I’d like to tweak the Times a bit for letting NBC/CNBC spin (read: lie) on Stewart vs. Cramer without calling them out on it.
Last week, NBC brass, in defending its business network, dropped this canard:
Last week Jeff Zucker, the chief executive of NBC Universal, told attendees of an investors conference that “to suggest that the business media or CNBC was responsible for what is going on now is absurd.”
The problem is that’s not what The Daily Show “suggested.” Only a fool or a flack would say that, and the Times shouldn’t have let it go unchecked. Clearly, the people who caused this were Wall Street, regulators, the Federal Reserve, and the mortgage industry. The media’s responsibility is more indirect, in not calling them out enough beforehand. CNBC’s responsibility is that it actively egged them on and helped the inside-the-bubble thinking become that more incestuous and myopic.
Jeff Jarvis was in the audience and reports that Zucker also said “blaming” CNBC is like blaming the press for going to war in Iraq. It’s great to see that this media genius hasn’t learned that lesson yet. Or is he just that dishonest?
I’m not going to make that call, but it’s awesome how he’s comparing CNBC’s business coverage with the disgraceful press performance in the runup to March 2003. It’s an apt analogy. The press couldn’t have prevented a damn-the-torpedoes president from going to war in Iraq. It could have, however, asked the tough questions and done the deep digging that might have informed its readers and viewers on the truth, enabling them to prevent it.
As Jarvis points out, Zucker’s argument implies the utter impotency of his news organizations, which the journalists there must just love. Hey, what’s the point? Might as well sell insurance for AIG. Jarvis:
Really? I think that says that the press has no importance and no role in public policy. Doesn’t matter if we miss the story, he’s saying. It’s not our fault. Will he take no responsibility?
The LAT’s Patrick Goldstein, unlike the NYT today, pointed out last week that Zucker was full of it:
Actually, what’s really absurd is Zucker’s imagining that CNBC did a good job. What the network really did was help fan a gigantic financial bubble, even when Jim Cramer and its other “experts”—as Stewart has repeatedly pointed out—were savvy enough to know that the companies they covered, and often touted, were involved in all sorts of shady conduct.Zucker should be profusely apologizing and promising to make things right, not defending CNBC’s hapless carnival act.
This NYT miss isn’t the end of the world, but it goes to the point that we can’t just let people spew whatever they want to in the name of balance.
Spinning is lying. Call it out.
Nice piece of media criticism. That's the way it should be done, except for one thing. Why not just say Brian Stelter wrote that NYT piece? When you call out the NYT and give a complete pass to the journalist, just how effective do you think that is? That enables Stelter and his editor to go into the passive mode and evade responsibility for what he wrote. Not my fault! Just reporting what he said! Editor: We at the NYT take our job seriously!
How is that helpful?
#1 Posted by Tom, CJR on Mon 23 Mar 2009 at 10:26 AM
Sorry, but I think you're overreaching here. What Stewart has charged--and you have bought without question--is that CNBC, alone among not only business news organizations but also regulators, KNEW that CEOs were lying but let it pass in order to "fan a gigantic bubble." That is patently absurd. Absent subpoena power, business journalists can only go by companies' public statements and regulatory filings. It's not as if a CEO makes a statement to a reporter, then winks when the camera is off and whispers, "You know, I was lying just now." And while there may well have been telltale signs of excessive risk in SEC filings, CNBC wasn't alone in missing them, as you have noted repeatedly here.
The problem with CNBC is not that it failed to see the crisis coming--in that regard, it was in good company with other news organizations, regulators, and politicians. The real problem is that at a time when we most need straight, responsible coverage from CNBC, the line between opinion and reporting there has been obliterated. THAT is a huge disservice, and THAT is what you should be addressing.
#2 Posted by Steve, CJR on Mon 23 Mar 2009 at 11:46 AM
Hi, Tom,
I don't think not mentioning the reporter's name in any way gives them a pass.
