Audit Notes: Blame the Lenders, Government Scandals, Corrections

Abigail Caplovitz Field at Firedoglake writes a good post explaining why the blame-the-borrowers meme is ultimately misguided—and dangerous:

Houses are not like tulips, shares of stock, dolls, or any other mass-market consumer product. They just cost too much. The only people who can buy a house simply because they want to are cash buyers. No one will argue that cash buyers drove the housing bubble of 2005 onward (or whatever year you want to peg its start.) Cash buyers don’t fuel a foreclosure crisis either, though banks have been known to foreclose on cash buyers anyway.

We didn’t have a housing bubble in the ordinary sense because consumers don’t buy houses; banks buy houses. The housing market cannot undergo a demand-driven bubble without lender collusion and complicity…

Or to put it another way: what evidence is there that circa 2005 wannabe homebuyers became so sophisticated-nationwide, simultaneously-that they could con bankers who cared about ensuring loans made against sufficient collateral would be repaid into making huge numbers of loans that couldn’t be, against collateral that today’s market exposes was worth nowhere near the amounts claimed?…

Why did lenders’ incentives change? That’s a long story for another day, but it boils down to this: lenders no longer faced consequences if the loans weren’t repaid. They’d offloaded that risk to securities investors.

The Wall Street Journal ran an awfully ham-handed news story on Saturday:

Scandals Undercut Obama’s Message

Secret Service, GSA Cases Fuel Dissatisfaction, Make It Harder to Argue That Government Helps People

What exactly does the Secret Service scandal have to do with the government helping people? Not a thing. The GSA scandal, as outrageous as it is, involves some $800,000—not all of which was misspent. You can bet that unlike, say, Wall Street’s scandals, this government scandal will be fully investigated, those responsible for it will be punished, and oversight will be increased. And it should be.

Here’s the Journal’s lede, which shouldn’t have used this dog-whistle quote (emphasis mine):

The scandals simultaneously plaguing the Secret Service and General Services Administration have been disconcerting enough for the Obama administration. But beyond that, they have the potential to be a political liability for Democrats, who are making an election pitch to voters that the government is here to help.

And when you find yourself writing “no shit” stuff like this, it might be a sign that you’re on the wrong track:

While there’s general agreement that the Secret Service is necessary, limited-government advocates see these scandals as evidence the federal bureaucracy should be scaled back. Republicans and Democrats are divided over how much government is too much, sparring over issues ranging from the auto bailout to the health-care law.

The New York Times’s David Carr calls the TV news business on the carpet for failing to practice one of the most basic tenets of journalism: Correcting your mistakes.

Carr notes that NBC News failed to issue an on-air correction for its egregious misreporting of George Zimmerman’s 911 call. The lede is smart.

After broadcasting an audio clip on the “Today” show about George Zimmerman last month that hit the trifecta of being misleading, incendiary and dead-bang wrong, NBC News management took serious action: it fired the producer in charge and issued a statement apologizing for making it appear as if Mr. Zimmerman had made overtly racist statements.

The only thing NBC didn’t do was correct the report on the “Today” show.

That nifty setup shows just how foreign corrections are to the TV news business.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,