For months, Arianna Huffington's been trying to convince The New York Times and the general public that The Huffington Post is just as legitimate as its mainstream media counterparts. But this week, her journalistic credibility has taken a blow with the announcement that she'll permit one of her journalists to financially invest in the businesses he reports on so long as he discloses that information.

It's taken as gospel in journalism circles that reporters can't be trusted to independently report on stories in which they have a financial stake. And for good reason: the words of reporters constantly influences the market valuations of businesses, making favorable coverage awfully tempting for the investor-journalist.  Now to be fair, the journalist in question is no ordinary beat reporter: It's Michael Arrington, founder of TechCrunch, which came under the control of AOL in September of last year (Huffington is now editor-in-chief of AOL's content properties and AOL News may soon be defunct.) In the last few months, Arrington began investing in some of the companies his website covers. When Kara Swisher at All Things D caught on to this she began directing questions at AOL, which in turn prompted Arrington to disclose his financial investments. "This will all be fine," said Arrington Wednesday, promising to disclose all of his investments. "I’ll still be very hard on companies I invest in when they deserve it."

Arrington's cavalier regard for journalistic pieties surprised few: He's never fashioned himself an orthodox journalist. Arianna Huffington, however, is constantly touting her respect for real, quality journalism. And her justification for letting Arrington's policy stand has satisfied very few. A spokesman for AOL offered this to Forbes' Jeff Bercovici:

In order to avoid conflicts of interests, AOL Huffington Post Media Group editors, writers, and reporters may not have a financial interest in a company or industry that they regularly cover.  This does not include investments in mutual funds, money market funds, or other investments outside the employee’s day to day control.  If an editor or reporter is assigned to cover a company outside his or her usual beat, and has a financial interest in that company, including owning stock, he or she may maintain the investment but must transparently disclose it.

Michael Arrington operates from a unique position.  He was an investor in technology companies and start-ups before he started TechCrunch, and his extensive knowledge of, and involvement with Silicon Valley is one of the very things that has made TechCrunch a must-read site.  TechCrunch is committed to transparency.  Michael Arrington has written about the guidelines he follows — that he rarely writes about companies in which he is an investor, and that when he does, he clearly discloses this information.  The same rules apply when TechCrunch’s writers cover these companies.

That excuse isn't going over well with media critics and Valley watchers. "I can’t see how Ms. Huffington can move forward in her key role at AOL, without making a strong case for an ironclad ethics policy– without exemptions," writes Tom Foremski at ZDNet. "An ethics policy that allows for exemptions is a joke. By its very nature, it has to apply to all, or it applies to none."

Bercovici agrees:

This is patent nonsense. Yes, Arrington was a tech investor before he was a tech journalist — and then he gave it up, voluntarily, for two years because, by his own admission, his activities as the former interfered with his credibility as the latter. As for the idea that being involved in the tech scene as an investor makes him a better informed observer, one might as well say that an energy reporter who consults for Halliburton and BP is better serving his readers through the insights he acquires moonlighting. It makes exactly as much sense.

Kara Swisher at All Things D piles on:

Where do I get such a faboo ethical hall pass from Content Principal Huffington? ...She has put herself in word and deed right into the center of the debate on where news is going on the Web, especially after AOL paid $315 million for her Huffington Post news and opinion site... that power she has sought also gives her a responsibility to say exactly what that means on a real and granular and consistent level, beyond the platitudes of wanting to make great journalism that she declares all the time now.

Bercovici finishes his post with a deft comparison of the Huffington Post and The New York Times:

Arianna Huffington craves the respect of the journalistic establishment. That’s clear. That’s why she’s been so keen to lock horns with the editor of The New York Times, and to hire his people.

But the Times, whatever its shortcomings, has a serious commitment to ethics, as embodied by its extensive ethics policy. And it understands that its rules are meaningless if they’re only applied when it’s convenient, or to those who are happy to abide by them, or to those without the power to wrangle exemptions. In fact, it’s the stars who need to be policed most strictly since they’re the ones whose words carry the greatest influence.

  Ball's in your court, Arianna.