But I'm not so interested, anyway, in pointing out individual reporters and definitely not interested in shaming people or whatever. That's not what we do here (unless somebody really deserves it!).
Also, the reporter is far from the only one involved in a story. You've got his editor. His editor's editor. His copy editor, etc. etc. He has much less control over his copy than, say, a columnist. Maybe Stelter had a qualification in there and his editors cut it out for space. The point is that the institution is ultimately responsible.
By the way, it's not a policy of mine to not mention names. I do that often. But this wasn't like a totally wrongheaded A1 story. It was a small inside piece I had one quibble with.
#3 Posted by Ryan Chittum, CJR on Mon 23 Mar 2009 at 01:20 PM
I take your point that it was a mild infraction, comparatively speaking. I also take your point that there are "layers and layers" of review before stuff like this is allowed into print. However, from a reader's perspective, the layers and layers of editors are irrelevant. The guy put his name on it and he gets the criticism. If he has a problem with editors allowing that through, or removing relevant text, that's for him to deal with, not the reader.
Also, from the reader side of media criticism, shaking one's fist at the institution gets one haughtily called a conspiracy theorist and one's point gets flicked away like an irritating mote. Maybe it's different for media critics with a Bigger Foot. But I find it more effective to make people take responsibility for what they write and not fall back on the institution to protect them from rightful criticism. That's a fundamental part of the sickness that is American journalism, in my opinion.
The goal, I thought, was to change behavior -- journalism -- for the better. Maybe not. Blaming the institution and not the journalist doesn't do much to convince a journalist to improve his product, in my humble opinion.
#4 Posted by Tom Traubert, CJR on Mon 23 Mar 2009 at 05:01 PM
Tom,
I don't know how big a foot I have, but not all criticisms of the "institution" should be reflexively dismissed. All institutions/corporations/organizations have their own cultures. Everything produced springs from those cultures in one way or another.
Part of the culture of most news organizations, I'm sorry to say, is the false-balance problem that is an unfortunate side effect of our devotion to objectivity. We should give everyone a chance to comment or tell their side of the story, but if they're wrong or lie, we need to follow their explanation with a debunker when at all possible.
This is something all of us have done as reporters. It's something all of us need to improve on. That's why I point it out. I just don't care so much about one specific reporter and one specific (minor) instance.
#5 Posted by Ryan Chittum, CJR on Mon 23 Mar 2009 at 07:12 PM
Why expect the NYT or NBC to get it right when your own critique misses a main route cause of the problem?.
You say" Clearly, the people who caused this were Wall Street, regulators, the Federal Reserve, and the mortgage industry"
However 70% of all mortgages (conventional and sub-prime) are funded by Fannie and Freddie. If these two agencies had not started approving sub prime loans this debacle could of been largely avoided. You miss this fact totally and don't even begin to ask who is responsible for the change in policy.
Your critique rings awfully hollow to me.
#6 Posted by Redhead, CJR on Mon 23 Mar 2009 at 08:50 PM
Why expect the NYT or NBC to get it right when your own critique misses a main route cause of the problem?.
You say" Clearly, the people who caused this were Wall Street, regulators, the Federal Reserve, and the mortgage industry"
However 70% of all mortgages (conventional and sub-prime) are funded by Fannie and Freddie. If these two agencies had not started approving sub prime loans this debacle could of been largely avoided. You miss this fact totally and don't even begin to ask who is responsible for the change in policy.
Your critique rings awfully hollow to me.
#7 Posted by Redhead, CJR on Mon 23 Mar 2009 at 08:52 PM
Redhead, your conclusion is way off base. There are two questions that you badly confused in the debate over the source of the financial crisis:
1. What caused Fannie and Freddie to fail?
2. What caused the financial crisis?
Answering the first question does not necessarily answer the second. Showing that some politician, some policy, some legislation, lack of effective regulation, whatever, caused Fannie and Freddie to fail is important, we need to know why they were vulnerable when the system got in trouble, but Fannie and Freddie did not cause the crisis, they were a consequence of it.
