Banks Shot

Banks Shot

Banks Shot

A summary of what's in the major U.S. newspapers.
April 29 2003 5:03 AM

Banks Shot

The New York Times and USA Today lead with the government's $1.4 billion settlement that 10 top investment firms, charged with misleading investors, agreed to yesterday. The Washington Post and Los Angeles Times lead with the World Health Organization's announcement that SARS cases have peaked in Canada, Hong Kong, and Singapore. China, which has so far accounted for about 85 percent of world's 5,000-odd known cases of the virus, remains a hotspot. The WHO also criticized China, which reported 96 new cases in Beijing yesterday, for its continuing failure to share data: "The key question is, what do we know about the 96, who are the 96, when did they start, where did they live?" complained a WHO official. "We do think that it is now high time that this information becomes available."

[According to early-morning reports, U.S. soldiers shot and killed at least 13 Iraqis who had been protesting at a school near Baghdad. No further details were available.]

Advertisement

The Wall Street Journal, which has the best coverage of the bank deal, says it "could change the face of Wall Street." The settlement, agreed to by the banks, the SEC, and various states, details how analysts routinely issued falsely rosy research to curry favor and win lucrative investment-banking contracts. The settlement requires the 10 firms to reform their ways, including building (higher) walls between analysts and bankers. For instance, analysts will have to get paid based on the quality of their analysis, and not, say, on whether it generates investment-banking biz. Three of the firms were also charged with fraud, and two hot-shot analysts, Jack Grubman and Henry Blodget, will forfeit a total of $19 million. Both men were banned from the securities business for life. (Question: Are investment banks that aren't involved in the settlement planning to follow the stricter rules?)

The settlement also resulted in a flood of great e-mails and memos detailing the shady dealings. The head of Bear Stearns research told analysts at a meeting, "Being a partner to banking is part of your job." Another Bear analyst issued a "Buy" rating on a company, then e-mailed a colleague about the company, asking, "Any other scoop on this piece of [expletive]?"

A number of critics complained that the changes didn't go far enough. "The analogy is that if this were an operating room, they disinfected everything but the scalpel," said one analyst who wanted bigger barriers between analysts and bankers. The Post added that some investors were disappointed that no top-level execs were singled out for criminal prosecution. "Just wait," replied an agency official.

Everybody goes high with word that Iraqi exiles and opposition groups yesterday agreed to meet in a month to form an interim administration. As the papers mention only in passing, it's far from clear what role or how much authority the soon-to-be-chosen leaders will have. 

Advertisement

Most of the papers suggest that the meeting went well. The Post notes that several participants were pleased that the forum was "far more representative than they had expected." It was attended by delegates from SCIRI, the largest Shiite opposition group, which had boycotted a previous meeting. The Journal, though, notes that apart from SCIRI, "almost no prominent Shiites attended."

The NYT off-leads word that the U.S. has agreed to cease-fire terms with an Iraq-based Iranian opposition group that the State Department has long classified as a terrorist organization. The paper says up high that the group, the People's Mujahedeen, will be allowed to keep their weapons and in return have agreed not to use them against U.S. forces or anybody else. Much farther down, the NYT offers the unofficial, more interesting, explanation for the ceasefire: Unnamed military officials said they want to keep the group around as a sort of counter-balance to the Badr Brigade, an Iranian-backed militia group in Iraq. The U.S. bombed the People's Mujahedeen camps in early April in what was thought to be a thank-you to Iran for keeping out of the war.

The Times' piece focuses on the seeming irony of the deal, calling it the first agreement "between the U.S. military and a terrorist organization." The paper adds, "It raises questions about how consistently the Bush administration intends to apply a policy that had vowed to crack down on terrorist groups worldwide." The group, led by a woman, has no known connections to al-Qaida, but it did kill several Americans back in the 1970s. But another angle on this might be why the group was labeled a terror organization in the first place. As the Times mentions, a number of congressmen have argued that the choice was made, back in 1997 by the Clinton administration, as a sop to the Iranian government.

The papers all go inside with Secretary of State Powell's confirmation that in last week's talks North Korea did indeed offer to scrap its nukes program in return for aid and a non-aggression treaty, which is what the LAT, first among the papers,  noticed on Sunday. The talks "turned out to be quite useful," said Powell. Last week, President Bush described Pyongyang's offer as "back to the old blackmail game." Friday's papers played that angle up, emphasizing administration's officials assertions that North Korea threatened to test nukes.

Nobody is sure what caused the administration's change in tone. It could be a sign of in-fighting, evidence that Pyongyang left an obscure message, or both. The Post also adds an interesting twist, saying that Chinese officials contended yesterday (before Powell spoke?) that the proposal made by North Korea was more significant than the U.S. let on. A WP editorial tells the White House to keep negotiating and stop spinning, "The Bush administration chose to emphasize the alarming threat while playing down the offer of a deal." (Slate's Fred Kaplan agrees and says the administration should start haggling.)

A front-page piece in the LAT says the White House plans in a few weeks to start pushing its Israel-Palestinian "road map." The plan, which the paper details and describes as going "far beyond" the 1993 Oslo peace accords, calls first for Palestinians to stop their attacks and for Israel to "gradually" stop building settlements as security increases. The stated goal is to have a Palestinian state by 2005.

A piece inside the Post  fact-checks the White House's new pitch for tax cuts. As an administration spokesperson put it succinctly yesterday, "To the extent that the package is limited, we create fewer jobs." According to various economists cited by the Post, that's bogus. Asked to evaluate the new pitch, a Republican economist "with close ties to the administration" said, "I suppose it matters whether you think economics matters."