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Even as it’s come under the inevitable attack by ideologues of the left, and even a few on the right, the lessons in New York Times reporter Gretchen Morgenson’s book, Reckless Endangerment, resonate. More than this, they provide the stuff for some interesting speculation, none more important, for those of us in “medialand,” than this: Why didn’t the media shine a bright light on the perfidy of Fannie Mae and its “paid clappers” in academia and Congress (people like Joseph Stiglitz and Barney Frank) before now?

Could it be, as one may infer from what Morgenson reports, because the company at the center of the story had contrived to promote itself – in language that was politically correct but deeply misleading – as a high-minded enabler of home ownership for minority and lower-income citizens?

And if it’s true that investigative and political reporters, working for mainstream news organizations, were anesthetized by that kind of sloganeering, even in a case as egregious as the Fannie Mae fiasco, why would anyone think that “progressive” nonprofit news organizations would cover such a story – then, now, or in the future?  Organizations, for instance, like ProPublica that, founded, chaired, and bankrolled by a man as liberal as he is wealthy, sees its mission as “shining a light on the exploitation of the weak by the strong.”

For the benefit of those who haven’t yet read it, Reckless Endangerment is, most importantly, the story of the role in the country’s economic meltdown played by the government-sponsored enterprise (GSE) known as Fannie Mae.

Created in 1938 to assist borrowers in buying homes during the waning days of the Great Depression, decades later Fannie Mae would become, in Morgenson’s words, “the largest and most powerful financial institution in the world.”  And size wasn’t its only defining characteristic.

Under the venal leadership of its former CEO, James Johnson, and his corrupt successor, Franklin Raines, Fannie Mae became the very embodiment of crony capitalism: an outfit that used its (predominantly Democratic) political muscle to gain competitive advantage and to ward off every attempt at reining in its imprudent business practices, all while hugely rewarding its senior executives. (For his service as CEO in the ’90s, James Johnson took home $100 million.) The upshot of it all?  In 2008, the Federal Housing Finance Agency took conservatorship of Fannie Mae, at a cost to taxpayers (to date, and counting) of $150 billion.

This and much more is told in stomach-turning detail in Reckless Endangerment, and as is often the case with books of great moment, it has sparked numerous discussions, some about its primary thesis, and some about matters of secondary importance.

Not to be out-marginalized, and as suggested at the outset, the interest here is with an aspect of the thing that might be said to be of “tertiary importance," connected to “Fanniegate” only obliquely: namely, what the press coverage (or more precisely, lack of coverage) of Fannie Mae suggests about future stories and the relevance of nonprofit news organizations, particularly those in the “investigative news” business.

Nonprofit news organizations are all the rage these days.  We know this because the J-schools, journalism reviews, journalism-funding foundations, and the deep thinkers at places like Politico tell us so. Indeed, there are those (most of whom are on the payroll of the movement’s principal sugar daddy, the Knight Foundation) who argue that, because of the tough times at for-profit media, the nonprofits are indispensable keepers of the journalistic flame.

It says a lot that many of the same people who sing the praises of nonprofit organizations also advocate a larger role for government in the affairs of the media. Even as “local news” and “investigative” reporting need the input of nonprofits, they argue, the nonprofits themselves need help from the government, whether in the form of much larger contributions to NPR and PBS, or such things as federal tax credits for investigative journalism.

But because, as mentioned in an earlier blog, virtually all of the nonprofit groups bring to their work a history, a mindset, a funding base, and/or a mission statement that venerates government policies that are said to be “helping people,” when such policies go wrong they are invisible to these same nonprofits.

This is true not just of issues like the corruption of Fannie Mae, but of myriad other issues, among which are some of the most pressing problems in the country today.  Things, for instance, like the Ponzi schemes that governments at all levels have been running in broad daylight with their unbalanced budgets and debt issuance. Investigative reporters could write a different piece once a week for a year or two about examples of this in the states, municipalities, and at the federal level

Or what about the ruinous effect on state and municipal finance of public employee unions’ pay and retirement packages? Or the extraordinary expense, spread across so many industries, of ambulance-chasing trial lawyers?  Or the disastrous dependency, forged after decades of government support, of people trapped in the inner cities – areas that are these days so depraved and dysfunctional Charles Dickens wouldn’t recognize them?