How do we know this?
Fannie and Freddie became fairly large players in the subprime market, and they got that way by following the rest of the market down in lowering lending standards, etc. But they did not lead it down. Their actions came in response to a significant loss of market share, and it is this loss of market share that motivated them to take on more subprime loans.
We need to understand why the overall market - the part outside of Fannie and Freddie's domain - was able to lower lending standards (and increase their risk exposure in other ways as well), and how regulation which had worked up to that point failed to keep Fannie and Freddie from dutifully responding to the market pressures on behalf of shareholders by duplicating the strategy themselves, but again, they were followers, not leaders.
Fannie and Freddie didn't like losing their market share to the corporate lenders, and they pushed the envelope on credit quality as far as they could inside the constraints of their charter: they got into "near prime" programs (Fannie's "Expanded Approval," Freddie's "A Minus") that, at the bottom tier, were hard to distinguish from regular old "subprime" except-- again-- that they were overwhelmingly fixed-rate "non-toxic" loan structures. They got into "documentation relief" in a big way through their automated underwriting systems, offering "low doc" loans that had a few key differences from the really wretched "stated" and "NINA" crap of the last several years, but occasionally the line between the two was rather thin. Again, though, whatever they bought in the low-doc world was overwhelmingly fixed rate (or at least longer-term hybrid amortizing ARMs), lower-LTV, and, of course, back in the day, of "conforming" loan balance, which kept the worst of the outright fraudulent loans out of the pile. Lots of people lied about their income (with or without collusion by their lender) in order to borrow $500,000 to buy an overpriced house in a bubble market. They weren't borrowing $500,000 from the GSEs.
It's interesting to note how Fannie and Freddie took on the extra subprime debt:
Fannie and Freddie are subject to regulation by HUD under mandates to serve low- and moderate income households and neighborhoods. As originators and investors with more energy than brains expanded their (subprime) lending to those borrowers and neighborhoods, it was difficult for Fannie and Freddie to increase their shares. They didn't want to buy or guarantee subprime loans, correctly perceiving them to be insanely risky. Instead they purchased securities created by subprime lenders, taking only the supposedly-safe tranches. Those portfolio purchases were counted toward their obligations to lend to lower-income home buyers, but are now part of the write-downs.
Until Republicans started trying to claim that Fannie and Freddie caused the financial meltdown as a means of tying Obama to the crisis - a strategy that backfired badly when all of the embarrassing connections to Fannie and Freddie within the McCain campaign were revealed - nobody was saying Fannie and Freddie caused the crisis. Republicans simply worked backwards - they found connections between Democrats and Fannie and Freddie (never thinking to ask about their own connections), then tried to blame the crisis on Fannie a
#8 Posted by DeadHead, CJR on Mon 23 Mar 2009 at 11:27 PM
Deadhead,
I did not bring politics into the discussion but you sure did. Journalism should not be politically tainted it should just follow the facts and explain with out the ideology and agenda. The above critique misses that point completely by ignoring the prime root cause.
The bogus excuse of "loss of market share" (supposedly for shareholders) has in essence lost 100% of their shareholder value and about 100 billion in taxpayer funds. (plus the financial melt down that their trillions in toxic paper has created) . Any fool can increase market share by selling below cost.
Now, the facts are that this whole mess would of "largely" been avoided if they had not funded about 70% of sub prime then sold it off as supposedly AAA paper. Simply would never have happened if they had kept strict loan requirements in place.
That is simple to understand but not reported.
Feel free to put blinders on and make excuses, but facts are facts. If you want to ignore the fact that Congress instructed these agencies to expand home (freely admitted and reported in the NYT at the time) ownership by buying sub-prime loans then you are just being politically correct and rewriting history. What motivation would you have for that? Maybe to protect certain politicians.
No surprise there.
