Report From the Buggy Whip Industry

A sign of the times in the buggy-whip manufacturing industry also known as "print journalism": the Christian Science Monitor, one of the best newspapers in the country, has ceased publishing its weekday edition and nobody outside the industry seems to notice, or give a damn.

My alma mater Business Week, meanwhile, seems destined for another round of layoffs, after a much-lamented round of firings late last year that deprived the magazine of some of its best people.

Yep, what we have here is beginning to resemble the buggy whip industry. Just yesterday I was cleaning out my closet and I cut my hand on an early memento of the news biz--an actual "spike" from my very first job, at the Hartford Courant. The spike was used to stick news copy that was no longer needed, or some such purpose. At the Courant we used manual typewriters, and transmitted copy to the main office via teletypes that now can be found at the Smithsonian.

The only thing that has changed is the pay for newcomers to the buggy whip industry. It's gone from bad to unspeakable.

Adjusted for inflation, my $170 a week starting pay (no state income taxes at the time), is $630 or so today, and a good deal more when the tax situation is factored in. Some interns today are paid a big fat nothing. That's progress, I guess. After all, a starting journalism job is an investment in the future of a dying industry. Think of all the colorful stories beginners today can tell their grandchildren--if they can afford to have any kids themselves.

UPDATE: And the beat goes on, as Herb Greenberg would have put it, as (gulp) Portfolio feels the crunch.

© 2008 Gary Weiss. All rights reserved.

Stating the Obvious

The Wall Street Journal today repeated a point that I made in Wall Street Versus America, in a Salon article two years ago, and in this blog countless times: that the lessons of Enron have been lost, and that regulators have learned absolutely nothing from the corporate scandals of the early part of this decade.

Today's financial crisis has shown what a real debacle looks like. And it has made clear that executives' duties to public companies have, if anything, been loosened, not reinforced. What is worse, the post-Enron crackdown appears not only to have failed to stop flagrant corporate risk-taking, but to have lulled Washington to sleep.

"Enron was a gnat compared to what's going on," said Sidney Powell, a Texas attorney for former Merrill Lynch & Co. employees. Those employees still are awaiting retrial for participating in a Nigerian power deal with Enron in 1999. "There is blame far and wide here, beginning 20 years before. [Securities & Exchange Commission] failure. Congressional failure. The whole system needs to be retooled."

This is a problem that one sees with the law-defying gnats of Corporate America, such as my favorite corporate fraud poster child Overstock.com, and the burned-out carcasses of Wall Street. It is as if Enron never happened.

The two presidential candidates, while vaguely running against Wall Street, have been slim indeed in the specifics of what they will do to rescue the regulatory apparatus from years of neglect.

© 2008 Gary Weiss. All rights reserved.

Overstock.com's Emily Litella Financials

Never mind!

The quarterly financial statements and analyst conference calls of my favorite corporate fraud poster child, Overstock.com, are eagerly awaited entertainments. They are replete with "trucks hitting cows" excuses, quotations from Eastern philosophers, schemes worthy of Ralph Kramden (such as the ever-unpopular Omuse), and plenty of strange, pseudo-intellectual doubletalk designed to obfuscate the company's broken business model.

The latest entertainment from Overstock, on Friday, was straight out of Saturday Night Live in the 1970s, when Gilda Radner's Emily Litella character used to mangle some current event and then say "never mind."

Obfuscations and falsehoods were, of course, in abundance, as Sam Antar points out. That is to be expected from Overstock's dipsy doodle CEO Patrick Byrne -- who is so terrified of Sam that he responded at length, if incoherently, to questions that he posed in his blog.

But the real fun at Friday's conference call was a whopping "never mind": Overstock said that its financial statements dating way back to 2003 cannot be relied upon, and restated them. However, the company had already restated its financials from 2002 and 2005 because of an "inventory accounting error," and made a "cumulative adjustment" in 2007 because of a "revenue accounting error" -- making it well neigh impossible to figure out exactly how much money Overstock is losing.

Byrne supplied the usual cock-and-bull story to describe why the company had to engage in this massive re-re-restatement. Given his history of making up stuff as he goes along -- this is a man who claimed in a 2005 conference call that his stock was manipulated by a "Sith Lord" he dreamed up on the spot -- it's safe to assume that his latest "upgraded our system but forgot to blah-blah" story is yet another fairy tale.

