One of our forms of recreation is keeping an eye on how coverage of certain news stories in the Wall Street Journal is curiously different than elsewhere. We’ve noted before that the WSJ tends to put a happy face on economic and market news (its company reporting is considerably more evenhanded).
The latest reporting disparity comes with the written submission to Parliament by Mervyn King, the governor of the Bank of England. The document, which took a tough position against providing liquidity because it would bail out speculators and might not prove to be necessary, was covered by the Financial Times, Bloomberg, and even the New York Times, yet got no mention in the Wall Street Journal (only a short post in its MarketBeat blog, which is not the same as putting it in the paper).
The Times gave a good overview:
In an unusual public display of discord, the British central bank criticized other central banks yesterday for injecting cash into the financial system to help stabilize credit markets, saying that such a policy amounted to a bailout of investors who made bad decisions.
Mervyn King, the governor of the Bank of England, also hinted that the credit crisis could make further interest rate increases unnecessary — if the recent sharp increase in borrowing costs ended up hurting consumer demand. That, he said, would reduce the prospects of inflation, despite the run-up in the prices of a wide variety of commodities, including crude oil and wheat.
The main thrust of his written testimony to Parliament, however, was a sharp warning about “moral hazard” — a term used to describe the downside of policies that effectively rescue investors when their bets turn out wrong.
“The provision of such liquidity support undermines the efficient pricing of risk by providing ex-post insurance for risky behavior,” Mr. King wrote. “That encourages excessive risk-taking and sows the seeds of a future crisis.”
The FT also picked up on the theme “Central banks split over credit squeeze action,” but put more stress on the different views of the main actors, with the Bank of England the most stringent, the ECB the most accommodative, and the Fed (at least so far) taking a middle path.
The Times also noted it may be easier for the Bank of England to take a stand:
But some analysts maintain that the bank is relying on measures taken in the United States and at the European Central Bank in Frankfurt. To the extent that British banks need pounds sterling, this view has it, they can simply borrow in dollars or euros and convert them, freeing the Bank of England from the task and allowing it to occupy the moral high ground..
Still, Mr. King has turned into the most prominent critic of those in the financial markets who have been clamoring for cheap money….. Mr. King’s fear is that cheap money will encourage investors to create anew the kind of financial house of cards that is now tumbling down.
“If risk continues to be underpriced,” he said, “the next period of turmoil will be on an even bigger scale.”
Now why is this story missing from the Journal? One might conclude that the Journal is unwilling to run any serious story that takes issue with the idea of a rate cut.
It appears that the Journal, like Greenspan, doesn’t want to upset the markets.