Concerning these and many other issues, there is no reason to believe that nonprofit news organizations out there today would show any greater interest than have the mainstream for-profit media. They largely ignored the monstrosity that was Fannie Mae when their “investigative reports” might have made a difference, and because of their prevailing mindset they will in all likelihood ignore all other issues displaying a kindred pathology.

 The opinions expressed above are those of the writer and not of The Media Institute, its Board, contributors, or advisory councils.

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As noted here, the recently released FCC report on the future of journalism has effectively put the kibosh on the “media reform” crowd’s dream of government intervention to “save journalism.”  Likely gone forever are such schemes as a federal tax credit for investigative journalism, or an AmeriCorps-like “Geek Corps for local democracy.”

But there’s another element of the “reformers’” agenda that is still alive and kicking, and that is the rise of so-called nonprofit journalism, i.e. the creation, as nonprofit organizations, of “investigative” journalism groups, like ProPublica, which research and write feature stories that are then peddled for publication (or publicity) to for-profit, and often mainstream, media companies like The New York Times, The Washington Post, and the Associated Press.

At a time when so many news organizations, newspapers especially, are laying off reporters, concern about the future of journalism is neither wrong nor untimely, and when compared to the inherent evils in direct (or indirect) government funding of journalism, the nonprofits’ activities are orders of magnitude more benign.

This said, even a cursory review of this cottage industry reveals deep flaws that aren’t, in the main, even being discussed.  Two in particular stand out: (1) Virtually without exception these groups are funded by left-of-center individuals and foundations – funding that is reflected in the groups’ mission statements and/or in the material they publish; and (2) the nonprofit groups’ relationship with for-profit outlets reveals a business plan on the part of the former that relies utterly on the existence  of the latter, thereby vitiating claims that the nonprofit groups are any kind of “solution” to what ails the media.

A piece recently published in Politico shines some (unintended) light on the problem.  Titled “Liberal Journalism’s Fickle Godfather,” the article tasks PBS commentator Bill Moyers – who also heads a grant-giving foundation – for not staying long enough in financial support of some liberal nonprofit startups that subsequently folded.

In between quotes from disgruntled grant recipients dropped by Moyers’s foundation (the Schumann Center for Media and Democracy), the author of the piece recounts some recent history of such organizations, including a few survivors, and sums things up this way:

“Earlier this month, the FCC released the results of a year-long survey of this destruction and recommended that philanthropy play a bigger role in supporting journalism.  But so far, few foundations are set up to provide the ongoing support that journalism organizations really need.”

Well, okay, if Politico says so it must be true, right?  But there is this: Every nonprofit mentioned in the piece as doing “investigative journalism” derives virtually all of its financial support from liberal grant-giving foundations.

Take, for instance, the Center for Public Integrity, said by Politico to have “a diverse funding base.” In fact, the Center’s funding base is “diverse” only in the sense that there’s more than one contributor.  Otherwise, virtually every group shown (on Wikipedia) to be in support of the Center is a liberal grant-giving foundation.  Though not all of them give the same proportion of their funding to nonprofit journalism groups like the Center for Public Integrity, the media programs they do fund are resolutely left-of-center.

There is, one hastens to say, nothing intrinsically wrong with committing liberalism (of course there’s nothing right with it, either), but kidding aside, when the whole of the nonprofit journalism community is funded by such as George Soros’s Open Society Foundation, or the MacArthur Foundation, or the Tides Foundation, or the Knight, Ford, or Schumann foundations, and manned by the kind of people, and/or with the kind of mission, as at the Center for Responsive Politics, the Center for Investigative Reporting, or the Center for Public Integrity, there is the risk (how to put this gently?) that the resultant investigations will be “one-sided.”

Of course this isn’t a problem for everybody, and certainly not for Politico, but it really is a problem – though not yet widely recognized as such – for the participating mainstream media.

