Over recent months, The Audit and CJR have investigated how it was that business reporters failed to see the crisis in the mortgage and credit markets as it brewed and bubbled, even when evidence of its unsustainability was plain to see for those who chose to look. I’ve followed CJR’s account with great interest from the perspective of an independent journalist who in the mid-2000s reported on and questioned - often with one palm on the laptop and the other slapped against my forehead - a growing epidemic of financial insanity. The fact is, and as immodest as it may seem to say, independents were repeatedly ahead of the curve on covering the mortgage and real estate bubble and in connecting the dots between vital elements of the bigger story—especially the links between predatory and lending and the metastasizing mortgage-backed securities market.
In 2002, The Nation warned that the mortgage-backed securities market’s bottomless appetite for subprime mortgages was financing an epidemic of destructive lending. In 2003, Southern Exposure exhaustively documented Citigroup’s move into the mass production of high-interest loans designed to drain borrowers’ meager wealth. In 2005, Mother Jones assigned me to find out why the streets of Cleveland were lined with vacant houses. A reasonable question, and I found the answers on the Wall Street credit securities market. Indeed, all through this period, alt-weeklies told tales found in living rooms and legal services offices of homeowners who had believed a mortgage broker’s misleading sales pitch and wound up facing foreclosure. I’m contributing this post to The Audit to explain why I think I and other indie journalists were able to make the connections and warn of the dangers in the mortgage market with the hopes of passing along some of this outsider’s perspective to business editors and reporters. Hey, sharing is only fair—we independents have always relied on the business and trade media’s invaluable foundation of reporting to orient ourselves to the arcane instruments and markets that have such serious consequences for the outside world.
I don’t pretend our work was comprehensive; far from it. And at times it veered into the naïve and under-informed, particularly when it came to the inner workings of the credit markets. And did I predict that the ultimate consequence of what I was covering would be the near-implosion of the credit and banking systems? Hardly. But the fact remains independent journalists exposed the dimensions of the problem with a depth and timeliness that mainstream news organizations simply and regrettably did not match. It’s not about being better journalists; it is about being tuned to a different audience and set of interests.
From 1999 to 2005 I was editor of a small nonprofit magazine, City Limits, covering New York City neighborhoods. Mayhem caused by predatory and fraudulent mortgage lending was a story we couldn’t avoid—criminal rings had infested a HUD mortgage program and left hundreds of homes in Harlem and Brooklyn boarded up or sold in terrible condition at inflated prices to defrauded working-class buyers. (Besides leading to criminal convictions and the suspension of the program, the story we broke ended up as a plot line on The Sopranos, Season Three.) By 2002, I had learned enough to say this in an editorial about the Bush administration’s campaign to increase homeownership by pushing low-income people into real estate: “Without adequate regulation and oversight of the lending industry, it’s lunacy.” The following year we ran a feature on a spike in subprime foreclosures, a dress rehearsal to the mortgage crisis that essentially went unmentioned in the media.
When I left the magazine in 2005 to freelance, I knew an urgent story was out there. I asked the Mortgage Bankers Association for its latest National Delinquency Report, showing state-by-state default rates for home mortgages—and was astounded by the default rates for subprime mortgages. And Ohio was out of control—north of 14 percent of all subprime mortgages were in default. I wanted to tell the story behind that figure. As the real estate bubble raged on the coasts in 2005, San Francisco-based Mother Jones assigned me to report the story a world away, in Cleveland. Nothing prepared me for the streets I would visit, lined with boarded-up houses. I thought I would be gathering tales of wronged borrowers, and did much of that. But the sheer scale of the destruction made it clear that something even more dangerous was going on there. I would soon learn what that was—the city was crawling with real estate speculators, locusts who, with the collusion of appraisers and mortgage brokers, deliberately deceived lenders into issuing mortgages for far more than the dilapidated real estate was actually worth. Predatory lending, predatory borrowing, phony appraisals—the whole system was out of control.