Interesting developments to come - See what made the cut...|
Bloomberg Terminal Breach Under Fire
The U.S. Treasury and the Federal Reserve are examining the extent to
Bloomberg's journalists access and usage of the company's data terminals of
Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Tim
Geithner. Reportedly, access to the usage information of the officials was wide
spread among all journalists at Bloomberg. Concerns revolve around general
functions used by the officials and the frequency with which those functions
were accessed by Bloomberg journalists pertaining to bond, equity markets or
news. The controversy puts the media empire, founded by New York City Mayor
Michael Bloomberg into strange, new territory as it explain its actions to an
industry that rakes in billions of dollars every year.
In recent days, a reported called a Goldman Sachs Group (GS) employee inquiring
about a partner's employment status and noted that the partner had not logged on
to the terminal lately. The incident prompted a complaint from Goldman and led
Bloomberg to terminate the ability of reporters to monitor subscribers.
Bloomberg posted a statement on their website, "Having recognized this
mistake, we took immediate action. Last month we changed our policy so that all
reporters only have access to the same customer-relationship data available to
Reportedly, the former Bloomberg employee from the editorial section recalled
calling up the information on Fed Chairman Ben Bernanke and Treasury Secretary
Tim Geithner "just for fun" and displaying the information to new recruits "to
show how powerful" the Bloomberg terminals were.
The former Bloomberg employee reportedly said he recalled seeing the
functions used by the Federal Reserve Chairman and Treasury Secretary as well
as, the number of times those functions were utilized at a broad level. The
information accessed by the officials included bond spreads and pages pertaining
to global equity indexes. By knowing how often a user reviewed certain
information - based on the number of functions available - and how often they
logged in could provide valuable information, in the right hands. With more than
300,000 Bloomberg terminal subscribers worldwide, journalists had a vast amount
of confidential information to track. For example, Bloomberg reporters used the
"Z function" which was a command using the letter Z and a company's name to view
a list of subscribers at a firm. A Bloomberg reporter could click on a
subscriber's name, which would take the user to a function called UUID which
would provide a background on the individual subscriber, including contact
information, when the subscriber had last logged on, chat information between
subscribers and customer service representatives, and weekly statistics on how
often they used a particular function.
Daniel L. Doctoroff, chief executive of Bloomberg L.P. and a close confidant
to the company's founder, Michael R. Bloomberg, said in a memo to employees that
"client trust is our highest priority and the cornerstone of our business."
Doctoroff said as he posted a damage control message to clients on the Bloomberg
terminal and blog, calling the reporting practice a "mistake," "To be clear, the
limited customer relationship data previously available to our reporters never
included access to our trading, portfolio, monitor, blotter or other related
systems or our clients' messages."
Last summer when JPMorgan Chase (JPM) faced a multi-billion dollar trading
loss, Bloomberg journalists reportedly contacted the bank inquiring as to why
certain traders had gone silent on the terminal and asked whether those
employees had been fired. While Morgan complained to Bloomberg, official
complaints were not registered to executives at Bloomberg.
Just last month, Bloomberg senior sales executives were dispatched to
Goldman's Lower Manhattan headquarters in an effort to assure top bank
executives, including Gary D. Cohn, the firm's president and chief operating
officer, that the problem would be resolved. "We brought this matter to the
attention of the news organization, and senior management at the company assured
us that they were taking immediate measures to address the problem," a bank
Matt Winkler, editor in chief of Bloomberg News, reportedly contacted Goldman
with an apology for the incident. During a meeting on Friday, Winkler reminded
reporters of Bloomberg's policy about terminal use and employee confidentiality
"I think this caught Bloomberg LP blind-sided because there has been this
kind of access for 20 years or so," said one former Bloomberg LP executive, who
wished to remain anonymous. "I think they just forgot reporters had this kind of
access, until now. Or maybe they are Machiavellian enough that they said let's
keep it on until somebody discovers it." Reportedly, the access began years ago
when demanding CEO Michael R. Bloomberg mandated that employees in the company,
from sales persons to journalists, call a client once a quarter and ask them if
they were having any issues or needed any help. "It gave employees a feeling
that they had something to do with the clients," the former executive said.
"That was around the time this kind of access was put in place."
European central banks stipulated that none of their information be shared
and a decade ago, Swiss banks raised questions about whether certain shared data
violated Swiss bank secrecy laws.
The controversy underscores the paradox of the 32-year-old privately-held
Bloomberg LP is vigilant in not disclosing information about its own finances
and operations while generating $8 billion a year in revenue providing and
collecting massive amounts of data.
With the breach comes some of Bloomberg's biggest customers on Wall Street
re-examining their agreements with the company to see how much information
Bloomberg reporters can access from desktop terminals. Terminal sales has
maintained the revenue-generating side of Bloomberg. Reportedly journalism side
and terminal sales side of Bloomberg have a long history of tension with many
reporting that the growing investment in journalism has been a drag on the
company's bottom line.
According to reports in December, an incentive for a much-anticipated bonus
program in which employees would have received a bonus of up to 70% of their
average salary, if Bloomberg hit $10 billion in revenues between July 2013 and
June 2014 is falling to the way-side with receipt of a memo that the target
would not be achieved.
At the Federal Reserve, regulators are examining whether their own employees
were subject to tracking by Bloomberg reporters.
Fed to Reduce Bond Buying
U.S. Federal Reserve officials are working on a strategy to wind down their $85
billion-a-month bond-buying program meant to spur the economy. The program
remains a focus on Wall Street and the Fed remains focused o preserving
flexibility and managing the highly unpredictable market expectations.
Fed officials are focused on clarifying their strategy in a manner to prevent
markets from overrating to their next moves.
Since the Fed announced in September that it would ramp up the bond buying
program, stocks and bond markets have been steadily rising. Wall Street could
see an abrupt halt to the rise resulting in a reversal in their direction, if
the reduction in bond buying ends abruptly.
May 13, 2013