Was Goldman’s sleazy behavior really illegal?

Goldman Sachs founder Marcus Goldman

Keep an eye on the Securities and Exchange Commission’s case against Goldman Sachs. It’s hard to imagine a less sympathetic defendant than Goldman. That may be the problem, because evidence is already emerging to suggest regulators are concocting violations in order to punish sleazy but legal behavior.

In today’s New York Times, Binyamin Appelbaum offers a useful analysis of the SEC’s civil suit against Goldman, which stands accused of defrauding investors. The story quotes experts who point out that those investors were fully informed about what they were buying. The only thing investors didn’t know was that a hedge-fund manager named John Paulson helped pick what went into the investment vehicles and then bet they would lose money, to the great benefit, as it turned out, of Goldman’s shareholders. [Note: The previous sentence has been corrected since this item was first posted.]

Elsewhere in the Times, Andrew Ross Sorkin asks, “Why was Goldman, or any regulated bank, allowed to create and sell a product like the synthetic collateralized debt obligation at the center of this case?” The key word in that sentence may be “allowed.”

The Goldman case seems similar to one investigated recently by ProPublica and the NPR program “This American Life” involving Magnetar, a hedge fund that created collateralized debt obligations (CDOs) that it then bet against. Magnetar has been accused of deliberately making those CDOs as risky as possible and then shorting them, running up many tens of millions in profits when they failed. (Magnetar denied the accusation.)

According to the report, Magnetar’s dealings may have single-handedly extended the housing bubble for at least a year, making the subsequent crash much deeper than it otherwise would have been. Yet not only has there been no hint that there was anything illegal going on, but Magnetar itself is still in business.

(And by the way, if you haven’t heard the report, you should download the podcast. It is a rare model of clarity about an exceedingly murky subject. You will come away, as I did, actually knowing something about what CDOs are and why they were so harmful to the economy.)

Although the charges Goldman faces are civil rather than criminal, the story calls to mind my friend and occasional collaborator Harvey Silverglate’s book “Three Felonies a Day,” which details the expansive reach of federal prosecutors who use vague laws (“conspiracy” is a favorite) in order to punish people and corporations they have targeted.

The news media ought to follow Appelbaum’s lead and be on alert against getting spun by tales of wrongdoing at Goldman. The real outrage may prove to be not what’s illegal but what’s legal. Perhaps a better story is whether the massive financial-regulation bill now being considered by Congress would outlaw the sort of behavior that made Goldman and Magnetar clients even richer than they already were — while leaving the economy in ruins.

Photo via Wikimedia Commons.

Slip-sliding with the Red Sox

David Ortiz

It’s way too early to write off the Red Sox. The starting pitching, relievers Jonathan Papelbon and Daniel Bard, and the defense are all going to be fine. Early-season aberrations are nothing to worry about.

What does make me worry are bad things that were eminently predictable. A soft bullpen. Poor defense by catcher Victor Martinez. And, more than anything, weak offense led by the all-but-finished designated hitter, David Ortiz.

The Sox are going to have to get by with Martinez as catcher, and in any case he’s no worse than Jorge Posada. But the hitting? They’re two hitters away.

Getting that first hitter may be as easy as benching Ortiz and replacing him with some combination of Mike Lowell and Jeremy Hermida.

The second hitter? I imagine Theo is hoping Clay Buchholz can string together enough decent starts so that he can unload him for a good bat.

As it stands, I could easily see this team not making the playoffs. I know: Sounds like I am writing them off, doesn’t it? But I’m counting on Theo making some adjustments.

Photo (cc) by Googie Man and republished here under a Creative Commons license. Original at Wikimedia Commons.

Is there more to Howie’s suspension?

Howie Carr

Sometimes a cigar is just a cigar. So maybe Howie Carr’s suspension from WRKO Radio (AM 680) is just a suspension. But let me inject some uninformed speculation into the matter. The once-great station has been running on fumes for some time. Maybe its corporate owner, Entercom, has decided to force an end game, let Carr out of his contract and turn ‘RKO into an outlet for, oh, let’s say Spanish-language infomercials.

