Why Isn't ProPublica Attacking Citigroup?

ProPublica got its knickers in a twist when it discovered that Goldman Sachs had put out negative research on California, which had the potential of raising California's borrowing costs.

Just imagine what would have happened if a major bank put out negative research on a big state, and then the state's borrowing costs rose, and then the bank itself -- not even its clients -- profited by lending the state $8 billion at the new, higher interest rate.

Here's the "Overheard" bit of today's Heard on the Street column:

Citigroup's disclosure that it has helped lend Dubai more than $8 billion over the past few months caused a few eyebrows to be raised in the Persian Gulf. Observers of the local financial scene remember how only last month the U.S. bank produced a research note suggesting the highly indebted emirate, which has little oil wealth, was vulnerable to the economic downturn. That prompted a furious response from Dubai's ruler, Sheikh Mohammed bin Rashid al-Maktoum, who wrote a letter demanding Citi revise its opinions, according to people close to the matter. Citi won't say how much of the $8 billion was its own money. Still, Citi's efforts should smooth ruffled feathers in Dubai.

Obviously, the Heard people have this all wrong. This isn't about smoothing ruffled feathers, it's about profiting from a conflict of interest! I'm sure that ProPublica's Sharona Coutts could phone up Columbia's Geoffrey Heal and get an outraged quote out of him -- and possibly an all-expenses-paid trip to Dubai, too, to get an equally outraged quote out of Sheikh Mohammed bin Rashid al-Maktoum, depending on how ruffled his feathers still are.

But I doubt that's going to happen. Banks have conflicts all the time -- it's a necessary consequence of being an intermediary between investors and borrowers. And it feels so much more satisfying to go after Goldman Sachs than to attack poor beleaguered Citigroup. That almost wouldn't be fair.