The Wise and the Reckless

On the housing plan and the “unscrupulous or irresponsible”

In Phoenix Wednesday, President Obama introduced the Homeowner Affordability and Stability Plan as an effort that would neither “rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans” nor “reward folks who bought homes they knew from the beginning they would never be able to afford.” He drove those points home strongly, and the sound bites made their way into many a news report (the plan really, really won’t be used to help irresponsible homeowners).

The Arizona Republic, for instance, focused on the this is not a rescue for the irresponsible line touted by the administration, by running the headline, “Who qualifies? Owners who ‘played by rules.’” And then, in the article:

The Homeowner Affordability and Stability Plan will help more people than expected. But there will be no assistance for speculators who bought multiple homes as investments, or for people who bought homes they couldn’t afford and then tapped all their home equity.

Similarly, in the Miami Herald, after noting that the “highly anticipated” housing rescue plan would allow homeowners to refinance at “historically low interest rates” and that subprime borrowers could see monthly payments “slashed to affordable levels”:

What the plan will not do: rescue investors, reckless borrowers who took out more than they could afford to repay and dishonest lenders, Obama said.

In one sense, these stories are just reporting the details of the plan, which includes describing who will benefit (and who won’t) from the rescue package. But the emphasis on the distinction between the responsible and the irresponsible, the wise and the reckless, rings a bit false. Because while stressing the rescue of responsible homeowners is both valid and important stuff, it’s also more politically convenient than it is entirely accurate. And it would be useful to remember that the rhetorical split between the two groups is, at least in some ways, an artificial rhetorical device meant to reassure a public worried about how their tax dollars are being used.

The Los Angeles Times, perhaps responding to Obama’s appeasing tone, called the housing initiative “the most politically palatable component of Obama’s larger plan to fix the economy.” That’s a pretty cogent point, underscoring both the personally charged nature of the housing crisis and the administration’s determination, after the prolonged struggle to pass the stimulus bill, to cast this next effort in positively reinforcing terms. The administration may not need congressional approval here, but it undoubtedly wants to bolster public support for its economic recovery plans.

David Leonhardt at the NYT Economix blog wrote more directly about that political palatability, turning attention to Obama’s carefully chosen emphases:

In his speech in Phoenix today, President Obama emphasized that his plan would help those homeowners who had acted responsibly…The political reasons to describe the plan in this way are obvious. A housing bailout that helps those who played by the rules is likely to be far more popular than a bailout for unscrupulous investors.

But the lines aren’t quite as clear as Mr. Obama suggested. In fact, his plan will end up helping a fair number of people who bought homes that they should have known they would never be able to afford. The core of the plan gives banks a financial incentive to reduce many mortgage payments to no more than 31 percent of a borrower’s income.

Leonhardt was hardly proffering advice for how to cover the housing plan, but if he were to do so, it appears he’d caution against wholesale swallowing and regurgitation of the president’s talking points.

It’s not that news reports stressing the winners and losers of the plan are out of place; in fact, they fit right into the picture of housing aid that the administration is painting. But, as Leonhardt wrote in an excellent piece in Wednesday’s Times, Obama’s plan addresses two groups of homeowners—those that can’t afford their mortgages and have fallen behind on payments, and those that are making their payments but whose houses are worth less than the payment owed on their mortgages (and are “underwater”). And in that mix, as Leonhardt later blogged, “people who bought too much house — and banks that allowed people to do so, or even encouraged them to do so — will also benefit.” So while there’s good reason to frame this as a rescue for responsible homeowners, it’s important to remember that that rhetoric at least in part stems from political expediency.

This isn’t to say that words like irresponsible or unscrupulous aren’t relevant descriptives. But when our commander-in-chief is a remarkable salesman, we should take care not to retell his narrative by rote.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Jane Kim is a writer in New York.