press failed abysmally. Mark was an exception. Mark’s irreverence allowed him to see the crisis coming when other financial reporters accepted uncritically what the industry said. Mark’s irreverence was what made him a great reporter.
Mark Pittman was featured in the recent film American Casino, a documentary which analyzed the subprime mortgage catastrophe and the resulting financial crisis. In September of 2008, when the crisis had most people in the world scratching their heads in confusion, Pittman provided a roadmap to the initial bailouts, shortly after they were distributed.
The interview with Mark Pittman, conducted by Ryan Chittum for the Columbia Journalism Review in February of 2009, gave Pittman the opportunity to share his experiences during the onset of the financial crisis. The interview is especially informative as to what we can expect to find out about this mess in the future, as the investigations begin to unfold. Passages like these reveal the magnitude of the loss resulting from Pittman’s death:
TA: Does there need to be regulation just to simplify things to where it makes sense to more people?
MP: If it was all transparent the complexity wouldn’t matter. If the CDO market had had publicly available prospectuses with the contents of the CDO disclosed, we wouldn’t have this issue, because Bloomberg probably would have made fun of anybody who bought anything like this. But there was this enormous shadow banking system going on. We did a series about that, too. A lot of times people don’t see what we do.
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The thing that people don’t realize is that the Fed is now the “bad bank.” That’s just something that people don’t understand. They’ve taken collateral, and they refuse to tell us how they valued it …
We have numerous banks — dozens, maybe hundreds that are insolvent. And they become more insolvent every day because more people quit paying their mortgage loans, and more guys move out of the shopping center, and more people quit paying their credit cards. But nobody wants to have the adult conversation. We need to be honest about what the problem is here, how big it is, and how we’re going forward to clean it up, and who’s going to pay for it.
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Hopefully, we will be able to inform the people enough to know how badly we’re getting screwed (laughs). We need to know how to prevent it from happening again, and we need to know who did it. There’s renewed energy on this front because we’ve staffed up the people who cover banks, the securities firms. We have a lot more people going at real estate and a bunch of different areas that this involves. That was a conscious move from meetings we started having in 2007. We hired people and we moved people from one area to another area.
Pittman’s final statement during the interview underscores the fact that one of the greatest fighters for an informed public has been lost:
This is a big deal and it’s going to be going on — I swear to God I’m going to retire on this story, because it’s just going to keep happening.
Tragically, Mark Pittman was forced to “retire” on terms that were not satisfactory to any of us. We can only hope that others will be inspired by his work and follow his lead.
A Look Ahead
December 7, 2009
As 2010 approaches, expect the usual bombardment of prognostications from the stars of the info-tainment industry, concerning everything from celebrity divorces to the nuclear ambitions of Iran. Meanwhile, those of us preferring quality news reporting must increasingly rely on internet-based venues to seek out the views of more trustworthy sources on the many serious subjects confronting the world. On October 29, I discussed the most recent GMO Quarterly Newsletter from financial wizard Jeremy Grantham and his expectation that the stock market will undergo a
“correction” or drop of approximately 20 percent next year. Grantham’s paper inspired others to ponder the future of the troubled American economy and the overheated stock market. Mark Hulbert, editor of The Hulbert Financial Digest, wrote a piece for the December 5 edition of The New York Times, picking up on Jeremy Grantham’s stock performance expectations. Hulbert noted Grantham’s continuing emphasis on “high-quality, blue chip” stocks as the most likely to perform well in the coming year. Grantham’s rationale is based on the fact that the recent stock market rally was excessively biased in favor of junk stocks, rather than the higher-quality “blue chips”, such as Wal-Mart. Hulbert noted how Wal-mart shares gained only 14 percent since March 9, while the shares of the debt-laden electronics services firm, Sanmina-SCI, have risen more than 600 percent during that same period. Hulbert pointed out that the conclusion to be reached from this information should be pretty obvious:
My favorite reaction to Jeremy Grantham’s newsletter came from Paul Farrell of MarketWatch, who emphasized Grantham’s broader view for the economy as a whole, rather than taking a limited focus on stock performance. Farrell targeted President Obama’s “predictably irrational” economic policies by presenting us with a handy outline of Grantham’s criticism of those policies. Farrell prefaced his outline with this statement:
At the first point in the outline, Farrell made this observation:
Farrell’s discussion included a reference to the latest article by Matt Taibbi for Rolling Stone, entitled “Obama’s Big Sellout”. The Rolling Stone website described Taibbi’s latest essay in these terms:
Since the article is not available online yet, you will have to purchase the latest issue of Rolling Stone or wait patiently for the release of their next issue, at which time “Obama’s Big Sellout” should be online. In the mean time, they have provided this brief video of Matt Taibbi’s discussion of the piece.
The new year will also bring us a new book by Danny Schecter, entitled The Crime of Our Time. Mr. Schecter recently discussed this book in a live interview with Max Keiser. (The interview begins at 16:55 into the video.) In discussing the book, Schecter explained how “the financial industry essentially de-regulated its own marketplace. They got rid of the laws that required disclosure and accountability …” and created a “shadow banking system”. Shechter’s previous book, Plunder, has now become a film that will be released soon. In Plunder, he described how the subprime mortgage crisis nearly destroyed the American economy. The interview by Max Keiser contains a short clip from the upcoming film. Danny also directed the movie based on (and named after) his 2006 book, In Debt We Trust, wherein he predicted the bursting of the credit bubble.
It was right at this point last year when Danny’s father died. The event is easy for me to remember because my own father died one week later. At that time, I was comforted by reading Danny’s eloquent piece about his father’s death. Danny was kind enough to respond to the e-mail I had sent him since, as an old fan from his days at WBCN radio in Boston, during the early 1970s, my friends and I tried our best to provide Danny with any leads we came across. These days, it’s good to see that Danny Schechter “The News Dissector” is still at it with the same vigor he demonstrated more than thirty-five years ago. I look forward to his new book and the new film.