Wall Street Is Shocked: How Much Does Bloomberg Know?

(Read More: Privacy Breach on Bloomberg Terminals)

Beyond Wall Street firms, customers of the more than 300,000 leased Bloomberg terminals across the globe include clients as prominent as the Federal Reserve and the Vatican. As Bloomberg executives acknowledged the privacy breach as a "mistake" and tried to downplay the controversy, it was still not clear how widespread the practice of peeking into customer terminals was among Bloomberg reporters. Bloomberg has said it has discontinued allowing reporters to access subscriber information.

"I think this caught (Bloomberg LP) blind-sided because there has been this kind of access for 20 years or so," said one former Bloomberg LP executive, who wished to remain anonymous. "I think they just forgot reporters had this kind of access, until now. Or maybe they are Machiavellian enough that they said let's keep it on until somebody discovers it."

The origins of this access may have started first when Bloomberg, as a demanding CEO, mandated that every employee in the company, from sales persons to journalists, call a client once a quarter and ask them if they were having any issues, or needed any help. "It gave employees a feeling that they had something to do with the clients," the former executive said. "That was around the time this kind of access was put in place." Some clients, however, such as European central banks, stipulated that none of their information be shared. And a decade ago, Swiss banks raised questions about whether certain shared data violated Swiss bank secrecy laws.

Since being elected mayor in 2001, Bloomberg has removed himself from the daily operations of his company. As of Saturday night, he had not commented on the breach. The current CEO, Daniel Doctoroff, once a managing partner at private equity firm Oak Hill Capital Partners, told employees in a memo Friday "client trust is our highest priority."

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At its core, the controversy underscores the paradox of the 32-year-old Bloomberg LP, a privately-held company that is vigilant in not disclosing information about its own finances and operations while generating $8 billion a year in revenue providing and collecting massive amounts of data. The terminal, with its countless functions, may just serve as a window into Wall Street's second-to-second operations. While coveted by traders and other professionals as an indispensable tool, the terminal and its ubiquity in the financial sector may turn this into a much bigger headache for Bloomberg, Tabb said.

Meanwhile, the controversy has Wall Street buzzing. One hedge-fund manager, who wished to remain anonymous, described the Bloomberg practice as "shocking," and he has asked his lawyers to review his agreement with Bloomberg to determine what kind of usage information Bloomberg can access from his fund's terminal. "My initial reaction was a bit of schadenfreude. Like, finally, Goldman's getting spied on. But then I realized, while it's fine to spy on Goldman, they could be spying on me," he said.

A source at JPMorgan Chase, who also wished to remain anonymous, said that several Bloomberg reporters have used data about when traders at the firm log into their terminals as the basis for stories about the bank. "They were quite open about it. They'd say, 'We see your Whale trader hasn't logged in three days. Has he been fired?'" the person said. Bloomberg reporters once asked if JPMorgan was pulling back in a certain market segment based on the fact that several traders in that area had not been logging in regularly.

"They were trying to figure out our strategy based on who was logging in. That was disturbing," the person said. JPMorgan complained to the reporters involved but did not raise the issue with Bloomberg executives.

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Still, despite new competition from a Thomson Reuters data platform called Eikon and new offerings from Interactive Data Corp., Tabb believes the controversy will not greatly pinch Bloomberg's sale of leases, which average between $1,600 and $1,800 a month. "Wall Street is used to paying a premium for the terminal because they know they can't get what it provides anywhere else," he added.

What's more, the publicity surrounding the privacy breach could drive an even bigger wedge between the journalism side of the company and terminal sales, the revenue-generating side of the house, a relationship that historically has had tension. Some on the sales side have seen the growing investment in journalism as a drag on the company's bottom line.

In December, it emerged that the incentive for a much-anticipated bonus program would not be reached, according to a report on CapitalNewYork.com. Under the program, employees would have received bonuses of up to 70 percent of their average salary if the company hit $10 billion in revenues between July 2013 and June 2014. A memo went around last year, according to the report, saying that the target would not be achieved.

Disclosure: Lowry was an employee of Bloomberg LP for three months following the company's 2009 acquisition of BusinessWeek.

— John Carney contributed to this article.

— Follow Tom Lowry on Twitter @lowrytom. Follow John Carney @carney.