About a year ago I was given the unpleasant task of participating on an ABA panel with the general manager of the newest kid on the block, the nonprofit investigative group called ProPublica.  Founded, chaired, and bankrolled by the billionaire and uber liberal Herbert Sandler, ProPublica’s editor is Paul Steiger, formerly with the Wall Street Journal, on whose watch the organization has won two Pulitzer prizes.

According to published reports, Mr. Steiger’s total compensation in 2009 was just under $600K, so it’s not clear if he joined ProPublica because he believes in its stated mission (“shining a light on the exploitation of the weak by the strong”), or for more pedestrian reasons, but whatever the case the point of conflict between me and ProPublica’s general manager back then was his argument that it was possible for journalists to separate their work and opinions from those of their employers.  The example the gentleman gave was of the management of The Wall Street Journal and its reporters.

As I subsequently wrote, this argument doesn’t compute because a for-profit media manager’s job (as at the WSJ) is to make money, not politics, whereas the investigative nonprofit manager’s job is just the opposite. Indeed, this argument is akin to the tired old nonsense, spouted for decades by certain editors, that the political affiliation of their reporters – even where, say, registered Democrats outnumber Republicans by nine or ten to one – doesn’t color their journalistic product.  Of course it doesn’t.

So at a time when the perceived bias of the MSM is driving people en masse into the arms of such as Matt Drudge, Andrew Breitbart, and Glenn Beck (and how “progressive” is that?), the collaboration of mainstream media with the uniformly liberal nonprofit journalism groups threatens to hasten that emigration.  And as suggested at the beginning of this piece, even this isn’t the only problem with nonprofit journalism.

The other problem is that, unlike the ersatz “reforms” (of which nonprofit journalism is but one) promoted by such as the Knight Foundation, there are some real initiatives being undertaken by individuals and organizations – including media companies themselves – who have not given up on the MSM or for-profit journalism, and are trying very hard to find ways to compensate for the extraordinary loss of advertising that is at the root of the crisis in medialand.

Broadcasters, for instance, are hoping to adapt to the new realities through the development of such things as multicast digital channels and mobile DTV, while print companies, like The New York Times and the Dallas Morning News, are rolling out online subscription pricing plans in an attempt to generate more revenue.

And they are not alone.  Other informed people, like certain members of the communications bar, are trying to lend a hand.  Take, for instance, the highly regarded media and First Amendment attorney Bruce Sanford, who has written and testified about prospective changes in copyright, ownership, and antitrust laws as would provide a more level playing field for the commercial mainstream media.

At the end of the day it’s this – the contrast between the hopes and plans of those who have not given up on the media versus those who have, and would now turn it into an industry reliant on the government, or nonprofit groups with an agenda – that frames the other problem with nonprofit journalism: It’s a time-consuming and expensive distraction from the real work that needs to be done.

Even if, as often seems to be the case, the real motive behind the promotion of nonprofit journalism is the rescue of the recently (or soon-to-be) unemployed, dressed up in the rhetoric of “saving the news,” it amounts to little more than a gesture in the larger scheme of things.

Even if it were a more ideologically even-handed enterprise, nonprofit investigative journalism is not now, and never will be, either a solution to the problems of, or an obviation of the need for, mainstream, professional, and for-profit media.

The opinions expressed above are those of the writer and not of The Media Institute, its Board, contributors, or advisory councils.

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From the Pew Research Center/Project for Excellence in Journalism comes the welcome report that newspaper editors and TV news directors are not eager to be, or to be seen as being, wards of the state.  This wholesome sentiment will not come as a surprise to most people, but it has to be disconcerting to the “media reform” crowd, which has been clamoring for direct government subsidies or tax breaks for the news media.

According to the study, 75 percent of the respondents, drawn from the ranks of members of ASNE and RTDNA, had “serious reservations” about direct subsidies from the government, and approximately half had such concerns about tax credits for news organizations.  (Note: These figures do not indicate how many of the respondents had “reservations,” only those who had “serious reservations.”)

