Problems At The New Republic And For An Obama Backer

The New Republic has been one of Barack Obama's loudest backers. It's also fervently anti-Iraq War, but lost more than a little credibility when it decided to publish fake stories about some incidents in Iraq written by a soldier stationed in the war zone - the third time in the last decade that TNR had published work by someone who later turned out to be a fabulist.

It looks as if the magazine's image problems are getting worse. Ed Lasky reports over at American Thinker that the editor-in-chief of TNR, Martin Peretz (also a fervent Obama backer), has been using his position at the magazine to publish some pretty scathing attacks on one major player in the mortgage business - the bond insurer MBIA. That wouldn't normally be a problem were it not for the fact that Peretz has been profiting from his investment in a hedge fund - one that is run by a former student of Peretz - that itself profits by betting that the value of MBIA would decrease!

For the last few months I have been wondering why Martin Peretz -- a major supporter of Barack Obama who has used his perch as editor-in-chief at the influential magazine The New Republic to promote his candidacy -- would be addressing the mortgage meltdown crisis in America with particular attention and ire focused on one company, MBIA.

MBIA is a major bond insurer that has been a favorite of speculators and hedge-fund managers who have taken major trading positions that would benefit them greatly if the company's stock price collapsed. This has indeed happened over the last few months, enriching investors who have profited handsomely. The financial health of these bond insurers -- as reflected in the strength of their stock and debt prices -- is vital to the operation of the mortgage market and thus the housing market. Investors can profit by trading strategies (going "bearish") that makem money when the prices of the company's equity and debt decline. Unfortunately, this has also accelerated and worsened the problems facing our economy.

Now we have a possible answer why Peretz has been devoting himself to targeting MBIA for opprobrium. And it is not a pleasant one. Barron's is reporting that Peretz has a vested interest in the collapse of MBIA. He has profited from his investment in the one hedge-fund most associated with its bearish "bets" against MBIA, one run by a former student of Peretz's at Harvard, William Ackman. The New York insurance superintendent, Eric Dinallo, has sternly warned about the appropriateness of this "poison pen" strategy.

Lasky goes on to quote from an article in Barron's that looks into this mess. I suggest you read it. This is not a good ethical position to be in for the editor-in-chief of one of Barack Obama's staunchest supporters in the media.

A powerful media member using his position to influence the value of a particular stock. Said member then profits handsomely off of the new value of the company. Isn't this something that the Democrat-led Congress would love to have hearings on - to highlight the apparent abuse of the public's trust?

I wonder when that will happen?