A business partly responsible for the economic downturn requested another $15.3 billion bailout last week.
It wasn’t one of the news media’s usual suspects, like the banks or insurance giant AIG – the ones they have repeatedly scorned and scrutinized for needing bailouts. It was government favorite and Democratic donor Fannie Mae, the Federal National Mortgage Association, created as a public-private hybrid in 1938 but taken over by the federal government in Sept. 2008.
There was no media outrage; in fact there was almost no coverage. Fannie Mae’s Feb. 26 request for more than $15 billion made few print headlines and was ignored entirely by ABC, CBS and NBC – despite the billions of taxpayers’ dollars that have gone to bail Fannie out in the past year and a half.
“The new request for aid will bring Fannie Mae’s total to more than $75 billion,” according to an Associated Press report that ran in the Los Angeles Times Feb. 27.
The only hint in that article about improper conduct leading to Fannie’s downfall was in the last sentence: “The two companies (Fannie Mae and Freddie Mac) loosened their lending standards for borrowers during the real estate boom and are reeling from the consequences.”
That was an understatement – the problem at Fannie Mae has always been the socialized risk of implicit (now explicit) backing of the Treasury Dept. which enabled them to take excessive risks with minimal concern for the danger. Add to that powerful friends on Capitol Hill like Rep. Barney Frank and Sen. Chris Dodd, and a news media willing to ignore its failings; Fannie Mae was a disaster waiting to happen.
In the past three months, Fannie Mae or Freddie Mac was only mentioned in seven stories by the three broadcast networks. Only three of those very brief mentions were at all critical of Fannie or Freddie.
But during that same time frame, the networks have criticized bailed out insurance giant AIG and “banks and securities firms,” including Goldman Sachs, J.P. MorganChase, Morgan Stanley.
A ‘Politically Correct’
So how have Fannie and Freddie mostly escaped the scrutiny of the network news?
In 2004, Newsweek’s Charles Gasparino provided an explanation in a CNN appearance: “Well, Fannie Mae is a very politically corrupt – it may be politically corrupt, but it’s a politically correct company. I mean, they do all the things that, let’s face, liberal journalists like, like put home mortgages out there for poor people. And so right now, beating up on Fannie Mae is kind of politically incorrect.”
Both companies are also well connected, especially to Democrats, in
“Fannie Mae was always a political beast, but it reached its elbow-swinging heights during the time when former Clinton administration budget director Franklin Raines sat in the CEO chair. Under Raines' leadership, Fannie overstated earnings by a stunning $10.6 billion, all the while paying Raines and his senior management team massive bonuses,” the Motley Fool reported Sept. 10, 2008.
Motley Fool also pointed the finger at a few others, including Rep. Barney Frank, the House Financial Services Committee chairman (and Fannie regulator).
Some print outlets have examined Fannie and Freddie’s donations to politicians. The New York Times online attacked Sen. John McCain, R-Ariz., on Sept. 24, 2008 for ties to Freddie Mac, but glossed over then Sen. Barack Obama’s, D-Ill., connection to Fannie and Freddie. And never mind Barney Frank’s (see related story).
The Times story buried campaign contribution figures for both candidates until the very last paragraph of the 1,401 word story. According to the article, since 2004 “Senator Obama has received about $126,000 in contributions from employees of Fannie Mae and Freddie Mac, while Senator McCain, over the last decade, has received about $22,000, according to the Center for Responsive Politics.”
Networks’ Ignored Fannie and Freddie’s Problems in 2005, 2008 and 2010
The broadcasts networks rarely criticize Fannie Mae or its sibling Freddie Mac, despite accounting scandals and the 2008 taxpayer bailout.
ABC, CBS and NBC often attacked AIG, Goldman Sachs, Citigroup and others for “greed” and for needing bailout funds. But when $42 million in cash compensation packages were announced on Christmas Eve for Fannie Mae and Freddie Mac executives, the networks couldn’t muster any anger toward the highly connected groups.
The Business & Media Institute found three brief mentions from ABC and CBS totaling 175 words about Fannie Mae and Freddie Mac between the bonus announcement and Jan. 5, 2010.
Not a single one of those reports used the word “bonus” or mentioned the Obama administration decision to extend the credit line of both government-sponsored enterprises (GSEs), which already required more than $100 billion from taxpayers.
Unlike the broadcast networks, CNBC’s Rick Santelli was indignant about the stealth extension of funds to Fannie and Freddie. On Jan. 4, Santelli told viewers his New Year’s resolution to “mention Freddie and Fannie and every day maybe ask what’s wrong with S&P, Moody’s and Fitch. Because for us to re-nationalize off balance sheets these trillions of dollars of lecherous accounting gimmicks without having it affect the
But the networks were used to ignoring such critics of Fannie and Freddie. In 2008, as the GSEs’ financial stability was crumbling there was almost no coverage of the pair despite serious criticism.
Charles W. Calomiris, finance and economics professor at
“The poor choices of these two government-sponsored enterprises (GSEs) – and their sponsors in Washington – are largely to blame for our current mess,” Calomiris and Wallison wrote in a Sept.
As problems at Fannie Mae and Freddie Mac intensified in August and September 2008, the media switched to attacks on deregulation and Republicans, rather than the mortgage giants.
All the networks needed to do was read the Wall Street Journal to get an idea of how bad the coming crisis would be. As far back as 2002, the Journal was comparing Fannie Mae to Enron in its editorial pages. A Feb. 20, 2002 editorial entitled “Fannie Mae Enron?” exposed the high debt and poor risk management of Fannie and Freddie.
“The more we’ve since looked at Fan and Fred the more they look like poorly run hedge funds: lots of leverage and snarkily hedged risk. The word Enron ring any bells?” said the Journal editorial.
It turned out that Fannie Mae’s financial fiasco was – at that time – 19 times bigger than Enron’s. Yet, the TV news media on ABC, CBS, CNN and NBC barely made a peep. Now with the federal bailout, that number is much higher.