Wednesday, February 06, 2002


Now that the initial hysteria about Enron has abated (somewhat), one question that sort of hangs over the press coverage is this: To what degree is The New York Times coverage of Enron influenced by the advertising downturn? If you read The Times coverage, you are all but berated into believing that Enron is a major political scandal. If you look at the balance sheet of the facts (so far), there's not much there. Like every other company that ever ranked in the top ten of the Fortune 500, Enron had access and entry to important policy makers and key decision makers. But when the company's schemes came undone and it needed a multi-billion dollar favor (in the form of a bailout), it was turned down flat.

Ordinarily, one would expect a mighty journalistic enterprise like The Times to turn at least some of its attention to other enablers of the Enron scam. An obvious target would be the financial supermarket companies, like JPMorganChase and Citi, that made windfall profits underwriting Enron projects in the United States and around the world. Surely the due diligence of these financial powerhouses must have made them aware of Enron's precarious financial state. Why did their analysts tout Enron stock as a "strong buy?" Why didn't these firms advise their private banking clients to dump Enron's stock when it lost half its value in six months? Didn't these firms have some obligation to inform their investors of the problems at Enron. After all, JPMorgan Chase is on the hook for $2.3 billion in the Enron fiasco, according to the Wall Street Journal. Citi is on the hook for $800 million (at least). That's real money. And yet nothing was said. No disclosure was made.

That is, by itself and by any definition, a huge story. But The Times has all but ignored it. Mickey Kaus, who writes for Slate and the website known as kausfiles argues that the Times' coverage of Enron is influenced by the new managing editor's zeal for campaign finance reform. Enron = political corruption = increased demand for campaign finace reform = eventual passage of some awful legislation = NYT wins Pulitzer Prize. And this is almost certainly true. The managing editor in question, Howell Raines, is a zealot on the issue and he probably does truly believe that Enron's political activism is emblematic of everything that is wrong with the way the "system" works.

But there's another explanation for why the Times has shied away from what might be called the "financial community scandal." Simply put: The paper can't afford to offend some of its best advertisers.

As everyone knows, media (in general) are suffering through the worst advertising recession in decades. Revenues, earnings, margins and profits are down sharply. Given this environment, it's not surprising that companies that continue to advertise regularly and reliably are much appreciated in the executive suites. Two companies that continue to advertise regularly and reliably in The New York Times are JPMorganChase (mostly for retail banking services) and CITI (for a variety of financial services, including retail brokerage, retail banking and business-to-business banking and insurance).

Turning loose a team of investigative reporters on either one of these institutions would be a risky gambit, since both could pull all of their future advertising at a moment's notice. If profits at the Times fell 46% last quarter with JPMorganChase and CITI as regular and reliable advertisers, how much would profits have fallen without them? It's a question that no one at the Times really wants to answer.

The great thing about kicking around politicians in Washington is that they can't retaliate. JPMorganChase and CITI can retaliate. I don't think that: JPMC/CITI cuts in advertising spend = lower profits at NYT = ergo, NYT devotes bulk of available resources to DC coverage (as opposed to Wall Street coverage). It's not that simple. Organizations like the Times are pushed along by a hundred different factors and actors.

But the influence of the ad budgets of the major financial services companies is important and significant; as important and significant as Enron's influence was in Washington.