It’s in the matter of non-governmental support, of the sort that issues from “interest groups” or nonprofit organizations, that the picture becomes a little murky.  According to the report, a whopping 78 percent of the respondents had serious concerns about accepting donations from “interest groups that engage in advocacy of some kind,” while a little over half expressed either serious or “some” reservations about funds issuing from nonprofit foundations.

Buts what about those groups, like the investigative news organization ProPublica, that are funded and led by people with extensive, and clearly defined, political profiles?  Is ProPublica an advocacy group or just a nonprofit news group?  The question takes on a practical significance in light of the Pulitzer recently awarded to ProPublica and The New York Times for their collaboration on a piece published in the New York Times Magazine.

As reported here, the founder, chairman, and principal financial backer of ProPublica is billionaire Herbert Sandler.  Since selling his interest in the bank (Golden West Financial) through which he made his fortune, Herbert and his wife, Marion, have become big-time philanthropists, with substantial sums going to “progressive” organizations like the Center for American Progress and Acorn.

Along the way the Sandlers acquired an interest in bankrolling a news organization that would create “journalism in the public interest,” as ProPublica calls itself, and hired Paul Steiger, then the managing editor of the Wall Street Journal, to act as editor-in-chief.

As reported in The New York Times, Steiger, who was then nearing the WSJ’s mandatory retirement age, didn’t know the Sandlers well but regarded them as “civic-minded people who were kind of partial to lefty or progressive causes.”

From its inception in 2008, ProPublica has proclaimed its independence and impartiality — a claim that is undermined by its avowed goal of producing journalism that “shines a light on exploitation of the weak by the strong,” and by the looming presence of Mr. Sandler who, rather than donate his money as a lump sum and walk away, installed himself as chairman and is parceling out his contributions over time.

At a recent conference of the American Bar Association, the general manager of ProPublica who, like Mr. Steiger, was formerly with the Wall Street Journal, defended the organization against criticism of Mr. Sandler’s role by suggesting that ProPublica, like the WSJ, is capable of producing journalism that is independent of the political views of management.  Unfortunately, this is an inapt analogy.  In fact it’s worse than that — it positively undermines the argument it’s meant to buttress.

This, of course, because the reason that the Wall Street Journal, or any commercial news organization, can produce news stories that are not a reflection of the political views of management is because they, like all for-profit organizations, operate on the principle of maximizing returns to the shareholders, rather than as a forum for the expression of management’s political or ideological views.

But contrast this dynamic with the very different operating principle of ProPublica, or any nonprofit enterprise.  As Slate’s Jack Shafer asked at ProPublica’s launch, “What do the Sandlers want for their millions? ... How happy will they be if ProPublica gores their sacred Democratic cows?  Or takes the ‘wrong’ position on their pet projects: health, the environment, and civil liberties?”

In fairness, most of the reports produced by ProPublica to date do not suggest an organization that is marching in lockstep with the progressive agenda.  For the most part they are ideologically value free.  But that’s only half the story.  The real issue with a group like ProPublica is not the kind of issues it does cover but the kind it doesn’t.  As Jack Shafer asked, what kind of investigative pieces will ProPublica do — not counting the rare expose that proves the rule — that discomfit progressives?  That will be the true test of its independence from its benefactor, and of its suitability as a partnering organization with mainstream news organizations.

In the meantime, close your eyes and try to imagine the kind of reception that would have come to Paul Steiger and ProPublica if, instead of Mr. Sandler, the group's founder, chairman, and bankroller had been someone who, politically, was Mr. Sandler's polar opposite — someone who had supported conservative or libertarian causes and organizations.  How do you think that would have gone down with the J-schools, journalism reviews, and grant-giving foundations?

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Signs of institutional meltdown are everywhere apparent.  Wall Street and Detroit are obvious examples, as are the states of New York and California.  But nowhere is the collapse of standards and credibility more alarming than among journalists and their profession.

Evidence of journalism’s implosion is seen not only in the declining readership and viewership of the MSM, and in public opinion polls, but also in the recent antics of journalists themselves and of those grant-giving foundations that support journalism programs.

A lamentably good example of the latter was provided last week by the Knight Foundation -- the largest provider of funding for such programs at universities and nonprofit organizations -- and by the Associated Press.

