New York Times

The last chapter of Kate Kelly’s Wall Street Journal epic on the decline and fall of Bear Stearns tells us that the “hurried deal” to keep Bear Stearns out of bankruptcy included a “loophole” that gave Bear Stearns investors leverage to seek a higher price. By now this story of the loophole is well-known, thanks in part to a New York Times front page story that first reported it. In time this story is likely to harden into conventional wisdom, especially now that it’s been endorsed by both the Times and the Journal.
Unfortunately, the story probably isn’t true.

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Big Rescues Must Work Because Smart People Care!

It is well known that smart people—particularly the subset of the intelligent sometimes called intellectuals—tend to overrate the role of intelligence in providing solutions to social problems. This was on display in lurid colors in Gretchen Morgenson’s Sunday column in the New York Times lamenting the lack of “an intelligent and comprehensive plan for dealing with mass foreclosures and the economic consequences associated with the [credit crash] debacle.”
Morgenson goes to great lengths to draw comparisons to New York City’s bankruptcy crisis in the midseventies—which, as she says, was avoided in part by a cabal of government officials and bankers conspiring to refinance the city’s teetering debt structure. But she goes too far in reading a greater lesson into this story. It becomes almost a fairy tale of intellectualism, in which well intentioned intellectuals swoop in from their glass and steel perches to rescue capitalism from its tendency toward anarchy. The idea that no rescue plan outside of permitting market processes to operate is available is reduced to “doing nothing.” A better way must be available because “America is full of smart and caring people!”
We’re second to no one in our appreciation of the smart and caring—we’re not supposed to call them the “best and the brightest” anymore—Inhabiting these Untied States. Unfortunately, we have stubborn memories that insist on recalling the fact that the mortgage crisis that set off the broader credit crisis has its origins in the plans of the smart and caring to expand homeownership beyond the levels established through market processes. Perhaps its time to give “doing nothing” a chance.
Big Rescues Can Work. Just Ask New York. [New York Times]

This Week In Great Discoveries Made By The New York Times

Columbus.jpg The New York Times, or one really “plugged-in” features editor, realized over the weekend that some people in business aren’t going to business school. This is before the Gray Lady realizes (in maybe two years?) that as the market turns, more people are going to try to go to business school.
At least 28-year old Gabriel Hammond, who founded Alerian Capital, thinks that business school is bogus, and for a New York Times feature, that’s all it takes. Despite the fact that we probably agree with him, we’re thinking the odds are that Alerian didn’t have a wonderful August (anyone know any numbers on these guys? – send to tips at dealbreaker dot com), leaving Hammond with barely enough money to take the GMAT (that story will run in December).
Hammond thinks business school is so ridiculous that he hires people straight out of it, for reasons other than the fact that those people went to B-school. Take that, silly institution!
Hammond made his initial thousands from his Johns Hopkins dorm room betting on Caterpillar (wishing that Baltimore would be torn down and reconstructed into a fun, livable city). G-Hamm then went to Goldman to become more awesome, and by more awesome we need to say no more than a 2005 Trader Monthly top 30 trader under 30, as judged by nothing in particular. Hammond left Goldman to “raise” $5 million (a move that screams an obvious subtext that the New York Times is willfully glossing over, like the fact that it was probably family or family friend money) to start a “hedge fund.” Now the fund manages $300 million and Gabriel makes “seven figure payouts.”
Others, according to inside sources at the New York Times, get promoted straight to Associate without going to B-school, including people dressed in business formal looking earnestly (yet cautiously, knowing the burden of being so uniquely and massively successful) into a blurred cityscape at Citi.
Others, actually attending B-school and now wanting to kill themselves, were forced to attend by PE firms.
Hedge Funds and Private Equity Alter Career Calculus [New York Times]

murdoch-meter 85.jpg
The New York Times published its 3800-word investigation of Rupert Murdoch’s NewsCorp today, but it doesn’t contain any of the dealbreaking revelations we anticipated. In the “Murdochracy,” the Times reports, Murdoch avoids government regulation and generally gets what he wants through the potent cocktail of intimidation, lucrative private contracts for elected officials, campaign contributions and enormous lobbying budgets.
We remain convinced that the Times’ business section would love to see the NewsCorp.-Dow Jones deal go through, if only to watch the Wall Street Journal tabloidicized. Inset into the indignant larger story by the news department, business section reporters Richard Siklos and Andrew Ross Sorkin have a short piece reporting that, after a tempestuous weekend, the Dow Jones deal is closer to realization than ever before. The news section seems to think Murdoch is a manipulative, dangerous man while the business section just likes watching their rivals at the Journal sweat.
Yesterday, Murdoch drafted a letter withdrawing NewsCorp from negotiations after he found the Dow Jones proposal to ensure the Journal’s editorial independence “insulting,” the Journal reported. The letter was never sent and talks returned to normal late last night. Even if Dow Jones and NewsCorp can agree on the governance of the Journal, the Bancrofts still need to settle on a price, meaning these negotiations could go push into July. Bankers we spoke to said it was unlikely that Murdoch would increase his offer.
We’re dialing the Murdoch Meter back five points after the tumultuous weekend.
Murdoch Reaches Out for Even More [New York Times]
Dow Jones Deal Talks Intensify [Wall Street Journal]