The Boston Globe’s Erin Ailsworth reports that Carr was suspended for a week for badmouthing the station on the air — something he has done continuously since he was forced into staying in 2007. (Apparently it’s gotten worse lately.) Carr is said to be unhappy that Rush Limbaugh’s syndicated show recently moved to Clear Channel’s WXKS (AM 1200), part of a national “Rush Radio” network.

Funny, but I thought one of the reasons the station replaced Rush with Republican political consultant Charley Manning was that Howie and Manning are buddies, and that Charley might keep the petulant star more or less in line. I don’t have any numbers in front of me, but Boston radio observers have long noted that this is one of Limbaugh’s worst markets. The idea of not fighting to keep Limbaugh and going with a local show struck me as pretty smart, even if Manning’s show is a work in progress.

Carr does seem to be wallowing in bitterness lately. For instance, he recently wrote in his Boston Herald column that President Obama wouldn’t have made it through college and law school if he weren’t black:

Of course, no one expects Barack Obama to really know anything. We understand, all too well, exactly how he got through Columbia and Harvard Law. He had certain … intangibles, shall we say.

That’s pretty rancid even by Howie’s standards. No, I’m not leaving anything out — the ellipses are his, not mine.

Back in 2007, Carr tried to jump to WTKK (96.9 FM), which wanted him as its morning guy. Unfortunately for Carr, he turned out to have a contract more restrictive than Curt Flood’s, and he was forced to stay.

What’s not known is whether Greater Media, which owns ‘TKK, still wants him. Morning drive is now ably helmed by Jim Braude and Margery Eagan. Would ‘TKK move Jay Severin out of afternoon drive to make way for Carr?

Moreover, given the changed economic climate, it certainly seems unlikely that Greater Media would still be willing to pay Carr $7 million over five years.

The other mystery factor is how much Entercom really wants WRKO to succeed. There’s a lot of audience overlap between ‘RKO and another Entercom station, WEEI (AM 850), a sports-talk outlet that also carries the Red Sox. No doubt the company wants WRKO to make money, but not at the expense of its more-valuable sports station.

Carr is a legitimate talent, but it’s been years since he’s showed more than an occasional glimmer. His suspension comes at a time when he probably has little leverage. Maybe he’ll be back on the air in a week as though nothing happened. But you have to wonder if Entercom executives have finally decided it’s time to do something drastic about its faltering talk station.

Photo (cc) by Paul Keleher and republished here under a Creative Commons license. Original at Wikimedia Commons.

Analyzing coverage of the Phoebe Prince story

Occasional Media Nation commenter Bill Weye has written a detailed critique of how his local newspaper, the Springfield Republican, has covered the Phoebe Prince story. Weye offers a harsh analysis, pointing his finger at newsroom cutbacks and a court reporter whom he considers to be inexperienced.

I know nothing about the Republican. But whether Weye is right or wrong, his post strikes me as a well-thought-out take that is worth reading.

Poll illuminates tea-partiers’ views on race

Thanks to Greg Mitchell’s Twitter feed, I know far more about the New York Times/CBS News poll of tea-party supporters than I would have if I’d relied solely on the Times’ polite take. (The Times does better with an interactive presentation of the complete results.) What you really want to do is check out CBS News’ coverage, starting here. A few findings that are worth pondering:

  • Fewer than half — 41 percent — believe President Obama was born in the United States. Thirty percent flatly declare that Obama was born in another country, and another 29 percent don’t know. In other words, 59 percent of tea-partiers are either hard-core or soft-core birthers.
  • Then again, 32 percent of Republicans believe Obama was born in another country.
  • Eighteen percent of Americans identify with the tea-party movement, and just one percent of them are black. Not surprisingly, 52 percent of this overwhelmingly white group say that too much is made of the problems facing black people, and one-fourth believe the Obama administration favors blacks over whites.
  • Fifty-four percent are Republicans, and 41 percent are independents. Given that 73 percent say they’re conservatives, it stands to reason that most of the independents are politically to the right of where they perceive the Republican Party to be. Just 5 percent say they are Democrats.
  • Sixty-four percent believe a flat-out falsehood (other than the birther falsehood): that taxes for most Americans have risen during the Obama presidency. In fact, they have fallen.
  • And here’s the explanation: 63 percent say they get most of their news from the Fox News Channel, and large majorities hold favorable view of Glenn Beck and Sarah Palin.
  • While anger is a prime motivating factor, tea-party “activists” turn out to be even angrier than mere supporters: 72 percent of activists are mad as hell, compared to 53 percent of supporters.

