Financial News Censorship

Censorship of negative financial news may be on the upswing.

In my recent post, The Government Panic of September 2008, I noted that there was extremely limited coverage of the run on bank mutual funds then going on. I also pointed to a Dow Jones story that was negative on money market mutual funds that completely disappeared.

Now comes word that a key comment made in New York last week by Luo Ping, a director-general at the China Banking Regulatory Commission was scrubbed from a Reuters report. Here's what Luo said. The bold is what was scrubbed:

Mr Luo, speaking at the Global Association of Risk Management’s 10th Annual Risk Management Convention, said: “Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

However, Mr Luo said Chinese officials would encourage its banks to finance domestic mergers and acquisitions rather than provide rescue finance to distressed financial companies in other countries: “There will be no bottom-fishing of financial institutions, particularly in the US, because there is a lot of uncertainty about the quality of the books."

Read it with and without the bold paragraph. Two completely different stories. The top paragraph surrounding the scrubbed paragraph is just cushioning by Luo for the clear body blow sentence, "We know the dollar is going to depreciate.."

The Mortgage-Lender Implode-o-Meter reports that it has the original version of the Reuters story, that was picked up from FT, and notes:

Reuters did not disclose that this was an updated version of the release, nor did they change the timestamp on it from Thu Feb 12, 2009 8:22am EST, yet I can confirm the story has changed since 6:56pm on the 13th.

FT is still carrying its original version, here, from where Reuters picked up the story.

The Reuter's scrubbed version is here. Notice that the word, "However" is removed from the sentence following the scrubbed paragraph. This shows that the context of Luo's comments were distorted, from a contrast of two possibilities to a continuous flow of everything being peachy dandy and simply that the Chinese were going to buy U.S debt without reservation.

Now, what is of further interest is that there is no original reporting on this story from many U.S. majors, financial or otherwise, including NYT or Bloomberg--and some very curious reporting from WaPo and WSJ.

Here's what WaPo had to say about Luo's comments in a story about Secretary of State Hillary Clinton's trip to China:

China holds nearly $700 billion in U.S. Treasury securities, which some analysts have said China could use as lever against the United States if relations begin to fray. But in a signal of the two countries' growing interdependence, a top official recently said in New York that Beijing had little choice but to keep buying them.

"Except for U.S. Treasuries, what can you hold?" Luo Ping, a director-general at the China Banking Regulatory Commission, said to reporters. "Gold? You don't hold Japanese government bonds or U.K. bonds. U.S. Treasuries are the safe haven. For everyone, including China, it is the only option."

Again, this gives Luo's comments a different spin from Luo's "the dollar will depreciate" part of the comment.

And here's WSJ's coverage:

A top Chinese bank regulator said Wednesday there are few real alternatives to holding U.S. Treasury securities.

"Except for U.S. Treasurys what else can you hold?" said Luo Ping, director general of the China Banking Regulatory Commission. He added that U.S. government debt "is the safe haven for investment."

Ping did add that it can be uncomfortable at times to hold Treasurys, especially in times of rising debt issuance that affects the value of the dollar and pushes yields higher

A WSJ blog post managed to butcher the story even more and mis-identifies Luo as heading the "training" center:

U.S. Treasurys have remained a favored purchase for those seeking safe assets, but even that picture is clouded. Luo Ping, director general of the training center of the Chinese Banking Regulatory Commission, was quoted last week as saying there are few real alternatives to holding U.S. Treasury securities — but the semi-official China News Service later said Mr. Luo said buying U.S. debt is one of China’s options, but not the sole option.

Who knows how much of this is self-censorship by MSM, and how much is more sinister. The China story and what Chinese officials think should be front page news, not a buried story with incomplete quotes. There are fewer more important stories right now than the climbing debt and how much of it China will buy. Hiding Chinese concerns does not appear to make for an informed citizenry, regardless of who is doing it.