If the phrase ‘jumped the shark’ hadn’t long ago done so itself, we might write that the news coverage of News Corp’s bid to buy Dow Jones jumped the shark this morning. The business news media is obsessed with the story—which just happens to be about the business news media. And sometime late last night and early this morning—to the sound of full-color print presses humming and newspaper delivery trucks idling—the coverage of the story really began to plumb the depths of its own navel.
This morning the New York Times delivered the news that—as the headline proclaimed—‘Wall St. Journal Editors Held News of Murdoch Bid.’ (Click here for Joe Weisenthal’s reaction in Opening Bell.) It’s a story that the Times editors viewed as important enough to run on the front page of the business section. So what we end up with is a story in a business section (the Times) about how a business news organization (the Journal) covered an acquisition about a business news organization (also the Journal). And now all the other business news organizations (CNBC, the wire services, DealBreaker) are reporting and commenting on that.

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  • 10 Nov 2006 at 10:09 AM
  • Analysts

Morgan Stanley’s One-Two Combo Against New York Times Management

NewYorkPostNYTMorganStanleyGraphic.jpgMorgan Stanley’s stock analysts downgraded the stock of the New York Times to the equivalent of a “sell” rating yesterday, the New York Post reports this morning.

Publishing analyst Lisa Monaco cut her rating on the stock from “hold” to “underweight” – the equivalent of “sell” – saying that the Times’ revenue is deteriorating and that, contrary to some investor expectations, a sale of part or all of the company is “implausible.”
The negative report came only a day after a Morgan Stanley investment fund based in London stepped up a campaign to push the Times to take away either the chairman or publisher posts from scion Arthur “Pinch” Sulzberger, Jr. and the two-tiered stock structure that keeps the family in control of the company.

Although the New York Post is treating this a blow to Pinch (see graphic on left), ironically the downgrade might indicate good news for the chairman/publisher. If the changes demanded by Morgan Stanley’s investment fund were realistically in the pipeline, Morgan Stanely analysts probably wouldn’t have downgraded the stock. The downgrade is a vote of no-confidence in Pinch but its also a sign that he’s probably pretty safe in both his jobs at the Times. That meter is never going to reach KO.
Times Scared [New York Post]

  • 09 Nov 2006 at 11:37 AM
  • Banks

Morgan Stanley Still Beating Up On New York Times’ Pinch

NYT Building.jpgThere is a delicious irony that the paper whose Sunday Business Section regularly carries Gretchen Morgenstern’s screeds against the size of executive pay packages is under fire from one of its largest investors for overpaying its top executives. Why do we suspect that the odds of Gretchen writing about this are approaching zero?

One of the New York Times’ largest shareholders stepped up an attack on the newspaper giant yesterday in a move some industry observers consider a veiled attempt to dethrone company scion Arthur “Pinch” Sulzberger Jr.
In a shareholder proposal filed yesterday, Morgan Stanley Investment Management, which owns a 7.6 percent stake in the Times, urged the company to split the jobs of chairman and publisher, positions currently held by Sulzberger.
Sulzberger is also trustee for the controlling Sulzberger family, all of which adds up to “inherently conflicted positions that thwart effective board oversight,” Hassan Elmasry, head of the London-based Morgan Stanley fund, wrote in the proposal.
“As publisher of the newspaper, he reports to the company CEO whom he himself [as chairman] appoints,” Elmasry added. “As chairman, he reports to a board of directors, the majority of whom are elected by the Sulzberger Family Trust on which he himself serves as trustee.”
The Morgan Stanley fund, an investor in the Times since 1996, wasn’t bothered by this arrangement until a few years ago when the company’s strategy took a new turn and access to Sulzberger and other top executives became increasingly constrained, sources close to the fund told The Post.
Among Elmasry’s criticisms are the hefty compensation packages awarded to top executives as profits tumbled and the enormous new Midtown Manhattan headquarters built as the size of the company’s staff was shrinking, sources said.

Squeezing Pinch [New York Post]