Politico’s Ben White Writes a Dubious Piece on Wall Street and Gets Slapped Down By Media Peers

By Pam Martens: January 23, 2014

Politico’s Ben White appears to have joined the Maria Bartiromo be-kind-to-Wall-Street camp. Bartiromo lectured fellow participants on Meet the Press last September that “We need to get beyond the conversation of is Wall Street evil.” (Perhaps the statement should be phrased: “Wall Street needs to stop being evil so we can get beyond that conversation.”)

White took it one step further last week, suggesting in a column that Wall Street is fully reformed and no longer dangerous, thanks to those omnipotent folks in the Nation’s capitol whose financial reforms have gotten Wall Street purring like a kitten.

In a piece preposterously titled “How Washington beat Wall Street,” White writes that “In 2009, Washington went to war against big Wall Street banks hoping to blow up the kind of high-risk, high-reward strategies that helped spark the financial crisis. Five years later, that war is largely over. And Washington won in a blowout.”

If there was any blowout, it was on the tires of that financial reform caravan in Washington.

The article frequently feels like White has slept through the last five years – he certainly slept through the September 23, 2013 Time magazine cover story that explained in excruciating detail “How Wall Street Won.” White must have also snoozed through all those Congressional hearings of the last two years documenting how Wall Street was still rigging markets and looting consumers around the globe and how JPMorgan snuck its high-risk derivatives trading over to London and lost $6.2 billion of its depositors’ money – long after the Dodd-Frank reform legislation was in place.

White’s view of things is so outlandish in this column as to seem like a Saturday Night Live spoof. For example, White writes: “Morgan Stanley, Goldman’s one-time bitter rival in the swashbuckling world of high-risk trading, is transforming into a staid money management firm with a side business underwriting stocks and offering merger advice.” Notice that there is no mention of Morgan Stanley’s highly suspicious oil and gas empire.

The “staid” Morgan Stanley, as we reported earlier this week, is currently under investigation by the U.S. Senate for having a controlling stake in a sprawling operation of oil and gas pipelines and storage terminals while it is allowed under current law to make high stakes wagers on those commodities in the foreign exchange market with leverage of 95 to 1.

The ink was barely dry on White’s story at Politico when the same Wall Street firms patted gently on the head for cowing to their masters in Washington were announcing the suspension of traders implicated in yet a new global conspiracy to rig foreign currency exchange rates. The traders were so cavalier about their conduct that they used chat room names such as “The Bandits’ Club” and “The Cartel.”

White also attempts to paint the egregiously incorrect picture of Wall Street as a slimmed down, “shell” of its former self, having “sold off many of their classic ‘Wall Street’ businesses.” This statement was published just one day after Senator Sherrod Brown announced in a U.S. Senate hearing that the six largest Wall Street banks “have 14,420 subsidiaries, only 19 of which are traditional banks.”

White’s outlandish depictions of a chastened Wall Street earned him the swift derision of his media peers. Michael Hiltzik of the Los Angeles Times wrote that “You couldn’t ask for a more perfect distillation of what Wall Street wants you to believe. But the truth is that the financial sector still wields excessive control over the economy, the big players have grown even bigger, and the regulators have been systematically emasculated.”

Hiltzik adds that “Former Labor Secretary Robert Reich, now teaching at UC Berkeley, put it succinctly in his blog on the fifth anniversary of the Lehman Bros. collapse: ‘The giant Wall Street banks are ungovernable – too big to fail, too big to jail, too big to curtail. They should be split up, and their size capped.’ ”

Others with their fingers on the current pulse of Wall Street have sounded the same alarms. Last month, Andrew Brooks, head of U.S. equity trading at mutual fund powerhouse T. Rowe Price, which manages $647 billion in customers’ funds, called the markets “dysfunctional” in an article in the Wall Street Journal. Brooks discusses the growing unlit marketplace where trades are conducted by more than 40 dark pools away from exchanges and the continuing practice of internalization where the biggest Wall Street firms match their own customers’ buy and sell orders away from the stock exchanges.

