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DealBook: Hunch About Bloomberg Brought Rivals Together

June 1, 2013 by Leave a Comment

Bloomberg’s TV studio in Manhattan. The news and financial data company has recently begun expanding into new businesses like stock and bond trading.Hiroko Masuike for The New York TimesBloomberg’s TV studio in Manhattan. The news and financial data company has recently begun expanding into new businesses like stock and bond trading.

Goldman Sachs and JPMorgan Chase are usually bitter rivals, competing for lucrative banking and trading business. But one day in April, the Wall Street titans found common ground: frustration with the Bloomberg news and financial data empire.

Goldman’s public relations chief, Jake Siewert, a former Treasury official, called his counterpart at JPMorgan Chase, Joe Evangelisti, with a simple question: “Do you have any issues with Bloomberg?”

Before he could finish his sentence, Mr. Evangelisti began rattling off his grievances, say people briefed on the call. At the top of the list was a Bloomberg News article in 2011 that likened the strife in an Italian town after a bad deal with JPMorgan to the fallout from the Nazis’ occupation in World War II. He also mentioned another episode when a Bloomberg reporter surreptitiously obtained an access code to listen to a private conference call for senior executives.

The two men shared one major concern: they believed that Bloomberg reporters were using the company’s data terminals to monitor Wall Street sources — the executives at the banks that were spending thousands of dollars a year to use the data-rich machines.

That phone call lifted the lid on a long-simmering, but seldom discussed, tension between Bloomberg and Wall Street. This article is based on interviews with many of the people with whom Mr. Siewert spoke.

There had long been suspicions among public relations executives that Bloomberg reporters might be using terminals to check up on bank executives. But one Wall Street chief executive, who spoke on the condition that he not be named, said recently, “I hate it when something happens that hadn’t occurred to me, and this situation certainly hadn’t.”

The grumbling and gossiping never amounted to much until Mr. Siewert, who joined Goldman last year, began his mission.

Through its lucrative terminal business, Bloomberg provides firms with intricate financial information. And while the company is not alone in providing data to the big banks — Reuters and others offer similar services — Bloomberg terminals have become so ubiquitous on Wall Street that they are essentially a prerequisite for traders. They come at a steep price: each machine can cost an average of more than $20,000 a year.

Adding to the tension between Wall Street and the data provider, many bank executives have grown to resent the fact that Bloomberg will not reduce the cost of the terminals, as other vendors have. After reports of Bloomberg’s monitoring emerged, some Wall Street executives sought concessions on the cost of the terminals, but those efforts failed, according to people briefed on the matter.

At the same time, Bloomberg is also expanding into businesses like stock and bond trading, a lucrative sector that is still largely dominated by banks like Goldman. The company has put more resources into offering fresh methods of trading stocks, bonds and some more complex financial instruments.

As a result, some at Bloomberg have privately accused Goldman Sachs of creating a firestorm over the terminal surveillance. Goldman executives bristle at that assertion.

Still, the business initiatives at Bloomberg, which has reporters around the globe, exacerbates the tensions that any news organization has with the people it covers.

“Bloomberg has to walk a fine line between selling a service to firms like Goldman Sachs on the one hand and hammering them on the other with stories,” said Paul A. Argenti, a professor of corporate communications at Dartmouth’s Tuck School of Business.

Bloomberg reporters had a limited window into what terminal users were doing, according to people close to Bloomberg. For instance, they knew when a subscriber was logged in or out, and could see help-desk chats, which might give clues about what a subscriber was interested in.

Mr. Siewert said in a statement that Bloomberg representatives had told Goldman that they would get to the bottom of the issue.

“We’ve got a lot of respect for Bloomberg reporters, and the company is making sure that the news desk has no special access to client information, so they’re on top of it,” he said.

A spokeswoman from JPMorgan declined to comment.

Ty Trippet, a spokesman for Bloomberg, said, “We always want to hear from our clients and others about our editorial coverage, and we take substantive concerns very seriously.”