Forensic accountant Tracy Coenen observes:

You can be sure of two things when looking at Overstock.com (NASDAQ:OSTK) financial statements:

1. They’re wrong
2. There are massive losses (which will be even bigger when #1 comes to light)

You can also safely assume that the SEC will do nothing about it -- just as surely as you can assume that the analysts on the call (the much-feared Antar having been excluded), timidly let all this bullcrap fly, unchallenged.

However, with the change of administrations -- and the disastrous pro-corporate policies of the Bush SEC under attack -- Byrne's serial lies and obfuscations may no longer go unpunished.

UPDATE: Byrne celebrated his company's latest Byrne-caused misery in typical fashion, by lying.

Tracy Coenen raises an intriguing question: how is that a supposed systems glitch in 2005 can affect financials back to 2003?

I used to end items like this by saying "SEC take notice." But we all know that the ineffectual, demoralized, useless Bush administration SEC doesn't take notice of corporate train wrecks, and when it does it doesn't give a damn. Fortunately, a new SEC will be coming down the pike in January, and perhaps the new SEC will take notice.

© 2008 Gary Weiss. All rights reserved.

A Useful Reality Check

I just completed what I must say was a really enjoyable chat on Washingtonpost.com with columnist Michelle Singletary. A link to the chat can be found here.

The chat was a useful reality check, at least for me, as so many of the questions -- there were dozens that could not be answered -- were from people who are truly hurting. In this blog I tend to deal with the lunatic fringe, such as the always amusing stock market conspiracy nutcases, and it is easy to lose sight of the fact that millions of people out there are struggling to stay afloat.

We media people tend to live in a cocoon, and it's useful to get a sense of what's happening west of the Hudson. And what's happening out there ain't pretty. Some of the questions reflected circumstances that were, frankly, heartbreaking.

Anyway, as promised, I'll be happy to answer questions in the discussion section below. Some are going to be emailed to me, and I'll post the ones I can answer.

© 2008 Gary Weiss. All rights reserved.

Joe the Plumber vs. Sam the Plumber

I wonder if I'm the only one who thinks that "Joe the Plumber" sounds like one of those old-fashioned Mafia aliases, sort of like "Sam the Plumber" (above).

Sam the Plumber was Simon Rizzo DeCavalcante, boss of the New Jersey mob in the sixties and, like Joe the Plumber, not a plumber at all.

© 2008 Gary Weiss. All rights reserved.

Time to End the Insane FBI Forced-Retirement Policy

The New York Times yesterday had a devastating article on the decline in prosecutions of white collar crime during the Bush Administration, and pointed out that the FBI was struggling to find the personnel it needed to prosecute white collar crime and criminal cases generally.

The Times reported:

From 2001 to 2007, the F.B.I. sought an increase of more than 1,100 agents for criminal investigations apart from national security. Instead, it suffered a decrease of 132 agents, according to internal F.B.I. figures obtained by The New York Times. During these years, the bureau asked for an increase of $800 million, but received only $50 million more. In the 2007 budget cycle, the F.B.I. obtained money for a total of one new agent for criminal investigations.

In 2004, one senior F.B.I. official, Chris Swecker, warned publicly that a flood of fraudulent mortgage deals had the potential to become “an epidemic.” Yet the next year, as public warnings about fraud in the subprime lending markets began to approach their height, the F.B.I. had the equivalent of only 15 full-time agents devoted to mortgage fraud out of a total of some 13,000 agents in the bureau.

It also noted that "In some instances, private investigative and accounting firms are now collecting evidence, taking witness statements and even testifying before grand juries, in effect preparing courtroom-ready prosecutions they can take to the F.B.I. or local authorities."

But what the article didn't point out is that many of those private investigative and accounting firms are staffed by retired FBI agents -- experienced investigators who left the bureau for private employment, either voluntarily or forced out by the FBI's insane policy of retiring agents at the age of 57.

Sam Antar points out that "Top-notch, experienced FBI agents are leaving the Bureau for higher paying private industry jobs as soon as they qualify for retirement causing a brain drain within the FBI. As white collar crime is becoming increasingly complex, our government must revise employee retention policies to compete with the private sector."

I agree. In the past I've pointed out the sheer stupidity of the forced-retirement policy, which has stripped the bureau of some of its best people. Time for it to end.

