'Swatting an Imaginary Fly'

There's a terrific editorial today in Barron's on the SEC's naked short selling publicity stunt, and it is the most powerful and well reasoned commentary I've seen yet on the subject. The title is "Swatting an Imaginary Fly," the "fly" being the phantom menace of naked short selling.

Editorial page editor Thomas G. Donlan writes:

. . . What isn't obvious from the news or from the historical record is whether the SEC understands its mission.

Does the SEC have its eye on the ball? Hardly. It is the agency that preserved and protected the shared incompetence of a few favored "nationally recognized" credit-rating agencies. It is the agency that watched while auditors became corporate consultants, selling the kind of services that audits should detect and report and eliminate, and even selling methods of hiding deleterious facts from auditors. It is an agency that attempts to regulate speech because it's easier than detecting and prosecuting fraud.

Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there's no dead bug.

This is a courageous stance, because opponents of naked short selling conspiracy theories -- which the SEC has explicitly not endorsed, not that it matters to kooks pushing that line-- are immediately subjected to a smear campaign. It is orchestrated by the free-spending trust fund baby, Overstock.com CEO Patrick Byrne, successor to the recently jailed fraudster Richard Altomare as head of the Baloney Brigade naked shorting conspiracists.

Byrne has said that the SEC's politically motivated pandering means that he has "won the intellectual argument" on naked short selling. But there hasn't been an intellectual argument. There has been a campaign of intimidation and personal attacks against critics of his poor management of his company and his naked shorting jihad.

A recent SEC filing shows how Byrne has pissed away the money-losing Overstock's scarce cash on behalf of his obsession, paying a high-priced lobbyist, Ken Salamon, to goad the SEC to pursue Byrne's imaginary demons. Overstock has wasted $680,000 on Salamon and other lobbyists and pos, according to OpenSecrets.org numbers quoted in the New York Post.

Despite all the bucks Byrne has thrown at this, and endorsements by anti-investor organizations like the Washington Legal Foundation and "consultants" paid to tout conspiracy theories, like former commerce secretary Robert Shapiro -- a "litigation consultant" in junk lawsuits against the DTCC -- not a single editorial commentary has favored the SEC action. The SEC, I suspect, is reacting less to Byrne's bucks than it is to SEC chairman Chris Cox's desire to find a scapegoat for his agency's poor performance.

I'm sure that Donlan and Barron's will be subjected to the usual attacks by Byrne's paid stooges, and their inboxes stuffed with harassing emails, because of this editorial.

The same goes for Elizabeth MacDonald, who wrote a smart analysis in her blog today on the Fox Business News website.

© 2008 Gary Weiss. All rights reserved.

More on the Fate of Barron's Under Murdoch

The New York Times today has an article on the fate of Barron's under the almost (but not quite) certain News Corp. acquisition. This was a good and thorough article, as evidenced by the fact that it quoted a blog item on the conspicuous absence of Barron's from the debate over the Murdoch bid.

But I have a quibble with the reporter's analysis.

After observing that Barron's editors are not covered by the "editorial independence safeguards" to which both parties agreed, the Times says:

Ultimately, market forces may be a better safeguard than special agreements. The publication is doing very well, and Mr. Murdoch is first and foremost a smart businessman — as recognized by Barron’s list in March of the top 30 chief executives.

I think that misses the point. No one is suggesting that Barron's is going to be dismembered. Its staff may even be beefed up. However, I think there is a good chance that Barron's editorial product will be the first true outpost of Murdoch in the Dow empire.

That's also likely for MarketWatch, is similarly is not covered by the agreement.

The Bancroft family is meeting today. Given the pressures being brought to bear, I'd say the chances of Dow Jones surviving as an independent entity are fast evaporating. R.I.P.

© 2007 Gary Weiss. All rights reserved.



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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

Whither Barron's in the News Corp. Empire?

One essential element has not been mentioned in the tussle between Dow Jones and Rupert Murdoch is the fate of the prestigious, market-moving, influential Barron's financial weekly.

That absence stood out like a sore thumb in the "agreement in principle" between Dow Jones and News Corp., anticipating the all but inevitable takeover.

The text was posted here last night.

Note that this agreement is narrowly constructed to cover just the Wall Street Journal and the Dow Jones news wires. Barron's is not mentioned, and has been ignored in the public back-and-forth over editorial integrity.

Under this agreement, the editor of Barron's can be replaced immediately, and this publication could immediately be used as a showpiece for News Corp. staffers and editorials. Its staffers, if not covered by the existing CNBC deal, could be immediately utilized by the new Fox business news channel.

Or at least, that's what I would do if I were Rupert Murdoch. I'd put one of my own people in charge of Barron's ASAP.

I wonder if this omission is a reflection of the lack of importance given to Barron's by both sides.

Or is it a reflection of what has been widely known for some time -- that the management of Dow Jones is grievously incompetent?

If so, we in the media who are watching this deal are not any better. Apparently nobody has given the fate of Barron's any thought. Remember that this is not a stock-touting newsletter. It is a respectable, highly reputed investment journal with a reputation for hard-hitting investigative reporting. (Full disclosure: I used to work there in the early eighties.)

In the media coverage of the Murdoch takeover, Barron's usually gets mentioned only in an offhand fashion as part of the Dow Jones organization. It has otherwise been overlooked, and nobody has noticed that it is not covered by the management-employment guarantees and editorial-independence strictures that have been discussed.

Dean Starkman of CJR Daily's Audit section says that the News Corp. "can't cover" the U.S. business story, and details why in an article yesterday. If there is any validity to that point of view, it certainly applies to Barron's as much as it does the Wall Street Journal. Yet the media has ignored this whole aspect of the takeover as much as the Dow Jones board.

Dean says the media has done a "terrific job" covering this story, but I am not so sure.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.