State Government

SHAMED: The Age slammed over subprime slur slip-up supreme

On Saturday, The Age published an extraordinary story about government and financial institutions making investments in risky subprime debt investments that was first revealed by VEXNEWS to be false and misleading.

Buried in a story today in The Age was this retraction:

In contrast, Victoria Teachers Credit Union chief executive William Wolke said the credit union had never bought CDOs of any sort, including those related to the ailing US subprime mortgage market. In stories published last week, The Age incorrectly identified the credit union as having purchased CDOs from Lehman Brothers. “Categorically we do not have direct exposure to subprime and that’s both in our investment policies and procedures and our lending procedures,” Mr Wolke said. “In fact we are in a very strong position in the market at the moment.”

In stories published last week, The Age incorrectly identified the credit union as having purchased CDOs from Lehman Brothers. “Categorically we do not have direct exposure to subprime…

NEWSPAPER CONDEMNED

The ugly situation appears to be getting a lot worse for The Age. Yesterday in Parliament, senior figures in the state government condemned the irresponsible newspaper for getting key facts in their story utterly wrong.

The Premier John Brumby said:

The Leader of the Opposition made a number of points about an article which appeared in the Age newspaper over the weekend. I advise the Leader of the Opposition to read the retraction of that article by Lehman Brothers which appeared in today’s ‘Business day’, and I say to the Leader of the Opposition, if he is not already aware, that the original article contains a number of serious errors. Invest Victoria, for example, has confirmed to the Department of Treasury and Finance that it does not hold any investments of the type described. The Age claimed that Invest Victoria had $4.5 million invested. The Metropolitan Ambulance Service has confirmed that it has no direct investment or exposure to the subprime market, and yet the Age said that the MAS had $30 million.

It’s hard to imagine how they could publish a story of this magnitude without carefully checking the claims they were making. The Premier continued:

I am advised by the Treasurer that Treasury is not aware of any Victorian government organisation cited in the article in the Age on the weekend that currently has any direct exposure to the US subprime market. It would appear that the Leader of the Opposition is basing his questions on an article which appeared on the weekend which has been shown by all relevant agencies to be largely false.

DISGRACEFUL

The State Treasurer condemned the “disgraceful” article for its serious error too, He said the article could have very serious obligations indeed:

If we are talking about exposure to CDOs, and if the Age had the information right, if it had looked at what Lehman Brothers said — it did not even check its story properly, which it had an opportunity to do — —
Mr D. Davis interjected.
Mr LENDERS — Mr David Davis said I am having a go at journalists; what I am saying is that many people in Victorian charitable organisations — whether they be the Catholic Church, the Uniting Church, the Anglican Church or various welfare organisations — who were spooked on the weekend and thought their investments were under some sort of threat because a newspaper could not bother checking its story properly. That is an issue of some significance.

FAIRYTALES

The Age’s story was gravely serious in its effect but the state’s Industry minister Theo Theophanous summed up the affair on a lighter note:

The problem is that the member opposite reads fairytales. It is one of the two: he either reads fairytales or he reads the Age. I am not sure which of the two he got his information from on this occasion.

In another damning condemnation, Municipal Association of Victoria President Dick Gross corrected The Age’s story that claimed several local councils had invested in subprime debt.

LIED ABOUT LOCAL GOVERNMENT

He said the Age was not correct. Gross made the facts clear:

“Victorian local government has the strictest investment guidelines for councils across Australia. The legislation prevents investments in funds with subprime market exposure.
“According to the report, documents seen by The Age did ‘not reveal councils’ latest subprime exposure’. That’s because there is no exposure.
“Since investment powers were amended in 1998, local government in this state has only invested in funds and trusts with an AAm or AAf Standard and Poor’s rating, where the trustee is both a registered trustee company and independent of the funds manager.
“While The Age did contact a number of councils prior to printing its story, it still chose to run both misleading and accusatory information.
“None of the Victorian councils mentioned in the story has invested in CDOs, and most do not even have funds under management by Lehman Brothers. These are not denials, they are facts.

• Wellington Shire Council has no funds invested with Lehman Brothers or exposed to the subprime market; it invests only with well-known local bank
• City of Greater Bendigo and Hobsons Bay City Council only used Lehman Brothers as an investment broker but have not directly invested any funds into the institution
• Greater Shepparton City Council has only used Lehman Brothers as a broker to make direct investments in low risk Australian banks and has never purchased CDOs
• East Gippsland Shire Council and Maroondah City Council have not invested in funds managed by Lehman Brothers, but have used its Australian arm (Grange Securities) to source and invest in products that comply with local government legislation. None of these products are CDOs.

Gross explained that “It is grossly misleading to represent that an organisation who lawfully invests in cash funds or other products managed by Lehman Brothers (or Grange Securities), or who uses their brokerage services must also be exposed to the subprime market.”

© 2008 VEXNEWS 2010©.