(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
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
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.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- 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
- 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
Money talks [ID:nL1E8KB710]
- For previous columns by the author, Reuters customers
can click on [GOLDFARB/]
(Editing by Richard Beales and Martin Langfield)
Keywords: BREAKINGVIEWS GOLDMAN/BLOOMBERG
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