#9 Posted by Redhead, CJR on Tue 24 Mar 2009 at 07:48 AM
Redhead, your preposterous right-wing "theory" fails to account for the fact that 84% of subprime mortgages were issued by private lenders, and that 83% of those loans through private lending institutions were made to low- and moderate-income people. Countrywide, for example. BZZT! EPIC FAIL!
#10 Posted by Tom, CJR on Tue 24 Mar 2009 at 08:49 AM
Earth to Tom
Countrywide and the vast majorty of retail lenders sell those sub prime mortgages loans to Fannie and Freddie. They do not hold morgages. Simple fact. if Fannie and Freddie had kept strict underwritting rules like 20% down and income verification then the retailers like countrywide would not have offered sub-prime in any quanity. Of course some fools were willing to buy sub-prime but 70% were funded by Fannie and Freddie. If they had not CHANGED THE Criteria, the problem would of "largely" been avoided. The Fannie & Freddie AAA paper sold to investors, banks foundations ect was all bogus. A tragedy.
Why is it that so many pople can't get this simple fact or even report on it?
The only thing preposterous is your blinders.
I'm actually a libiterian and very liberal on many issues. However, I'm not blind to the truth. I reccomend it. The truth will set you free, so lets report the whole tuth even if it hurts.
#11 Posted by redhead, CJR on Tue 24 Mar 2009 at 09:39 AM
The facts are not debatable, dear. Fannie and Freddie did not participate in the non-comforming secondary market that collapsed so spectacularly. Those non-comforming mortgage-backed securities were sold in the private secondary market. Your facts are wrong and therefore you come to completely faulty conclusions based somewhere off in loony Limbaugh-land. Stop embarrassing yourself in public.
#12 Posted by Tom, CJR on Tue 24 Mar 2009 at 10:20 AM
I don’t wish to participate in your childish insults. I was hoping we could have a rational discussion that might result in some good.
Now what part of the “easing the credit requirements on loans that it will purchase from banks and other lenders” don’t you get? Easing of credit = affordable loans = subprime! Get it.
From the NYT on 9/30/99
Fannie Mae Eases Credit to Aid Mortgage Lending
By STEVEN A. HOLMES
Published: Thursday, September 30, 1999
‘In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit, is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.’
Around this time they also changed the compensation structure for the top executives to pay for volume instead of profitability. How could that be in stockholders interest?
More
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
From the Washington Post
Subprime Loans Labeled 'Affordable'
By Carol D. Leonnig
Washington Post Staff Writer
Tuesday, June 10, 2008; A01
“The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending.
$434 billion isn't zero, and that's just from 2004 to 2006.”
Fact, If Fannie and Freddie had not eased their credit standards and trillions of “affordable’ formerly known as sub-prime loans would not of been underwritten and then securitized with bogus AAA ratings (implied government guarantee) and sold off to investors and institutions all around the world.
Case closed!
But if you insist on continuing the debate please cite legitimate national reporting not commentary or opinion sites. Opinions/explanations are not facts.
My plea to the news media. Include this information in any discussion to shed more truth and understanding!
#13 Posted by redhead, CJR on Tue 24 Mar 2009 at 12:26 PM
The facts are not debatable, Redhead. People's conclusions based on the facts are debatable. And your conclusions, since they aren't based on fact, and exclude consideration of facts that you find inconvenient, lead you to conclusions that cannot be supported.
It's pretty hilarious that you quote the New York Times as THE definitive source after dismissing their credibility last night here where you said: "Why expect the NYT or NBC to get it right when your own critique misses a main route cause of the problem?." Which is it, dear? A credibile source, or not a credible source? Back to debating school with you, Red!
#14 Posted by Tom, CJR on Tue 24 Mar 2009 at 03:49 PM
The New York Times Sleeps With Jeff Zucker
http://chickaboomer.blogspot.com/2009/03/new-york-times-sleeps-with-jeff-zucker.html
#15 Posted by StewartIII, CJR on Tue 24 Mar 2009 at 06:58 PM
Very cute Tom, If you can't offer any facts, sourses, then just attack attack attack.
