Pleading the First

So what's the difference between an analyst and a journalist, anyway? Media maneuvers was initially vexed by this question a long decade or so ago, when Eliot Spitzer rode into town and exposed just how conflicted Wall Street research was. It turned out that many analysts didn't really believe all those bullish reports they put out on technology stocks during the dot-com boom. But they engaged in happy talk anyway, because that's what their business-hungry banker brethren wanted them to do -- and their ample paychecks were largely dependent on their compliance.

As a result of these revelations, analysts were pilloried, research departments decimated, and an industrywide settlement extracted. At the same time, journalists, who for years acted as the megaphone for these same analysts, breathlessly repeating and unquestioningly reporting their every bullish remark, escaped unscathed, even though they were just as wrong about the dot-com boom as analysts -- and similarly conflicted. Back in the early days of the new economy, many financial journalists held stock options in the dot-com-powered outlets they worked for. And even those who toiled at more traditional venues had a vested interest in a buoyant tech-driven market. After all, who wants to tune into CNBC or read Money magazine if stocks aren't going up, up, up?

But no matter. In this country, we have a free press (thank God), and journalists can say and write what they want, and if they're wrong, with a few key exceptions (notably, libel), well, no big deal. So while analysts like Henry Blodget and Jack Grubman were taken to the woodshed and banned from Wall Street for their Panglossian, conflicted predictions, their friends in the Fourth Estate went on their merry way, clinging to their First Amendment right to be wrong. No wonder Blodget, for his second act, chose to become a journalist, just like his one-time nemesis, Spitzer. And no wonder it's Blodget who, once again, is provoking the question: So what's the difference between an analyst and a journalist, anyway?

To recap, in case you just got back from the Hamptons, a few weeks ago Blodget suggested on his Business Insider website that Bank of America might need to raise anywhere from $100 billion to $200 billion in new capital -- that wide spread should have been a tip-off to the rigor of the analysis -- based on information he had gleaned from two financial blogs, Naked Capitalism and Zero Hedge. Blodget's post was quickly picked up by others, including The Wall Street Journal online, and he was soon fingered for causing a massive sell-off in the beleaguered bank's already-tanking stock. BofA then struck back, reminding everyone of Blodget's checkered past as an analyst, which prompted only more postings by Blodget, including one piece headlined "ANALYST: Bank Of America's Bizarre Personal Attack On Henry Blodget Suggests 'Something Is Seriously Amiss.' "

It was a skirmish tailor-made for the blogosphere and for Blodget, who has made no secret of his penchant for click baiting. So while Blodget was quick to point out that he has no vested interest in taking down BofA -- he's not shorting the stock, and he says he owns shares from his days at Merrill Lynch & Co. -- his attack brought Business Insider the kind of buzz other business news sites can only dream about.

That doesn't mean he is as conflicted now as he was during his days as an analyst -- or rather that he's any more conflicted than any other journalist working for a profit-seeking enterprise.

But as snarky as it may have seemed, BofA hit on something interesting -- and unresolved -- when it noted that Blodget was barred from the securities industry by the Securities and Exchange Commission for his stock predictions during the dot-com bubble. As a journalist, however, Blodget is free to opine away, short of engaging in "market manipulation," which is about as easy to define as pornography. That separates him from stock analysts, who remain subject to a bevy of SEC rules and regulations.

Ironically, just as Blodget found himself liberated, his former antagonist Spitzer discovered that even journalists may occasionally pay a price. In a column on Slate last summer, Spitzer attacked what he saw as loose financial regulation and referred to a "criminal conspiracy" at one of his targets, insurer Marsh & McLennan. The result: He was hit by defamation suit from two Marsh executives who had been cleared of all but one charge. Perhaps he should consult with Blodget about how to play the journalism game.

Yvette Kantrow is executive editor of The Deal magazine.