Capital Injections at Citi and Merrill: The Shorter Version

The WSJ's massive front-page story this morning, headlined "Citigroup, Merrill Seek More Foreign Capital", is an important one. But you might well not have time to read the entire 2,365-word article, so let me summarize it for you. Here's the article's contents, in decreasing order of importance:

1. Citigroup is looking to raise as much as $10 billion in new equity capital, to help offset a fourth-quarter write-down of as much as $15 billion.
2. Merrill Lynch is looking to raise as much as $4 billion in new equity capital, to help offset a fourth-quarter write-down of as much as $10 billion.
3. Citi is seriously considering cutting its dividend in half.
4. The political risk involved in accepting multi-billion-dollar investments from foreign governments is growing.
5. Big equity injections can also raise significant regulatory issues, regardless of the investor.
6. Looking forwards, prospects for banking-industry profitability in 2008 are dimming.
7. There have been big management changes of late at both Citi and Merrill; they might not be over.
8. Other bits and pieces: Citi is working on selling off both domestic and international business lines; Merrill is likely to accelerate stock awards to employees; both are likely to scale back bonuses.

(Everything from here on down is meta-media stuff. If you're only interested in banks and not in the WSJ, you can stop reading here.)

Boy is Rupert Murdoch right that the WSJ's front-page stories are too long. There's absolutely no need to squeeze all of this stuff into one huge story with three bylines and another two contributing reporters credited at the end. Break it up into easily-digestible chunks, and lead with the news. Consider my first bullet, with the $10 billion injection helping to offset a $15 billion write-down at Citi: those two numbers, in the article, are separated by more than 1,700 words.

There are at least four different stories here, which have been smushed into one. First is 1/2/3: Citi and Merrill are shoring up their capital base. Second is 4/5: political and regulatory hurdles are growing as the total size of these capital injections continues to increase. Third is 6: a chin-scratcher on banking-industry profitability in 2008. And fourth is 7/8: the way that management at these banks is dealing with the new realities internally. All four would make interesting stories, and would be much easier to read than the article which landed with a thud on a million doorsteps this morning.

And just look at how the article begins:

Two of the biggest names on Wall Street are going hat in hand, again, to foreign investors. [A cute lede, which says nothing that isn't in the headline.]
Citigroup Inc. and Merrill Lynch & Co., two companies that just named new chief executives [old news] after being burned by the troubles in the U.S. housing market [needlessly put into context], recently raised billions of dollars from outside investors. [old news] Now, they are in discussions to get additional infusions of capital from investors [that's the third time you've told me this, and I still don't have the beef], primarily foreign governments. [a tidbit of something new]
Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund. Citi could get as much as $10 billion, likely all from foreign governments. [Finally! The news!]
Such large investments would be the latest sign big banks are undergoing a rapid recapitalization to stabilize their shaky financial foundations. [And straight into more analysis] Already, foreign governments have invested about $27 billion in Merrill, Citi, UBS AG and Morgan Stanley. [old news]

Essentially, the first four paragraphs of the story contain precisely one piece of newsworthy information - and as we've seen, there's a lot of other news in this article which all the extraneous guff is crowding out. It's not until the tenth paragraph, for instance, that we learn that Citi's board is expected to talk about cutting its dividend in half on Monday.

The WSJ has a great team of reporters. Now all it has to do is package their work more intelligently.