That's the last resort when you don't have a leg to stand on.
This has been too easy.
You don't even remember my original point.
Why expect the NYT or NBC to get it right when your own critique misses a main route cause of the problem?.
You say" Clearly, the people who caused this were Wall Street, regulators, the Federal Reserve, and the mortgage industry"
However 70% of all mortgages (conventional and sub-prime) are funded by Fannie and Freddie. If these two agencies had not started approving sub prime loans this debacle could of been largely avoided. You miss this fact totally and don't even begin to ask who is responsible for the change in policy.
Your critique rings awfully hollow to me.
#16 Posted by Redhead, CJR on Tue 24 Mar 2009 at 09:04 PM
Redhead,
With all due respect, you're wrong. While Fannie/Freddie certainly had a role in the mortgage crisis, it was a small one compared to the others I named and they were most certainly not the dog wagging the tail. They were the ones being wagged.
As Tom has said above, Fannie and Freddie were actually some of the only ones applying the brakes on the mortgage train as it headed for the cliff. They were about the only ones with any standards at all left in 05-06 and as Tom says, had to weaken standards to stay afloat.
You're assertion that they own 70 percent of mortgages missed the point. Here's McClatchy six months ago:
"Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication."
Here's what we (and when I say "we" I mean Dean Starkman, not me) at The Audit wrote on this back in September.
Fannie and Freddie got into the subprime game in 2007 after the bubble had popped. Here's a good graphic that shows how the GSE's market share plunged as culprits like CDO's soared.
Fannie and Freddie were terrible institutions that should never have been allowed to evolve as they did over the decades, a super-powerful private corporation with the incentive to drive the stock price for executive bonuses while having what everybody knew (despite repeated BS denials) was a government "put" or guarantee on its debt.
That was a disaster, but it wasn't a major contributor to the housing bubble.
#17 Posted by Ryan Chittum, CJR on Tue 24 Mar 2009 at 10:08 PM
Ryan, Thank you for the civil discussion!
I grant you Fannie and Freddie were not the only bad actors. I read your sourses and much of their sources are opinion pieces that ignore the hard fact reported here by the WP. Or report in such away as to parse the terminology.
Per the WP, It is impossible to call 434 billion (only 2 years) in Fannie and Freddie sub prime loans a minor factor. That's just ignoring the elephant in the room. Or a major sin of omission in reporting to be kind! Name the company that securitized more than 434 billion in two years?
Once again, thanks for being civil and at least citing some sources. Again my main point is you and many others ignore the largest or one of the largest single players in the debacle when you say "Wall Street, regulators, the Federal Reserve, and the mortgage industry" Also, the original intent of the looser government imposed standards described by the 1999 NYT is also ignored. Another major sin of omission! Why?
PS. For example, by parsing, McClatchy writes about Fannie and Freddie "holding" these sub prime loans. Da, they securitize and sell off most loans not hold them. They obviously hold only a fraction of how much they underwrite. "Holding" is a very clever qualifier that misleads the reader.
From the Washington Post
Subprime Loans Labeled 'Affordable'
By Carol D. Leonnig
Washington Post Staff Writer
Tuesday, June 10, 2008; A01
“The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending.
$434 billion isn't zero, and that's just from 2004 to 2006.”
#18 Posted by Redhead, CJR on Tue 24 Mar 2009 at 11:30 PM
This is probrably the sourse of the miss infomation and missleading of the public.
Alan White of Public citizen writes the following (a special interest group)
Secondary Market – Wholesale Loan Buyers
In 2004, 2005 and 2006, securitized mortgages were 73%, 79% and 81% of all subprime mortgages. So for practical purposes the wholesale market was the securitization market. For the same three years, the total volume of subprime loans securitized was $521 billion, $797 billion and $814 billion respectively.
Almost none of those securities were issued by Fannie and Freddie.
Flat wrong!