Goldman’s response began when a press officer in Hong Kong received a call from a Bloomberg reporter about the whereabouts of a partner who the reporter noted had not logged into his terminal in a few weeks.

The Goldman employee felt the call crossed the line, and she immediately mentioned it to her boss in Hong Kong, who in turn raised it with Mr. Siewert in New York.

His first move was to find out whether Bloomberg had guidelines prohibiting reporters from using terminals to further their reporting. Mr. Siewert is probably best known for his years working for President Clinton, including as his press secretary.

Mr. Siewert called a reporter at Bloomberg who covers Goldman. He was directed to an editor, who assured him that Bloomberg had a policy aimed at preventing exactly the sort of behavior Mr. Siewert was concerned about.

This response surprised executives at Goldman because the reporter who called the Hong Kong office had admitted monitoring an executive’s whereabouts through the terminal.

Mr. Siewert then called more than half a dozen former Bloomberg reporters, most of whom now work at The Wall Street Journal. Most of those acknowledged using the terminal to further their reporting, or said they knew people who had done so.

At the same time, Mr. Siewert contacted a number of public relations executives on Wall Street and in Washington. Several executives told Mr. Siewert that they too had previous episodes of Bloomberg reporters’ checking the whereabouts of employees, but had not been concerned enough to take the issue up with Bloomberg.

Goldman held a series of meetings on Bloomberg’s monitoring. Goldman’s legal department pulled out the bank’s contract with Bloomberg, which prohibits Bloomberg from using confidential information it might glean from its relationship with Goldman for purposes not contemplated by the contract.

Mr. Siewert’s work culminated in a meeting on April 29 at Goldman’s headquarters in Lower Manhattan. In a conference room on the 43rd floor overlooking the Hudson River, Daniel L. Doctoroff, the chief executive of Bloomberg, met with Gary D. Cohn, the president of Goldman Sachs.

“This data is sensitive,” Mr. Cohn told Mr. Doctoroff, according to others present at the meeting. Mr. Doctoroff assured Goldman officials that Bloomberg was concerned about the breach and had cut off the ability of reporters to access client information, according to attendees of the meeting.

“They were very responsive and didn’t pretend it was an isolated incident,” said one executive at the meeting.

Mr. Cohn told Mr. Doctoroff that Goldman was considering notifying its clients of the breach, but before it did it wanted to be able to tell them what remedial action Bloomberg was taking. The two men agreed to talk again soon.

Bloomberg executives left the meeting feeling things were moving in a positive direction and were surprised by the subsequent news media attention.

Still, Mr. Siewert’s calls had piqued the interest of reporters, and The Wall Street Journal and The New York Post began reporting.

On the afternoon of May 9, Mark DeCambre, a reporter for The Post, called Bloomberg. His article, with the headline “Goldman Sachs employees concerned Bloomberg news reporters are using terminals to snoop,” broke the news.

Mr. Doctoroff responded in a note to Bloomberg clients.

“A Bloomberg client recently raised a concern that Bloomberg News reporters had access to limited customer relationship management data through their use of the Bloomberg terminal. Although we have long made limited customer relationship data available to our journalists, we realize this was a mistake,” he wrote.

A version of this article appeared in print on 06/01/2013, on page B1 of the NewYork edition with the headline: Hunch About Bloomberg Brought Rivals Together.

Article source: http://dealbook.nytimes.com/2013/05/31/hunch-about-bloomberg-brought-rivals-together/?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

In Europe, Lew Will Press for More Growth, Less Austerity

April 7, 2013 by Leave a Comment

WASHINGTON — Jacob J. Lew began his first trip to Europe as Treasury secretary on Sunday, a four-city tour in which he is expected to try to persuade finance ministers to pursue a little more growth and a little less austerity to improve the economic fortunes of the Continent and the world.

