(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Jeffrey Goldfarb
NEW YORK, May 13 (Reuters Breakingviews) - Unseemly conflicts of interest are not confined to Wall Street. Goldman Sachs (GS.N) and its peers regularly take heat for playing all sides of a trade. Now a furor involving Bloomberg reporters using private customer data has, this time, spared the blushes of bankers.
Goldman attracts more scrutiny than other financial institutions for treading a fine line. Breakingviews, whose parent company is Thomson Reuters (TRI.TO)(TRI.N) – a Bloomberg competitor – has mentioned "Goldman" and "conflicts" in the same view about 100 times since 2000. Goldman's many tentacles led Rolling Stone magazine to brand it a "great vampire squid" and conflicts underpinned Securities and Exchange Commission allegations over the Abacus collateralized debt obligation that the firm settled for $550 million in 2010.
This time, it was Goldman that spotted a potential conflict at Bloomberg, according to the New York Post, when a reporter let on that an inquiry about a partner's employment status had been triggered by a lack of activity on his Bloomberg terminal. The news and information flowing through the company's $20,000-a-year machines has made the company founded by New York Mayor Michael Bloomberg something akin to the Goldman of financial data – nigh on indispensable for users as they make decisions worth billions of dollars every day.
Both organizations also foster ambitious cultures designed to maintain their pre-eminence. That may help explain why tactics are accepted internally that, once aired publicly, seem to go clearly too far. Just as Goldman has sometimes taken hits for its perceived conflicts, Bloomberg is now admitting it made a mistake by allowing reporters to have access to certain customer information.
The episode has reverberated across trading floors, executive suites and even the halls of the Treasury Department and the Federal Reserve, which are also worried their Bloomberg activity may have been monitored. Questions about conflicts are particularly pointed given Bloomberg's crusade for transparency at the Fed, which it has sued for the release of information.
Bloomberg's misstep may have brought bankers a rare chance to garner empathy. It is unlikely, however, to reshape public opinion. In a Gallup survey conducted in November, 24 percent of respondents rated the honesty and ethical standards of bankers low or very low. Thirty percent said the same of journalists. The financial data firm interacts with banks in other ways, too, for instance with research and trading infrastructure, including a part share in a so-called dark pool operator called BIDS Trading. As is the case at a complex investment bank, conflicts at Bloomberg are not so easily avoided.
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- Bloomberg LP President Daniel Doctoroff on May 10 said the company had made a mistake with a longstanding policy of allowing journalists to have access to "limited customer relationship data." The company said it changed its policy last month, following a complaint from a client, so that reporters only have access to the same customer relationship data as clients.
- The New York Post reported on May 9 that Goldman Sachs had confronted Bloomberg over concerns about data access on the terminals. In one instance, a Bloomberg reporter asked a Goldman executive if a partner at the bank had recently left, "noting casually that he hadn't logged into his Bloomberg terminal in some time," the newspaper reported, citing unnamed sources.
- In an editorial published on May 12, Bloomberg News Editor in Chief Matthew Winkler wrote: "The error is inexcusable." He explained that Bloomberg journalists could see a user's log-in history and "high-level types of user functions on an aggregated basis, with no ability to look into specific information."
- He added: "At no time did reporters have access to trading, portfolio, monitor, blotter or other related systems. Nor did they have access to clients’ messages to one another. They couldn’t see the stories that clients were reading or the securities clients might be looking at."
- Winkler, who wrote "The Bloomberg Way" guide for reporters and editors, said the practice dates to the early 1990s when reporters used the terminal to find out the kind of news coverage customers wanted.
- Bloomberg statement: bloom.bg/xUdsLv
- Matt Winkler column: bloom.bg/12sWb68
- Reuters: Bloomberg's top editor calls client data policy 'inexcusable' [ID:nL2N0DU1NV]
Money talks [ID:nL1E8KB710]
- For previous columns by the author, Reuters customers can click on [GOLDFARB/]
(Editing by Richard Beales and Martin Langfield)
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