In a release dated June 15, the AP announced that it was launching a project “to distribute watchdog and investigative journalism from nonprofit organizations to its 1,500 member newspapers.”  Two days earlier, the Knight Foundation announced a new $15-million program of grants to several investigative news organizations.  Among them are two that the AP plans to include in its distribution, the Center for Investigative Reporting and ProPublica.

These two announcements herald the birth of what would have been unthinkable in better times, the spectacle of an established news organization like AP accepting and distributing handouts from third parties.

Such an arrangement is, and would be, objectionable even if the “investigative news” organizations in question possessed the qualities of balance and objectivity.  But these don’t, and you don’t need to be an investigative reporter to figure that out.

Take, for example, the best funded of them, ProPublica.  From their own website comes this revealing statement about their mission: “Our work,” they say, “focuses exclusively on truly important stories, stories with ‘moral force.’  We do this by producing journalism that shines a light on exploitation of the weak by the strong and on the failures of those with power to vindicate the trust placed in them.”

What this suggests, of course, is that ProPublica is likely to have little or no interest in some of the worst aspects of public policy in the USA.  Things like the disastrous dependency on government, forged after decades of welfare programs, in America’s inner-city neighborhoods.  Or like the ruinous role played by public employees and their unions on state and municipal finance.  Or the impact on the cost and provision of health care by ambulance-chasing trial lawyers.

Just by their mission statement it’s clear that ProPublica’s heart wouldn’t be in doing these kinds of stories.  But that’s not the only evidence of the organization’s unfitness for the role being given it by the AP.  There’s also the small matter of its founder and largest benefactor.

Billionaire Herbert Sandler and his wife, Marion (they’re always mentioned together because of the role each played in the founding of Golden West Financial), have painted, through their contributions to Democratic and leftist organizations like the Center for American Progress and Acorn, an unmistakable ideological profile, leavened with a fair amount of hypocrisy.

As Jack Shafer of Slate put it, in a piece published shortly after the Sandlers founded ProPublica in 2007: “What do the Sandlers want for their millions?  Perhaps to return us to the days of the partisan press … ProPublica’s Web site vows that its investigations will be conducted in a ‘non-partisan and non-ideological manner, adhering to the strictest standards of journalistic impartiality.’  But philanthropists, especially those who earned the fortune they’re giving away, tend not to distribute their money with a blind eye to the results.  How happy will they be if ProPublica gores their sacred Democratic cows?  Or takes the ‘wrong’ position on their pet projects: health, the environment, and civil liberties?”

Providing an almost comic dimension to the Sandlers’ ambitions is the fact that earlier this year Time magazine named them to their list of the “25 people responsible for the financial crisis,” and "SNL" did a skit in ’08 in which it was suggested that they should be shot.

Looming over the whole of the Knight/AP exercise is the elephant in the room that is the public’s growing lack of trust in the media.  A piece written last month by Melik Kaylan for Forbes.com summarized that distrust as follows:

“The Reagan years also ushered in the distrust of the Eastern-seaboard intellectual elites.  President Reagan understood and exploited the great divide between the heartland and custodians of news, who were chiefly in New York.  The two sides saw two different Americas.  Journalists and the institutions that formed their ideas saw a country composed largely of wronged minorities with fascinating grievances.  Much of the country saw itself as a unified coherent nation with its traditions under siege from insular power blocs who were back-scratching each other all the way up and down the seaboards.  Out of that disconnect grew the success of Rush Limbaugh, Matt Drudge, Ann Coulter, Fox News, the blogosphere and the great decentralizing force of the alternative media."

By an ironic coincidence, on the same day that the AP came out with its announcement, the Gallup organization released the results of a new poll of Americans' ideological attitudes.  It found that conservatives outnumber liberals by a margin of 2 to 1.  More importantly it revealed that only 5 percent of the people consider themselves "very liberal," a designation that accurately describes the investigative nonprofits the AP and the Knight Foundation have now embraced.

Leave it to them to explain, as the media continue their march toward oblivion, how such a biased and shabby program will improve the public's trust in the mainstream media or in journalism.