The New York Times Attacks Richard Syron

When does a good story get in the way of informing readers? Editors of all major publications face this decision each day. A recurring topic at "A Dash" is how many bloggers play fast and loose with facts. The Internet gatekeepers push along the stories placing the burden on readers. No matter how intelligent the reader, no one is going to check facts, sources, and analytical techniques for various stories.

With print media in competition with blogs, the distinction is starting to fade. Cyberspace is full of unedited and often unchallenged text. It lasts forever.

Background: The New York Times Attack

Charles Duhigg studied history at Yale and got an MBA from Harvard on the way to becoming a reporter for The Los Angeles Times and then The New York Times. His feature article on Freddie Mac and Richard Syron attracted plenty of attention and comment today.

The main contention is that Syron got a memo in 2004 from his Chief Risk Officer, David A. Andrukonis, warning that the firm was financing questionable loans. The next year Mr. Andrukonis left "to become a teacher." Duhigg has plenty of anonymous sources who confirm that Syron had this information.

Since we accept the factual authority of The New York Times, we do not challenge that there was such a memo. We also do not doubt that sources were confirmed. This leaves room for plenty of other complaints.

Challenges from our Blogging Colleagues

The best job of analysis on this article came early in the day from Tanta at Calculated Risk, one of our featured sites. She was clearly on a mission. Among other points she noted the following:

  • The Times short-changed Syron's resume;
  • Too many anonymous sources;
  • No recognition that this was one memo of many; and
  • Faulty grasp of the role of the GSE's.

Nice work.

Matt Stichnoth, writing for, has some other good points. He draws our attention to the following:

  • There was a big change from 2004 to 2005. These problems were not so obvious in 2004, and might not even have applied to loans at that time.
  • Recognition of Congressional pressure for Fannie and Freddie to pursue social missions; and
  • Recognition that the worst crisis in history might not have been totally foreseen.

Both of these articles deserve to be read in their entirety, as well as the original article.

Our Take

There is a common statistical problem involved here. In any large organization there are many people warning about many things. Sometimes the warnings are completely unnoticed. Sometimes they are evaluated but found to be unpersuasive.

If one starts with all of the situations where there is "a warning" the executive might have done very well. Who knows how many problems Syron correctly anticipated and solved or how many bogus concerns that he ignored.

If one begins with the conclusion, it is usually easy to spot something. Finding the warnings that should have alerted someone to the big mistakes is a classic revisiting of history. Some examples include the following:

We are surprised that these incidents were apparently not covered sufficiently in the Yale history program, nor the statistical problem in the Harvard MBA program.

There is also the policy perspective. The reason that GSE's had implicit government support is that they were following national policy, using prescribed rules (including degree of leverage), and overseen by appropriate authorities. It was a balancing act.

Whether these organizations, neither fish nor fowl, are appropriate mechanisms of policy is a question for another day. Second-guessing the executives confronted with difficult decisions is another matter altogether.

The Consequence of Journalistic Choices

We doubt that most readers, on their own, thought about the many points raised here or by Tanta and Matt. Since The New York Times has a much larger circulation than the bloggers, only a few will be alerted.

Our guess is that most will accept this as just another case of corporate greed. For every issue there is some simple heuristic, a lowest common denominator if you will, that resonates with those who have conclusions in mind when they read news. We are disappointed, therefore at the conclusion reached by another of our favorite sources. After noting that Syron has received $38 million in compensation since 2003 while the stock prices have declined, here is the conclusion offered:

This was simply greed on the part of an executive, a transference of wealth from Shareholders to himself . . .

Full Disclosure

While we have no position in Freddie Mac (FRE), we have a recent and very successful position in Fannie Mae (FNM) — long stock and short the pumped August calls.

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  • Mike C August 6, 2008  

    This was posted on another message board I regularly read. I thought it was some incisive writing from a common sense perspective in terms of what has happened the last few years and is connected to some of this recent discussion:

  • Barry Ritholtz August 6, 2008  

    Your main contention is false. Since you are critiquing others journalistic fairness and accuracy, let’s apply the same standard to this post:
    The article’s main thrust was not, as you wrote, that Richard Syron may or may not have gotten a memo; It was that HE WAS REPEATEDLY WARNED ABOUT RSKS AND IGNORED THOSE WARNINGS.
    Quote: “More than two dozen current and former high-ranking executives at Freddie Mac, analysts, shareholders and regulators said in interviews that Mr. Syron had ignored recommendations that could have helped avoid the current crisis.”
    Since you are critiquing other posts for their balance and accuracy, I am surprised you left out that little tidbit.
    In fact, that sentence completely undercuts your whole thesis. Not only is your main contention inaccurate, but it is guilty of precisely what you accuse the NYT of.
    Jeff, I am at a loss to understand your reasoning in this instance — you seem to be defending a lot of bad players lately . . .

