Stix Nix Crix Pix!

A mostly political Weblog.
Feb. 22 2006 1:42 AM

Stix Nix Crix Pix!

Plus--The NYT's Sacred Rattner

Troubleshooter Peppers Troubled Shooter: Cheney "troubleshooter" Mary Matalin really knows how to keep herself out of the story, huh? Anything to selflessly make her boss look good:

She also described a vice president, who, she said, was in no condition in the hours after the shooting to speak out himself. ... [snip]  "And I said, O.K., this guy is going to be worthless about getting me what I need to help him here,' " ...

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No wonder President Bush likes her so much!  ... P.S.: If Cheney's initial draft of a "brief statement" was so "bad" that Matalin told them not to put it out, wasn't it her job to draft a better one? ... P.P.S.: Or was something else going on? (Imus to Matalin: "The point is that's insane to tell me and anybody else that it made sense for this friend of his ... to call the Corpus Christi paper.") ... Pure speculation: Cheney hates the regular White House MSM press corps so much he couldn't bring himself to give them this horribly embarrassing story. ... 1:09 A.M.

Free Speech minus ...

A few Western countries have stupid laws, erratically enforced, against denying the Holocaust ... -- M. Kinsley, Slate, two weeks ago.

Not that erratically, it turns out. Austrian prosecutors are asking to increase the three year sentence  meted out to (despicable, creepy, infamous etc.) British writer David Irving for violating a criminal statute that penalizes anyone who "denies, grossly plays down, approves or tries to excuse" the Holocaust in print "or other media." ... Denying the Holocaust may or may not be the same thing as merely depicting the Prophet, but jailing someone for denying the Holocaust seems like the same thing as jailing someone for depicting the Prophet. The New York Post, shamefully, ran the story of the sentencing under a  nyah-nyah headline of "Deny This!"   We'll see how the Post'scrack editorial writers reconcile this glee at Irving's imprisonment with their criticism of the administration ("Bushies betray free speech") for having failed to defend in stronger terms the "freedoms that Americans hold dear" in the case of the Danish cartoonists. ... The Anti-Defamation League, also shamefully, limits its criticism to "acknowledging that America's constitutional system bars prosecution for hate speech" before rushing to congratulate the Austrian court for having "sent an unmistakable and important message." I'm afraid it did. ... 10:35 P.M.

The Times' Sacred Rattner and his "Chinese Wall": Any mention of investment banker Steven Rattner in the New York Times has to be read with intense suspicion--he's a longtime friend and adviser to NYT publisher Pinch Sulzberger and gets featured in the Times with unfailing, gratuitous deference. Even if Sulzberger didn't want Rattner to be treated like a sacred cow he'd still be treated like a sacred cow by editors and reporters who aren't sure what Sulzberger wants. ...

So here was Rattner getting a nice little bit of launch publicity in the Sunday Business section for his new hedge fund. Nothing unusual there! (How do they get these scoops?) What I didn't understand was the part about the "Chinese Wall" Rattner has pledged to erect within his firm. I'm no expert--I barely understand what investment banking is, let alone what constitutes "due diligence,"  but here's what I think is going on (something that's explained only in the most abstract and unhelpful way by the NYT's Andrew Ross Sorkin):

Rattner's new hedge fund will specialize in the same industry sector--media and communications--in which Rattner's Quadrangle Group also runs a private equity fund. Now suppose, hypothetically, that the Quadrangle private equity fund is thinking of buying a part of media firm Knight-Ridder, currently on the block. In the course of its "due diligence" as a potential purchaser, Quadrangle gets to look at everything within the company--five years of financial reports, projections, special projects, etc. Let's speculate, again hypothetically, that the results aren't that promising--the billions of potential cost savings Quadrangle thought they would find aren't there. There's no fat to cut! The equity fund concludes buying Knight Ridder isn't a good deal.

Now let's say that Quadrangle's hedge fund is "long" in Knight-Ridder stock. (Again, this is hypothetical, especially since the hedge fund isn't even established). The hedge fund is betting that private equity funds are going to buy Knight Ridder at a 20% premium above the current trading price. Of course, the hedge fund execs aren't supposed to be privy to Knight Ridder's books. But senior Quadrangle managers (e.g. Rattner) now know the meaning of every last detail of KR's business because of the diligent investigations of Quadrangle's private equity fund.  Are they really going to allow their hedge fund to make a "long" bet on Knight-Ridder stock if they know Knight Ridder isn't worth the money? Can any business like Knight-Ridder (or Time Warner) really trust the Quadrangle's private equity side not to share information with the hedge fund side?  More subtly, can they--with many millions at stake--trust that Rattner (also with many millions at stake) won't sigh, roll his eyes, or cough, or otherwise telegraph doubts when he (hypothetically!) hears his hedge fund guys explain why they think Knight-Ridder stock is a terrific buy and worth a whole lot of money? Yes, says Rattner! "[T]he two funds," Sorkin dutifully reports, are to be "separated by a so-called Chinese Wall. "

But wait. Rattner also tells Sorkin that the two sides will "share ideas about industry trends", and that he

hoped that investment managers who specialized in public market media companies would "offer a window into the other side of the house."

What kind of Chinese Wall is that? It lets "ideas" through but not ...er, what? (What if you see a "trend" that "there's no more fat to cut at big media firms"?) Isn't Rattner's promise of semi-porous purity the sort of claim of which the New York Times would ordinarily be a tad skeptical? (Substitute the name "Frist" or "Marvin Bush" for "Rattner" to see what I mean.)

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