The Most Important Financial Journalist of Her Generation (Page 5)

Like newspaper crusaders of old, Morgenson has sided with the little guy over the big guy, revealing, for instance, that Countrywide's predations continued even after its borrowers had filed for bankruptcy. A series in 2007 and last year reported that the lender had destroyed or "lost" $500,000 in homeowners' mortgage payments, then imposed additional penalties and fees, and presented to the court "re-created" letters that had never been mailed to homeowners.

"It's really about fairness," Morgenson says. "It just seems that the playing field is so skewed in some cases that it's worthwhile to educate people to level the playing field a little bit."

A little-understood aspect of Morgenson's approach is that she avoids a business-press tendency toward over-sophistication and goes after the big, honking story, the kind that rings alarm bells in executive suites.

Take the AIG/Goldman story. It came a mere two weeks after the bailout was announced, with the public still baffled as to why an insurance company would suddenly require scores of billions from the government. It also involved clashing with Wall Street's most powerful firm on the crux of a vital matter of public policy. (Disclosure: Goldman is a funder of Columbia Journalism Review's business section, "The Audit," which I run.)

Today, Lucas van Praag, a Goldman spokesman, says the story was "really very unfair" and that the now-corrected error, which mistakenly placed Blankfein in the same meeting with his predecessor, then-Treasury Secretary Henry Paulson, set off damaging conspiracy theories. (Tim O'Brien, one of Morgenson's editors, who got the original tip for the story, takes the blame for the error.)

Goldman, which adamantly contested Morgenson's premise that it had been exposed to AIG's failure, received support from a surprising quarter: Geithner, who called Morgenson on her cellphone the day the story ran, a Sunday.

"I think they were fully hedged," he told her, according to people familiar with the call. Translation: Goldman had no exposure because it had bought insurance from third parties.

"Do you know who the counterparties were?" she snapped back. Translation: are you sure, and have you checked? He conceded he hadn't, the people said. Geithner made a similar call to Ingrassia, people familiar with that call said. (A spokesman for Geithner declined to comment.)

The dispute continues. Goldman officials have repeated that Goldman's exposure to AIG was "not material," in effect disputing Morgenson's premise. The meeting between Blankfein and Morgenson in April did not resolve the question.

But even conceding Goldman's main point--that $10 billion was covered at the time of the bailout--the bank still had another $10 billion exposed, the value of which easily could have, and probably would have, plummeted absent a bailout. One could argue that with Goldman's immediate exposure covered, the AIG bailout didn't benefit Goldman directly and that Goldman benefited no more than other banks. But the AIG bailout clearly mattered to Goldman--and would come to matter more as additional bailout funds flowed to the bank, totaling $12.9 billion. The Times stands by the story, and the story stands.

In one of our later interviews, Morgenson remarks that such chronicling has shaken her belief in capitalism "to the core." But one comes away unconvinced. She was a skeptic in the first place, after all, and doesn't put much faith in government either. "It's scarier than what Wall Street was doing," she says. "The secrecy, doing an end run around Congress, tripling the size of the Fed's balance sheet."

So capitalism is the world's worst system except for all the others? "You need it," she says firmly. "But it must have a counterbalance, and that counterbalance must be tough regulation--and a very forthright media."

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