On June 26 of last year, Thomas Hoenig, former President of the Federal Reserve Bank of Kansas City and now Vice Chairman of the Federal Deposit Insurance Corporation, testified before Congress that the biggest banks are “woefully undercapitalized” and that we have a “very vulnerable financial system.” Hoenig feels that the Dodd-Frank financial reform legislation is a failure and is advocating for the return of the Glass-Steagall Act, legislation that would force the separation of banks holding insured deposits from Wall Street brokerage firms and investment banks that routinely engage in high risk behavior. In a bi-partisan move, Senators Elizabeth Warren and John McCain have introduced that legislation. White’s article is a direct assault against the need for the return of Glass-Steagall.

White’s credibility is further strained by a rebuttal published at the Huffington Post by the very same authority that White quotes in his article to make his case, Dennis M. Kelleher, President and CEO of Better Markets, Inc.

The same day White’s article ran, Kelleher wrote:

“Only in the warped, distorted, Alice-in-Wonderland world of Wall Street would one think ‘Washington went to war against big Wall Street banks’ or that ‘Washington won [the war] in a blowout,’ as said today in a Politico article…It may be counterintuitive, but the article reflects a fairy tale Wall Street loves to push. Not only that they have been picked on and been under/are under enormous pressure (almost all unfair, undeserved and counterproductive) by US and global regulators, politicians and policy makers, but, hey, they’ve lost and Washington won, so, ease up. No need to take any further action against the ginormous global too-big-to-fail banks that are bigger, more interconnected and dangerous than they were before the last crisis that they caused. No. Enough’s been done.

“Indeed, according to the article, the war is over. The American people should move on to other things. Washington should declare victory and return to its past practices of coddling the beaten Wall Street banks and cashing their campaign contribution checks. Nothing to do or see here.”

Barry Ritholtz of The Big Picture blog, Bloomberg View columnist and money manager tweeted White’s article. The first response asked if the article was a joke. Ritholtz responded: “I prefer to think of it as an alternative reality. Think Philip K Dick’s ‘Man in the High Castle.’ ”  (The reference is to a science fiction work based on a totalitarian America replete with confusion over true and false realities.)

Even Yahoo Finance got into the act with Deirdre Hughes posting the question: “Do you think Washington beat Wall Street?” along with excerpts from White’s article. Thus far there are 58 comments with the word “propaganda” appearing multiple times. One commenter writes:

“Propaganda. Washington caved using taxpayer money to fund continuous QEs that all went to Wall Street as a pay out, not main street. Wall Street is bigger and richer than ever. However main street is not allowed to participate in the profits only the losses (private profits vs. socialized losses). In return Wall Street funded political campaigns and screwed borrowers and savers alike. Getting money from the Fed at 0.001 (paying savers the same) and making borrowers pay 4.5 to 20% on credit cards and loans. Not only are the savers screwed but so are their children, workers, stores and restaurants they used to frequent. No[t] to mention stagnant or no wages and run away inflation on practically everything. Great job Mr. Pres and congress!”

White is no Johnny-come-lately to the Wall Street beat. According to his official bio, prior to joining Politico in 2009, White worked as a Wall Street reporter for the New York Times. From 2005 to 2007, he was a Wall Street correspondent at the Financial Times. Before that he was with the Washington Post in various capacities.

White drops a clue in the article as to whom or what might be fueling this new-think. White says Hamilton Place Strategies, a D.C. consulting firm, is “working with banks on image repair.” The web site for Hamilton Place Strategies says it “brings experience and issue expertise to bear for managing media…” Should media be managed? It also says it “shapes the way people and policy makers think about issues and ideas. We bring decades of experience and relationships with leading thought leaders and journalists in Washington and around the world.” And, finally, it notes that it has monitoring techniques “to measure the effectiveness of a communications strategy.”

If flipping the Time magazine cover story of “How Wall Street Won” on its head was somebody’s goal here, it should be duly noted by the media managers that this was a major bust.

 

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