Mucking up the works.

REMEMBER the scandal at the beginning of this decade when we found out that supposedly detached stock analysts were benefiting personally by touting certain doggy stocks?

Or the scandal in the early 1980s when Penn Square Bank, among others, made doomed loans to little oil-and-gas explorers and then sold the loans to unsuspecting bigger banks? Remember the S&L crisis?

If those form a kind of lineup in the Hall of Financial Scandals, the ongoing mortgage market meltdown is shaping up as one that could take a spot fight there in the rotunda.

And if that happens, several Los Angeles County companies stand to be key contributors. Countrywide Financial Corp., notably, has been taken to task for allegedly encouraging brokers to steer customers into riskier subprime mortgages, which were more lucrative for the company. Several lenders, including IndyMac Bancorp, made mortgages equal to 100 percent of a home's value to borrowers who maybe should not have gotten such loans.

The longer the meltdown goes on, the more nasty little secrets get pulled into the light. The Wall Street Journal reported a few weeks ago about how credit-rating firms--which get a lot more money for blessing the financial stability of pools of home loans compared to their usual task of rating corporate bonds--appear to have worked hard to give good ratings to questionable home loans.

It is bad enough that the mortgage meltdown appears to be developing into a full-scale, hall-of-shame level scandal. But if the meltdown lingers much longer, what will come next may be equally bad.

You can predict something like this will happen: There'll be calls to "do something." Congress will feel compelled to act. It will first skewer some hapless executives. Then it will come up with new roles and regulations for the home lending industry, particularly the subprime lenders. The rules may be well intentioned, and some may be good. But on the whole, they will impose more time and more costs on home lenders and more burdens for homebuyers, sellers and brokers.

In short, it will muck up the works for those who didn't take out subprime loans.

In the context of what's transpired at the Los Angeles Times in recent years, it's particularly interesting that Vanity Fair's upcoming issue has Rupert Murdoch as No. 1 on its list of most important people in what it calls the "New Establishment."

Here's why: Murdoch started as no media titan. He inherited a smallish newspaper in Australia and built a global news, media and entertainment empire that now includes the Wall Street Journal.

Compare that to the recent stewardship of the Chandler family at the Times. Or the Bancroft family at the Wall Street Journal. Or the Ridder family. Heck, the Sulzberger family at the New York Times hasn't had a much better record.

Say what you will about Murdoch, the recent generations of the American newspaper families started with far greater assets than he did. They sat still. He built.

As in sports, the most embarrassing blunder in business is blowing a huge lead. It's especially so when an upstart rival shows you up.

Charles Crumpley is editor of the Business Journal. He can be reached at [e-mail].