Conclusion: Anyone who thinks the tea-party movement isn’t motivated by racial fears is deluding him- or herself.

Apple’s heavy-handed approach to speech

I’m trolling for Boston-area stories about Apple’s heavy-handed approach to allowing and banning apps for the iPhone, the iPod Touch and now, of course, the iPad. If you know of any, please pass them along. I would love nothing more than to give Steve Jobs a Muzzle Award, but I need a local angle.

What prompts my request is this outrageous example involving newly minuted Pulitzer-winning cartoonist Mark Fiore, who was unable to get his app approved because his work “ridicules public figures.”

I’ll be in the market for a new phone in the summer of 2011. It’s looking less and less likely that I’ll be going with Apple, much as I love its technology.

Playing on racial fears

Let’s see how many media outlets report on the speaker who angrily referred to President Obama as “Barack Hussein” (not even the typical “Barack Hussein Obama”) at this morning’s tea-party rally on the Boston Common — and on all the members of the audience who cheered. Not this one, unfortunately.

I won’t call it racism, but it’s certainly a case of playing on racial fears.

Talking back to the news with NewsTrust

Who doesn’t like to talk back to the news? That, in its essence, is the idea behind NewsTrust, a site I’ve been involved with almost from its inception in 2005. The basic idea is to rate news stories on journalistic criteria such as sourcing, fairness and depth. You can rate news organizations, and other reviewers get to rate you as well.

Last week Mike LaBonte, a volunteer editor for NewsTrust who lives in Greater Boston, visited my Reinventing the News class to lead a hands-on demonstration. Dividing the class into four groups, we reviewed a story in the Washington Post on a day in the life of an Iowa tea-party protester.

It was a difficult story to rate, and my students were of two minds. On the one hand, the story was woefully incomplete, and the reporter allowed the protester to make all kinds of ridiculous assertions about President Obama and health-care reform. On the other hand, the story had value if viewed not in isolation but, rather, as part of the Post’s ongoing coverage. As a result, student reviews ranged from a high of 3.5 (out of 5) all the way down to a 1.7.

We followed that up with a class assignment: each student was asked to find, post and rate at least three stories, and to write about the experience, as well as the positives and negatives of NewsTrust, on her or his blog. Here is our class wiki, which links to everything.

Unlike previous semesters, we did not participate in a news hunt on any particular topic. Thus you’ll find stories ranging from the death of Polish President Lech Kaczynski and the pending retirement of Supreme Court Justice John Paul Stevens to lighter fare such as why yoga appeals mainly to women.

Students have differing views about the value of NewsTrust as well. One positive aspect, it would seem, is that perusing NewsTrust restores some of the serendipity that existed back when everyone read a print newspaper every day.

Yet Mark DiSalvo observes that Google News and the people he follows on Twitter already put news stories in front of him that he might not otherwise know about, and with less technological hassle. “Google News has better customization tools, and the people I follow on Twitter are already people whose taste I trust,” he writes.

Hannah Martin writes that NewsTrust makes her think about the news in a more critical and discerning way. “What I liked about the reviewing experience was it forced me to really analyze my news on its journalistic value, which, as bad as it sounds, is often something that slips my mind,” she says. “I browse the headlines of nyt.com, read what looks important, and accept it as fact, rarely stopping to count sources or assess context. The process of reviewing though, forced me to think through all the elements of each piece, and consider what, as a journalist, should ultimately be there.”

My own view is that NewsTrust is potentially valuable as a crowdsourced front page — an alternative to letting the New York Times or the Washington Post tell us what the most important news of the day is. The problem is that the software is time-consuming and not particularly intuitive, even though it has been improved over the past year.

And though NewsTrust claimed more than 15,000 registered users by the end of 2009, most of the stories you’ll find seem to have been posted and rated by just a small handful of regulars. This is not surprising. Studies have shown that two much-bigger crowdsourced sites, Wikipedia and Digg, are the handiwork of small numbers of unusually active users.

I hope NewsTrust will continue to grow, because the idea is sound. The challenge is that crowdsourcing only works when there is a crowd.