Shahien Nasiripour had a very important scoop yesterday—a set of confidential federal audits has found a pattern of mortgage fraud at the nation’s five largest mortgage companies. The victim? Uncle Sam. The findings have been passed to the Justice department, which could prosecute the banks under the False Claims Act, which Shahien describes as “a Civil War-era law crafted as a weapon against firms that swindle the government”.
Shahien also brings us up to speed on where negotiations are with between the banks and the federal government:
The five giant mortgage servicers, which collectively handle about three of every five home loans, offered during a contentious round of negotiations last Tuesday to pay $5 billion to set up a fund to help distressed borrowers and settle the allegations.
That offer — also floated by the Office of the Comptroller of the Currency in February — was deemed much too low by state and federal officials. Associate U.S. Attorney General Tom Perrelli, who has been leading the talks, last week threatened to show the banks the confidential audits so the firms knew the government side was not “playing around,” one official involved in the negotiations said. He ultimately did not follow through, persuaded that the reports ought to remain confidential, sources said.
This is big news, so it’s hardly a surprise to see the mortgage-fraud story splashed across the front page of today’s NYT. Except, Gretchen Morgenson’s piece barely mentions the federal investigation. Instead, she concentrates on a much less important piece of news: that New York AG Eric Schneiderman has started asking much the same questions of Wall Street banks that his predecessor Andrew Cuomo was asking earlier on in the financial crisis. Morgenson also fails to talk about the one possible reason the story might be important: that it could mark a break between Schneiderman and the other AGs, and thereby derail that settlement.
And to make matters worse, the NYT put a stunningly stupid headline on the story: “New York Investigates Banks’ Role in Fiscal Crisis”. What fiscal crisis? New York State’s? The US fiscal crisis? Is there even a fiscal crisis? The NYT doesn’t say—because in fact the story has nothing to do with any fiscal crisis at all. What the paper means is the financial crisis, or just the crisis, but presumably on the grounds that “financial” didn’t fit, some front-page editor decided that “fiscal” was a synonym. Which of course it isn’t.
It’s depressing to see the NYT and the WSJ give much bigger play to a small story hand-delivered to them by Schneiderman’s office than they do to the important story broken by HuffPo, which they completely ignore. It’s the downside of journalistic competitiveness: if someone else got the story first, the NYT and WSJ aren’t interested in it, no matter how newsworthy it might be. And of course they also probably have a strong desire to refuse to admit that HuffPo ever beats them on anything.
But Morgenson’s story appears right below the famous box saying “All the News That’s Fit to Print”. There’s news out there, broken by HuffPo, which is more than fit to print. And then there’s Morgenson’s story, all of which, after the first three paragraphs, is a rehashing of stuff we already know. If the NYT really wanted to do the best by its readers, it would tell them about the big news, as well as Morgenson’s non-exclusive scooplet.
Felix Salmon is a financial writer, editor, and podcaster. A former finance blogger for Reuters and Condé Nast Portfolio, his work can be found at publications including Slate and Wired, as well as his own Substack newsletter.