Growth is again at the top of the Obama administration’s agenda as Mr. Lew meets over a 48-hour period with high-ranking leaders representing the European Union, Germany and France. Europe’s sovereign debt crisis continues to simmer for its fourth year, most recently in Portugal over the weekend, and European unemployment rates are still rising. The euro zone economy shrank in the fourth quarter of 2012, with the large economies of Germany, France, Spain and Italy all contracting.

“Our European partners need to safeguard the stability they have achieved so far,” a senior Treasury official said, noting that the problems in the euro zone reduced global growth by three-tenths of a percentage point last year.

“In light of the reality that countries representing one-third of euro area G.D.P. are shrinking their budgets and restructuring their economies, it is vital to see rebalancing within the euro area with surplus economies contributing more to demand,” said the official, who insisted on anonymity in discussing the Treasury secretary’s plans.

Some European officials have also said they are concerned about a potential cycle of austerity and recession, with budget cuts leading to shrinking economies, making it harder and harder to meet budget goals.

The “economic outlook for the euro area remains subject to downside risks,” Mario Draghi, the president of the European Central Bank, said at a news conference last week. Mr. Lew is scheduled to meet with Mr. Draghi on Monday.

“The risks include the possibility of even weaker than expected domestic demand and slow or insufficient implementation of structural reforms in the euro area,” Mr. Draghi said. “These factors have the potential to dampen the improvement in confidence and thereby delay the recovery.”

But countries like Germany have shown little willingness to ease the constraints of austerity for peripheral European countries, or to engage in stimulus spending themselves. And for years, European officials have bridled at being lectured by officials from Washington — particularly because many feel that their financial crisis was largely caused by American financial products exported around the world by American banks.

Though Mr. Lew will travel to Europe with a familiar message from Washington, it may not be delivered as urgently as in the past. The European crisis continues to weigh on American growth, cutting into exports, but many economists believe that the United States has entered a cycle of self-sustaining economic growth driven by a turnaround in housing and improving household budgets.

Moreover, American companies have over the last few years steeled themselves against Europe’s financial woes, and the risk of contagion is perceived to be relatively low.

Europe was the primary international concern for Timothy F. Geithner, Mr. Lew’s predecessor as Treasury secretary and a familiar face on the Continent. But perhaps as a sign of Europe’s diminishing threat to United States economic stability, Mr. Lew’s first overseas trip as Treasury secretary, last month, was not to Paris or Berlin or Brussels, but to Beijing.

European leaders are expected to press Mr. Lew on an eagerly anticipated free-trade agreement. A study by the European Commission found that a deal could increase European Union exports to the United States by as much as 28 percent, a boost for the flailing European economy.

“The European Commission is ready with a proposed mandate for the future negotiations,” Karel De Gucht, the European trade commissioner, said in a statement last month. “We can now roll up our sleeves and get down to the business of preparing negotiations.”

The Treasury official said: “We will seek an ambitious, comprehensive and high-standard agreement.” The official added that such an agreement would include “full elimination of tariffs, reductions in nontariff barriers and disciplines that address emerging challenges such as state-owned enterprises and localization barriers.”

Financial regulations, including a proposed European tax on financial transactions, are expected to be a major subject of negotiations as well.

But concerns over growth, austerity and stability in the euro zone looked certain to be the central topic of negotiations yet again.

Speaking at a conference in China on Sunday, Christine Lagarde, the managing director of the International Monetary Fund, also reiterated her concerns about growth. “Low and lopsided growth is not enough,” Ms. Lagarde said at the Boao Forum for Asia annual conference, citing the continuing troubles in Europe. “It is not enough of a real recovery. It is not enough of a global recovery.”

In Brussels on Monday, Mr. Lew will meet with Herman Van Rompuy, president of the European Council; José Manuel Barroso, president of the European Commission; Olli Rehn, commissioner for economic and monetary affairs; and Michel Barnier, commissioner for internal market and services.