  • Jeff Miller August 6, 2008  

    Barry – The quotation you cite does not support your (caps lock) conclusions.
    It says that the author has 24 interview sources, not 24 different warnings. It could have been a number of different people who all knew about one or two instances.
    In addition, the quotation says quite clearly that these included analysts, shareholders, and regulators, not just “execs.” So your comment is factually incorrect, and in two different ways.
    If the author and used more real sources and done a better job of characterizing the internal debate instead of aiming for an expose’ I would not have taken up the subject.
    In the Calculated Risk piece I cited, and which I encourage you to read, Tanta put it well:
    “Actually, all but two of the “more than two dozen” were given anonymity to damage Richard Syron’s career while protecting their own, by my reading of this. One former Freddie Mac executive and one industry consultant are named. Nobody else is. And we are given no idea how many of the “more than two dozen” are shareholders.”
    As to defending “bad players” — let me suggest that collegial discussion, which you claim to encourage, avoids this sort of off-hand characterization of someone’s work. But your raising the point in this instance is useful, maybe worthy of a new article.
    I see many corporate “targets” of journalistic attacks as regular business people engaged in making difficult decisions. There is always internal dissent on tough issues. I believe that there is a lot of criticism of experienced executives by young journalists who do not (yet?) have the qualifications to be briefcase carriers, much less run major companies themselves.
    I am going to make a dramatic prediction —
    I note that you recently joined a corporate board. (Congratulations!) I predict that a few years from now, when you have more actual business experience, your attitude toward these executive decisions will be more nuanced and less doctrinaire, a bit more like mine.
    As usual, thanks for making your views clear to readers at “A Dash.”

  • Jeff Miller August 6, 2008  

    Thanks for the link, Mike. It is indeed an interesting article.

  • upsidetrader August 6, 2008  

    wonderful piece, seems anyone can write anything these days.

  • Jeff Miller August 6, 2008  

    Upside –
    Thanks! It is nice to know that some find my work to be of value.

  • gaius marius August 6, 2008  

    prof miller — i doubt we will ever be sufficiently informed about what went on behind closed doors at the GSEs. the times doesn’t have the luxury, but i’m more than willing to wait for the book.
    the article leaves a lot to be desired as a condemnation of syron — but i do think singling out syron is a silly exercize in the first place. the GSE model is not his idea, and the structural problems of the GSEs antedate him by many years — the flaws have been criticized since i was a lad, and it was always just a matter of waiting for the proper event to destroy them. had he wished to change the model, it’s highly doubtful he could have in the face of congressional pressure.
    the core problem with the GSEs is that they are serving two masters. paul jackson is articulating brilliantly the encroachment of social engineering on investor protections into the mortgage servicing field:
    and this conflict is at the heart of the GSEs woes — when the mission of the firm is something besides making money, it will eventually not make money.

  • RB August 7, 2008  

    I do not have any references but I heard on an NPR interview a couple of days ago regarding how editorial decisions are made and how the board did not run an article favorable towards the church at a time when the church scandals were breaking out so that it did not distract from the theme. I think the NY Times, among other newspapers, has made it its mission to frame the housing issue as one of corrupt, profit-seeking corporations against naive homeowners in difficulty because of personal medical issues. Anything that goes against this theme will not get an airing so that it doesn’t dilute the attack.

  • gaius marius August 7, 2008  

    as support for my above interpretation, i’m lucky enough to be able to offer:
    syron increased the size and risk exposure to freddie in order to commit to what he perceived to be its social function.

  • Jeff Miller August 8, 2008  

    Gaius – I like the line about the mission of the firm. The Syron interviews certainly did provide good support for your argument.
    I have noted a few times the difficulty in these quasi-public institutions. If you want another example, think Amtrak!
    Thanks for your comments.