Andrew Ross Sorkin's call for a regulatory crack down on those spreading rumors was probably a big hit in the corner offices of Wall Street firms. But it's getting a much frostier reception from some of his fellow scribes. Earlier we pointed out that Portfolio's Felix Salmon gave him a bit of a thrashing in his Market Mover's column. Now we also find that he's getting knocked around by the Deal's editor in chief, Bob Teitelman.
Teitelman points out that Sorkin's argument raises a philosophical question that's been around at least since the time of Christ: "What is truth?" How exactly would a prosecutor go about determining the truth of the financial condition of Bear Stearns when even its top executives seem to be largely in the dark? Ditto for Lehman Brothers, which was denying anything was wrong, cursing the rumor-mongers, until it finally had to confirm the rumors and hand around the hat once more.
We'll go a step further. The notion of pursuing rumor mongers is potentially far more dangerous than spreading false rumors. If subpoenas started flying around "at least as fast as the rumor mill." as Sorkin suggests, it would have a chilling effect on the way information gets passed around Wall Street. It would make the discovery of information, the pursuit of hunches, the comparing of notes far more dangerous. This is a frightening curtailment of freedom of speech, to be sure. Your right to express your doubts about the financial health of a company would suddenly turn on ex post-facto decisions of prosecutors, judges and juries.
It would also make markets less efficient by making obtaining information more costly. No doubt some of those who advocate a crack down on rumors would enjoy exactly that. It's far easier to get away with balderdash if no one dares call you on it. It is tempting to say that some journalists might even find this curtailment enticing because they would quickly become the only legitimate means of passing along such opinions. Of course, we must exempt Sorkin from any such suspicions. He's already got plenty of people willing to pass information through him.
Rumors, subpoenas and the pursuit of truth on Wall Street [DealScape]