I try to avoid quoting post in full, but this one is important, it’s been up long enough that I don’t imagine I am siphoning off any traffic, and the folks at FT Alphaville seem to be good sports. As they reported yesterday in “Truth, the flexibility of facts, and market panics“:
Phone rings…
FT Alphaville: Hello, Murphy
Morgan Stanley PR: Hi, this is XXXXX from MS. Have you seen the information on Bloomberg? Mr Mack did NOT say these things. And I’m just calling to get your post on this taken down, so can you take it down?
FTAV: No. We’ve noted the Mack denial – published snaps from Reuters. We will link to that and make denial clear. But the post stays up.
MS felt: You can’t believe the stuff that’s going around. People are just making things up…
FT AV: So what does the NYT say?
MS felt: Oh, that’s being dealt with by our NY people. I’m just ringing round getting stuff taken down….
Who knows whether the Mack comment, published by one of the most respected media titles on the planet, is true? We don’t and we’d guess the MS felt it is not 100 per cent sure either. We are not saying he is lying. We are just saying that in these febrile times “facts” take on a malleable form.
If you are John Mack and your stock’s in freefall, and you’re weighing what you might say to save your bank and what you might have to confess at the Pearly Gates – well, the bank wins and heaven can wait.
As it happens, on this occasion, forced to guess, we’d go with Mack; these are stressful days for reporters as well as financiers.
But there’s a more enduring issue here: lying to the financial media has become routine in recent years, encouraged by the tightening noose of market regulation. In short, answering media enquiries accurately can often constitute a breach of the market abuse regime. The truth quite literally becomes a criminal matter – and the result is a growth in speculative news reports.
All of which makes the following all the more intriguing.
On Tuesday, officials from HBOS contacted this newsblog and various other news organisations to state very clearly that there was no reason for the run on HBOS stock. The bank was well capitalised and continued to enjoy access to the capital markets.
The FSA, no less, followed up with a statement of its own:FSA statement re: HBOS
Since the beginning of the current extreme difficulties in the financial markets, the Financial Services Authority has worked intensively with all major UK banks to ensure they have credible capital and liquidity plans. We are satisfied that HBOS is a well- capitalised bank that continues to fund its business in a satisfactory way.
But as the razor-sharp Guido Fawkes blog notes, according to the BBC the Chancellor of the Exchequer believes he and his colleagues had been on to the problems at HBOS for several weeks:
Alistair Darling added that without the deal the outlook was “very bleak indeed…We were onto their (HBOS’s) problem for several weeks. It didn’t just suddenly happen…”
If the authorities can’t follow their own rules, why should anyone else?
Now consider this in conjunction with our preceding post, on how retail customers are sufficiently worried about their banks that increasing numbers are considering moving their accounts. The risk of runs is real, we’ve seen them. Northern Rock. Bear. IndyMac. Lehman in the early stages of one (hedge fund clients were fleeing). In a hair-trigger environment, corporate communications pros become hyper vigilant.
But to what effect? Anyone with an ounce of observation powers knows that the presentation of corporate information has been raised to an art form, and has at best the same relationship to reality that Norman Rockwell paintings do. Rockwell reportedly started with images of real people and burnished them. Children became cherubic, adults were well-fed and rosy-cheeked, and middle class virtues were idealized. Needless to say, less skillful practitioners provide images that are more glaringly at odds with reality.
So the more aggressive the efforts at spin control, the more it will drive the discerning to other sources of information. And not all of them will be as reliable as Institutional Risk Analytics.
17 comments
Comments are closed.
The vilification of sellers, short or otherwise, is reaching a hysterical level. That politicians are standing on soapboxes decrying the practice only serves to create more confusion for ordinary investors, for whom there is now even less transparency and price discovery. It’s difficult enough for professionals but the ordinary investor now has no protection and no bullets. They should just avoid the market. As you highlight PR are complicit in the deception being perpetrated. Do I hear the distant echo of jackboots on cobblestones…?
I agree. But in the realm of reality, isn’t the US government going in the direction of 0 credibility (reminds me of my youth and the “credibility gap” circa Vietnam)? Is it, or isn’t it true that most large US investment banks are insolvent by the current accounting rules? Who is served by pretending otherwise?
“adults were well-red and rosy-cheeked”
Man, I miss the old days when they were “well-read,” even if they only had ninth-grade educations.
Today’s college-graduated suckers will swallow anything.
Those aren’t jackboots echoing on the cobblestones, Anon 5:25. They’re Joe Biden’s wingtips. Do the patriotic thing, and pay for others’ losses. You’ll admire yourself in the morning!
anon 6:34
Joe Biden’s wingtips? You’ve got to be kidding. Last I read, the Republican Party controls Washington and has done so for 8 years. You know, the same Republican Party that has fueled the kind of ignorance you lament and, worse, invested in the lying and spin that Yves alludes to in this post.
