Doin’ Well by Doin’ Good: Fannie Mae and the Press

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.

One Reply to “Doin’ Well by Doin’ Good: Fannie Mae and the Press”

  1. Well-said Patrick. The media’s (especially the NYT) performance on major issues including Iraq, home ownership, FNMA, the health care bill, the deficit, pensions, rates a big F.

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