Bloggers at the Treasury

Last week, small groups of bloggers were ushered into the Treasury Department for quasi-off-the-record meetings with Tim Geithner and other senior Treasury officials. (“Quasi-off-the-record” because the officials’ names were published, but they weren’t quoted directly.) These blogger/Treasury confabs seem to be becoming institutionalized, there having been, I’m told, the two others before this.

It’s been interesting to watch as these outsider types (that is, most of them are outsiders; after all, Mike Allen was in one of the groups) take a few tentative steps up the access slope, where most mainstreamers live, and which, as we’ve written, can be very slippery indeed.

John Lounsbury, a SeekingAlpha contributor, wrote that he was “privileged” to be there, while Mike Konczal of Rortybomb posted an ironical photo of himself posing in front of Robert Rubin’s portrait (it’s definitely ironical: Konczal is a fellow with the Roosevelt Institute and a progressive).

(Just to get the logistics clear: There were two meetings: one, Aug. 16, that hosted non-salaried bloggers Lounsbury, Tyler Cowen and Alex Tabarrock, co-authors of Marginal Revolution, Philip Davis, a Seeking Alpha contributor, Konczal, Yves Smith of Naked Capitalism, and Steve Waldman of Interfluidity; and a second, Aug. 18, of salaried bloggers including Reuters’s Felix Salmon, Tim Fernholz of The American Prospect, Politico’s Allen, Derek Thompson of The Atlantic, Shahien Nasiripour of Huffington Post, Nick Baumann of Mother Jones, and Ezra Klein of the Wapo. Salmon reports that Matt Yglesias of ThinkProgress was unable to get past Treasury security. Got all that?).

(Disclosure: Salmon is an upcoming speaker at one of our on-the-record Audit Breakfasts with funders and others. Read more about those here. Are we done yet?)

Later, Smith mulled the threat of journalists being coopted, but dismissed it on the grounds that the meetings aren’t held that often and bloggers don’t get that much out of them, anyway. Fair enough. Indeed, she wonders whether meeting the Treasury Secretary is worth bloggers’ time. This is a new day, isn’t it?.

While in theory one could lose one’s edge by staring the opposition in the eye, sports teams do this as a matter of course. If we saw the staff of the Treasury more often and we had something to gain, that could be a concern, but these sessions take a lot of time, and I question what the upside for bloggers is. The immediate one is getting one’s nose inside a new tent, but that is a matter of novelty and wears off after the first encounter. I suspect the main effect is that we and Treasury each sharpen our games a teeny bit by engaging directly on points of contention.

Meanwhile, Salmon and the locked-out Yglesias debated whether the sessions should be on (guess who!) or off the record.

I’m with Salmon (“off”) on this, actually. There’s got to be some wiggle room.

All the process issues aside, I have no doubt these sessions did some good. For one thing, they seemed to palpably sharpen bloggers’ views on some subjects, particularly on HAMP, the mortgage-mod program that never sounded very promising, but is now coming into focus as a serious failure and cruel one at that.

The problem is that it’s not helping people stay in homes, but merely delays foreclosures. This helped banks weather a foreclosure crush, but raised false hopes among a substantial number of applicants, hundreds of thousands of whom were disqualified, as Felix points out, even though they made their payments on time.

That’s rough.

Waldman crystalized a lot of the thinking with these observations during a lengthy recap of his meeting. I’ll add some emphasis to break up the quote a bit:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

That prompted blogger Atrios (who tells me he was invited but didn’t feel like going; he had attended an earlier session) to take the next step:

Conning homeowners by announcing a government program designed to help them when in fact it was designed to help the banksters is, in my world, “cruel.”

This swayed Salmon to some degree.

He then linked to earlier reporting by Pro Publica’s Paul Kiel that lends support to the harsher view. The program can leave homeowners worse off than before.

Once they’ve been denied a permanent modification, homeowners owe the amount they were discounted during the trial. Banks often demand that the entire amount be paid as a lump sum right away or over a short period of time, causing a homeowner’s payments to swell beyond the original monthly payment.

What’s more, homeowners’ credit scores are damaged because trial payments are reported to credit agencies as delinquent or as part of a payment plan.

“Being in a trial modification if you don’t get a permanent modification is worse than having not been in a trial modification. Period,” said Diane Thompson, an attorney with the National Consumer Law Center. Worse yet, people “may have a hard time finding alternative housing because some renters check credit scores,” she said.

So, a debate over a complicated matter is sharpened, for me, anyway. Not to overstate anything: the world didn’t change because of the meetings. There’s no evidence the bloggers—via the meeting or their blogs—had any influence whatever, for instance, on HAMP policy.

Konczal (Rortybomb, if you’re keeping score) and others reported that Treasury officials feel the matter to have been handled and closed.

They are sticking by HAMP. The narrative seemed to change from helping homeowners to spacing out the foreclosures. I asked them to repeat it, because the idea that billions of taxpayer dollars are being spent to smooth out foreclosures for banks struck me as new narrative – it’s explicitly extend-and-pretend, and also fairly cynical.

There are, for sure, lots of pitfalls in these close encounters between commentators and the powerful. These might even spur bloggers to be overly tough, even on an unconscious level, in response to a feeling they’re being sucked into the game.

But there is at least one upside to hashing things out in person: it can move a reporter from being pretty sure to stone-cold certain, and that’s the best place to be.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.