He will also meet with Mr. Draghi in Frankfurt. On Tuesday, he will travel to Berlin and Paris to meet with his counterparts, the finance ministers Wolfgang Schäuble and Pierre Moscovici.

Article source: http://www.nytimes.com/2013/04/08/business/economy/in-europe-lew-will-press-for-more-growth-less-austerity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: ,

Lew to Complete Change of Obama’s Economic Team

January 10, 2013 by Leave a Comment

Mr. Obama called Mr. Lew “a master of policy who can work with membes of both parties and forge principled compromises.”

If confirmed by the Senate, Mr. Lew, 57, would become just the second Treasury secretary for Mr. Obama, succeeding Timothy F. Geithner, who at the president’s insistence stayed for the entire first term.

Mr. Geithner, formerly president of the New York Federal Reserve Bank and a top Treasury official in the Clinton administration, was the last remaining principal from the original Obama economic team that took office at the height of the global financial crisis in January 2009.

Mr. Lew, in brief remarks, did not address the looming challenges of the job, saying only that he looked forward to leading a Treasury staff that he called “legendary for their skill and knowledge.”

Mr. Geithner, who received a warm send-off, said his successor was “committed to defending the safety net for the elderly and the poor,” a reference to programs like Medicare, Social Security and Medicaid, which are under intense pressure in the long-running fiscal negotiations.

Mr. Lew also “understands what it takes to create the conditions for economic growth,” he added.

While the team is changing, so far it is made up entirely of men who have been part of the administration since its first months. Gene Sperling, like Mr. Lew a veteran of the Clinton administration and the partisan budget wars of that era, is expected to remain as director of the White House National Economic Council. Alan B. Krueger, a former Treasury economist, will continue as chairman of the Council of Economic Advisers and Jeffrey D. Zients, a former business executive, remains for now as acting director of the Office of Management and Budget, though Mr. Obama is said to want to promote him to another job.

That composition gives Mr. Obama a high degree of comfort with his economic advisers, who have experience in the budget struggles that have occupied the administration since Republicans took control of the House two years ago. Those struggles will resume later this month. Yet the continuity also plays into criticism that the president is too insular and insufficiently open to outside voices and fresh eyes in the White House.

If Mr. Lew is confirmed in time, his first test as Treasury secretary could come as soon as next month, when the administration and Congressional Republicans are expected to face off over increasing the nation’s debt ceiling, which is the legal limit on the amount that the government can borrow. Mr. Obama has said he will not negotiate over raising that limit, which was often lifted routinely in the past, but Republican leaders have said they will refuse to support an increase unless he agrees to an equal amount of spending cuts, particularly to entitlement programs like Medicare and Social Security.

Mr. Lew was passed over for Mr. Obama’s economic team four years ago, when Mr. Obama instead chose Lawrence H. Summers, a former Harvard University president and Treasury secretary in the Clinton administration, as director of the National Economic Council. Hillary Rodham Clinton then hired Mr. Lew at the State Department when she became secretary, and in late 2010 — over the objections of Mrs. Clinton, who had come to rely on Mr. Lew — Mr. Obama made him budget director, the same post Mr. Lew had held late in the Clinton administration.

Mr. Lew in the 1980s was a Democratic adviser to the House speaker at the time, Thomas P. O’Neill Jr., participating in fiscal talks with the Reagan administration. Mr. Lew is known for his low-key style and organizational skills.

While Mr. Lew has much less experience than Mr. Geithner in international economics and financial markets, he would come to the job with far more expertise in fiscal policy and dealing with Congress than Mr. Geithner did. That shift in skills reflects the changed times, when emphasis has shifted from a global financial crisis to the budget fights with Republicans in Congress.

John H. Cushman Jr. contributed reporting.

Article source: http://www.nytimes.com/2013/01/11/us/politics/lew-to-complete-change-of-obamas-economic-team.html?partner=rss&emc=rss

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