© 2008 Gary Weiss. All rights reserved.

The Changing Face of Philanthropy

My latest article in Portfolio tells the story of billionaire oil man David Koch, and describes how he epitomizes the new face of philanthropy. With big corporations and Wall Street having to cut their giving, nonprofits are feeling the squeeze and a handful of mega-rich types like Koch are filling the gap.

The article can be found online here.

© 2008 Gary Weiss. All rights reserved.

When Will Patrick Byrne Stop Lying?

And when will the media call him on his lies?

Overstock.com's wack-a-doo CEO Patrick Byrne has been telling every journalist naive enough to swallow his hokum that he "predicted" the current economic calamity. His latest blatherings came today on CNN.

There was this exchange:

.....How did you know the train was coming?

BYRNE: Well, boy, you do your homework. Yes, if you go on YouTube and YouTube my name, you'll see all these videos where I've been saying that.

Basically, every drinking binge I've ever seen ends in a hangover. Well, every expansion, every boom that's fueled by cheap credit ends in a collapse like this. So it's been sort of four or five years, it's been pretty clear this is coming, coupled with there's rampant stock manipulation on Wall Street that's just made the system more brittle.

Byrne, of course, has not uttered a word about "cheap credit," subprime mortgages or Fannie or Freddie or any other actual factor in the recent unpleasantness.

Indeed, Byrne's fellow naked shorting conspiracy theorists, notably blogger Phil Saunders, mercilessly pumped NovaStar Financial -- a leading subprime lender -- claimed that it was a victim of naked shorting and not its own profligate lending, and attacked critics of that company. They'd continued to do so as it slid toward bankruptcy. with Saunders flailing away on a website he created, nfi-info.net. As a commenter points out, Byrne once touted that doomed subprime lender as an "awesome firm."

Instead, Byrne's blatherings over the years have been incoherent rants about "Sith Lords," "hedge fund conspiracies" (notwithstanding his own background in the hedge fund biz), and "counterfeit stock," and there is of course not a shred of evidence that any such things caused the market calamity.

His 2005 contention that a "Sith Lord" -- a mastermind from the 1980s -- was conspiring against good CEOs like him has turned out to be a figment of the imagination of a very truth-challenged corporate exec.

His main preoccupation, of course, has been attacking people who dare to criticize him or say nice things about people he doesn't like, most recently in a vulgar, homophobic tirade.

In fact, the CNN interviewer apparently wasn't listening very carefully, because she let a nutty Byrne attack on Joe Nocera of the New York Times pass without comment. If CNN was a bit more wide awake, it would have realized there was something not quite right about the person it was interviewing and cut him off right there.

So I guess the question is, when will Patrick Byrne stop misrepresenting his past statements? When will he stop lying? The answer, of course, is "never," so I guess the next question is, will the supply of naive journalists giving a podium to this snake oil salesman ever end?

UPDATE: More on Byrne's con game, from Tracy Coenen.

© 2008 Gary Weiss. All rights reserved.

Does Everybody Know?

Until the market spasm today, I was beginning to think that the stock market was acting in sync with Leornard Cohen's "Everybody Knows."

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
Thats how it goes
Everybody knows

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Today I told a professional investor of my acquaintance that I was heavily invested in index funds, and he started talking to me like my dog just died. That (and the Sundance Channel) reminded me of the Leonard Cohen song.

See, that's the market for you. Everybody knows the boat is leaking, even if today there seems to be a patch.

© 2008 Gary Weiss. All rights reserved.

Root Out Corruption on Wall Street? How?

For the past few days I've been looking for the basis of John McCain's assertion that he will "fight corruption" on Wall Street. Sarah Palin took an even harsher line in the debate with Joe Biden, saying she and McCain would “get rid of the greed and corruption on Wall Street.”

Sounds to me like "getting rid of the salt in the oceans" but... whatever. I went to the McCain-Palin website and found nothing. Can someone help me out and point me to specific proposals on how this will be carried out? ProPublica says there there ain't no specific proposals, but I have an open mind.

Barack Obama, for his part, has been flailing away at "eight years of deregulation" under the W. administration. But I think he is being modest. As the New York Times story today on Alan Greenspan (and Wall Street Versus America, I modestly add) point out, deregulation was just as strong under the Clinton administration.

P.S. For the thousands of people who get all their news from this blog: the market collapsed today, and the sky is falling.