Perhaps your Joe Biden jab was just an ill-worded joke. If so, please let the rest of us know.
But if you are seriously suggesting that ‘paying for others’ losses’ is happening because of Democrats, then you clearly need more than coffee to wake up in the morning.
I like this blog and read it regularly, but a bit of context would help sometimes. What is this “Mack comment” and why should we care?
Simply, positive news is all that will be allowed until this period of negativity is over….When they get a full out crash on their hands and there is no short selling, who will they blame then. When Fuld said in March that they were fully capitalized and in great shape he was lying…its that simple. Now no one made money on that except the short sellers but its not those making money that should be roasted on the fire, its those who fooled, nay deceived folks to hold on and in many cases buy Leh stock on the back of the statements. Leh wasn’t sunk by shorts, it was sunk by bad investmensts that were so over leveraged that the company could not afford anything except expotential growth in house prices….
Whoops, “well-fed”.
The “Mack comment” came in an FT Alphaville post “The Run on Morgan Stanley“:
This is a pretty stunning line to read:
“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit, according to two people briefed on the talks. Mr. Pandit, a former senior investment banker at Morgan Stanley, said Citigroup was not interested.
The original source was the New York Times
The NY Times posted a correction/retraction. Yesterday. Where is yours?
http://www.nytimes.com/2008/09/19/pageoneplus/corrections.html?scp=2&sq=mack%20pandit&st=cse
Editor's Note
A front-page article on Thursday reported on discussions the investment bank Morgan Stanley has had with possible merger partners. It cited two people who were said to have been briefed on a conversation in which John J. Mack, chief executive of Morgan Stanley, had told Vikram S. Pandit, Citigroup’s chief executive, that “we need a merger partner or we’re not going to make it.”
After the article appeared, Morgan Stanley vigorously denied that Mr. Mack had made the comment, as did Citigroup, which had declined to comment on Wednesday. The two people whom The Times cited now say that because they were not present during the discussions, they cannot confirm that Mr. Mack in fact made the statement. The Times should have asked Morgan Stanley for comment and should not have used the quotation without verifying that the two people had direct knowledge of any comments made by Mr. Mack.
Anonymous of 9:11
The quoted story suggests that it’s actually Mack that’s telling the truth. What was it you wanted to be retracted or corrected?
I just have one question why is Democratic party helping to bail out the wall St. Bankers that caused this mess? I though they were supposed to be on the side of the common man. They are leading in the bailout efforts. This is an outrage and the taxpayers should revolt.
Forget about that! You took down the melted plastic bull! Censorship!!!
Matthew Dubuque
Very good post Yves!
Corporate spin needs to be carefully parsed word for word and phrase for phrase, just like an old denial from Bill Clinton or Dick Cheney.
That relates to the spin.
Some of what is coming out from corporate sources is outright lies. I’m convinced that Lehman was spewing a fair amount of that about its various proposed “merger partners” during its protracted endgame.
Additionally, I think the press crew needs to improve as well. I note the claim by a relatively unknown reporter for the Chicago Times where an alleged hearsay comment of Bernanke was PARAPHRASED and then given wide currency.
No other reporter from any reputable paper reported Bernanke’s alleged comment, nor David Hale’s checkered record understanding Fed policy moves in 1982 and 1987.
Matthew Dubuque
Perhaps it will be God’s Plan to narrow the range of comments in the blogsphere which are often too free, too unofficial, too unregulated and wild — thus it will help to have greater control of communications and to ease the burden for those that require stricter adherence to our new social policies. Perhaps it is also God’s Plan to distribute berets to all our children and begin better educational policies and reform movements as well as soon as possible! This is a time of crisis for our elite! We need to be on the same page together as one collective unit standing, I mean kneeling before our annointed officials!! SNARK Squared…
This is a symptom of a larger problem – our social capital aka trust is unwinding. And for some of the same reasons as the fiscal capital – too much leverage used recklessly and without regard to the long term consequences.
In the case of public trust that means too many lies and too much spin were geared up over too narrow a supporting base of trustworthiness.
Somebody tell Francis Fukuyama to call his office, it may be time to add an epilog to his 1995 book on Trust.
Rockwell may be the PR person’s statement, but the reality is more George Grosz
oops, Better link
fatbear, do you mean Grosz or Goya?
And please don’t forget Bosch and Francis Bacon: they look like premonitions, too.
As for our rationally impoverished populace, Lewis Mumford spoke more than forty years ago about “the electronic dark ages” in his masterpiece, The Myth of the Machine. It’s in two volumes; check out volume two, The Pentagon of Power.
By intending to give the investors in these fraudulent instruments every penny of interest they irrationally contracted for, so as to continue foreign purchases of treasury bonds to finance global militarism and empire, both political parties will destroy the currency, and perhaps the republic.
C. Wright Mills wrote about “crackpot realists,” and Ahab said – in close paraphrase – “My methods are reasonable, my purpose mad.”