Alans opinion piece does not square with the straight reporting facts reported by the Wp
From the Washington Post
Subprime Loans Labeled 'Affordable'
By Carol D. Leonnig
Washington Post Staff Writer
Tuesday, June 10, 2008; A01
“The agency neglected to examine whether borrowers could make the payments on the loans that Freddie and Fannie classified as affordable. From 2004 to 2006, the two purchased $434 billion in securities backed by subprime loans, creating a market for more such lending.
$434 billion isn't zero, and that's just from 2004 to 2006.”
Note, the WP has never made any corrections and I assume still stands by its reporting.
#19 Posted by redhead, CJR on Wed 25 Mar 2009 at 12:00 AM
Hi, Redhead,
Can't get into much right now, but wanted to show you this. This ought to tell you what you need to know about the quality of lending in the "fully private" market vs. Fan/Fred:
Total delinquency rate now: 7.9 percent.
Fannie delinquency rate now: 2.4 percent.
Freddie delinquency rate now: 2 percent.
I don't know for sure, but I think the MBA total-market numbers include Fannie and Freddie, meaning the private delinquency rates are even higher than 7.9 percent because Fan/Fred's low rates bring the avg down.
If the whole market had lent like Fannie and Freddie we wouldn't be in this crisis. They're a casualty of it.
#20 Posted by Ryan Chittum, CJR on Wed 25 Mar 2009 at 10:46 AM
Thanks Ryan, please provide the objective source of that information. I can’t find those numbers.
Once again, please name any company (source please) that securitized more sub-prime than Fannie and Freddie’s NYT documented $ 436 billion during a 2 year period? If you can do that I’m willing to give ground and adjust my position! If you can't then I have trouble understanding your statement that these two entities were minor players and should not be blamed. My evidence presented point to them as the largest funder of sub-prime! They created the market and then distributed the risk all around the world through securitization.
Look forward to hearing more from you. Let’s BOTH keep an open mind,seek the truth and make corrections that are justified by facts.
#21 Posted by redhead, CJR on Wed 25 Mar 2009 at 12:02 PM
Sorry Ryan about my source request, I’m a little color blind so I did not realize your information was linked. I have followed the links to the interesting information and see the facts that you supplied. Very interesting. I’m going to do some more research and get back to you. If I'm wrong I will tell you and apologize.
#22 Posted by redhead, CJR on Wed 25 Mar 2009 at 01:03 PM
http://www.washingtonpost.com/wp-dyn/content/graphic/2008/06/10/GR2008061000059.html
As shown in the above chart Fannie and Freddie had a 33% average market share of sub-prime mortgage backed securities? (Not 70% as I suggested, sorry). However, any market that has essentially one organization at 33% (in this case Fannie and Freddie operating to achieve government goals) is a significant if not the dominant player.
Now, you say “While Fannie/Freddie certainly had a role in the mortgage crisis, it was a small one compared to the others I named and they were most certainly not the dog wagging the tail. They were the ones being wagged.”
Best I can tell, they were the market leader (one year getting 44% and averaging 33%) is not the tail of the dog. Their low delinquency rate on what is currently held may be the result them selling off much of their subprime loans in the form of securities to other parties. This is the part they don’t hold. In other words they must have been pretty successful in off loading that business. It appears to me that somebody else got stuck buying what they probably thought were investment grade securities. In my research I read that they freely admitted that they did not even know what they were buying and never checked credit quality or the criteria because the job would have been overwhelming. The low delinquency rate does not make common sense unless they reduced their holdings or wrote this stuff off already. This whole thing is a good lesson in the law of unintended consequences.
Bottom line, they are clearly a major player; they made major policy blunders (at the direction of our government) in the 100’s of billions of dollars. Not mentioning their starring role in the subprime crises in a sub-prime journalistic report is like writing about the Auto industry and leaving GM out of the report, suggesting that General Motors has only a minor role regarding that debacle.
#23 Posted by redhead, CJR on Wed 25 Mar 2009 at 04:12 PM