Rumor Sourcing of the Day

As Zubin will tell you, the WSJ has a favored locution when it cites anonymous sources: it likes to call them "people familiar with" the situation. The sourcing is so vague it can mean just about anything -- essentially it's the WSJ's way of saying "trust us, we're sure this is true, but we can't tell you where we got it from".

Today, however, there's a peculiar twist on the usage of the phrase: it's referring to something which is false rather than something which is true. Last month, it seems, there was talk that Credit Suisse had pulled a line of credit with Lehman Brothers:

Fed officials contacted Credit Suisse last month, but it isn't clear if the move occurred before or after the Securities and Exchange Commission subpoenaed dozens of hedge funds and financial firms about four Lehman-related rumors. One person familiar with the rumor said it was circulating in early July.

One wonders just how familiar this person was with the rumor. Were they passing acquaintances? Something closer than that?

Indeed, the whole article is a little weird: it makes a very big deal of the fact that the Fed called up Credit Suisse to see if the rumor was true. It explains:

Urging lenders and trading partners to stick by an embattled firm also carries the risk that it will inflame the same anxieties that the Fed is trying to soothe. That is one reason why such calls occur rarely.

But nowhere in the article does it say that the Fed urged Credit Suisse to do anything: all we're told is that the Fed "quietly called" the bank to see if the rumor was true. Which is exactly what you'd hope the Fed would do if it heard that credit lines to a major investment bank were being pulled. And the Fed seems to have had no particular interest in managing or quashing rumors: once it was assured that the rumor was not true, it seems to have let the matter drop.

In other words, the Fed's actions seem to be based very much within its mandate of overseeing the health of the banking system; there's nothing to indicate that the Fed was sidling into the rumor-policing territory of the SEC.

But reading between the lines of the article there's definitely the impression here that the Fed was doing something important and newsworthy, and maybe even putting pressure on Credit Suisse to keep its Lehman lines open. If you ask me, this is the way that rumors get started.

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