© 2008 Gary Weiss. All rights reserved.

Now That We're in a Depression. . .

.... I say, make the most of it.

Bring back the fedora!



For sale here (and at a reasonable price, in keeping with the times).

"This fedora is crushable a wool felt fedora hat (they keep their great shape). You can snap the brim up or down. These fedoras come in black or grey, have a classic grosgrain band, and are water repellent."

401(k) got you down? Don't fret. Office1000.com has bulk pencils for sale. Cheap! Get out on the street and start selling them before your neighborhood is oversaturated. And that crush- and water-proof fedora will keep the rain off while you're selling your pencils (note the guy at right).

Above all, keep your sunny side up. Always let a smile be your umbrella on a rainy, rainy day.

© 2008 Gary Weiss. All rights reserved.

The Down and Dirty Details of Bear's Demise

Bloomberg today has a provocative article on the real causes of Bear Stearns demise, drawing from an unexpurgated version of an SEC report that was posted on the website of Sen. Charles Grassley.

The SEC had, for some murky reason, removed significant details from the report it had released earlier. The unedited version sat on Grassley's website, unnoticed, until the BBerg reporters picked it up.

Here are some of the salient details not previously disclosed, according to Bloomberg:

Bear Stearns traders used pricing models for mortgage securities that ``rarely mentioned'' default risk.

The firm lost one of its top modelers ``precisely when the subprime crisis was beginning to hit'' and writedowns were being taken, the full report said. ``As a result, mortgage modeling by risk managers floundered for many months,'' according to the unedited document, quoting internal SEC memos from April and December 2007. The comments were removed from the edited version publicly released by the SEC.

The Bloomberg report moved on the wire at midnight. I just went to the website, clicked on the three links to the report, and poof! It was all gone. Instead I got an error message. I checked and was told that this happened because of a technical glitch (too many hits, I would imagine). Hopefully it will be resolved soon, so that the raw findings will be available.

© 2008 Gary Weiss. All rights reserved.

Kudos For Wall Street Versus America (and a personal note)

Washington Post personal finance writer Michelle Singletary has some kind words about Wall Street Versus America in her latest syndicated column. announcing that it is the October selection for the Color of Money Book Club.

Not bad for a book that came out two years ago, if I do say so myself.

Her column notes that I've just signed as a contributing editor of Condé Nast Portfolio, for which I've been writing more or less full time for most of this year. I'm excited to be joining this very fine publication.

© 2008 Gary Weiss. All rights reserved.

How the SEC (And Media) Failed Abysmally

The New York Times today has a blow-by-blow account of how the SEC knuckled under to pressure from the major investment banks and threw capital requirements out the window -- planting the seeds for the ongoing financial meltdown. An unanswered question, only briefly dealt with in the article, is this: where was the financial press?

CJR Audit asks that same question: "Where was this story years ago?" The answer is "right in front of us." After all, the Times article was based on the public record, including open meetings of the commission that were not covered by the media.

A pivotal SEC meeting, the Times reports, "was sparsely attended. None of the major media outlets, including The New York Times, covered it."

In Wall Street Versus America I lament the media's coverage of the SEC, and it's sad to be proven so dramatically right.

The financial press, I think, needs to correct its neglect now, by giving the SEC's actions in this crisis critical scrutiny. With some exceptions, that is just not happening.

© 2008 Gary Weiss. All rights reserved.

BW Nails a Biggie

Amid the doom and gloom and general awfulness of recent days comes some rare cheery news (albeit of interest to only a few): my alma mater, Business Week, has snared a prestigious investigative journalism award for a series of articles entitled "Prisoners of Debt." The magazine won first place in the Barlett & Steele Awards for Investigative Business Journalism.

What makes this particularly satisfying is that Prisoners of Debt was a bangup-great series on a subject of wide interest. As the awards entry points out, it "revealed how large financial firms regularly collaborate with doctors and hospitals to turn unpaid medical bills into high-interest consumer debt. It explained how banks and credit card firms badger unsophisticated consumers to pay off debts even after they have been extinguished by the bankruptcy courts and also examined so-called 'micro-lending' that ties up the indigent in high-interest debt."

Hopefully this will get some ad dollars flowing in (but don't bet on it). Certainly it can't do the staff's flagging morale any harm at all.

© 2008 Gary Weiss. All rights reserved.