Unseemly conflicts of interest are not confined to Wall Street. Goldman Sachs and its peers regularly take heat for playing all sides of a trade. Now a furor involving Bloomberg reporters using private customer data has, this time, spared the blushes of bankers.
Goldman attracts more scrutiny than other financial institutions for treading a fine line. Breakingviews, whose parent company is Thomson Reuters - a Bloomberg competitor - has mentioned "Goldman" and "conflicts" in the same view about 100 times since 2000. Goldman's many tentacles led Rolling Stone magazine to brand it a "great vampire squid" and conflicts underpinned Securities and Exchange Commission allegations over the Abacus collateralised debt obligation that the firm settled for $550 million in 2010.
This time, it was Goldman that spotted a potential conflict at Bloomberg, according to the New York Post, when a reporter let on that an inquiry about a partner's employment status had been triggered by a lack of activity on his Bloomberg terminal. The news and information flowing through the company's $20,000-a-year machines has made the company founded by New York Mayor Michael Bloomberg something akin to the Goldman of financial data - nigh on indispensable for users as they make decisions worth billions of dollars every day.
Both organizations also foster ambitious cultures designed to maintain their pre-eminence. That may help explain why tactics are accepted internally that, once aired publicly, seem to go clearly too far. Just as Goldman has sometimes taken hits for its perceived conflicts, Bloomberg is now admitting it made a mistake by allowing reporters to have access to certain customer information.
The episode has reverberated across trading floors, executive suites and even the halls of the Treasury Department and the Federal Reserve, which are also worried their Bloomberg activity may have been monitored. Questions about conflicts are particularly pointed given Bloomberg's crusade for transparency at the Fed, which it has sued for the release of information.
Bloomberg's misstep may have brought bankers a rare chance to garner empathy. It is unlikely, however, to reshape public opinion. In a Gallup survey conducted in November, 24 percent of respondents rated the honesty and ethical standards of bankers low or very low. Thirty percent said the same of journalists. The financial data firm interacts with banks in other ways, too, for instance with research and trading infrastructure, including a part share in a so-called dark pool operator called BIDS Trading. As is the case at a complex investment bank, conflicts at Bloomberg are not so easily avoided.
