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Pay no attention to the people behind the curtain

Monday, October 13, 2008

Don't just reprint lies because someone says them. Please call them lies.

by folkbum

Reporters are supposed to report facts, yes? And when someone gives you statements that don't square with reality, it's your responsibility as a reporter to point that out, right?

So tell me why Diana Marrero just lets Republican Jim Sensenbrenner lie?
For Sensenbrenner [the current economic crisis] dates back to the Community Reinvestment Act of 1977 that required banks to offer credit in every market they served. The act forced banks to lend to “those who lack the ability to pay,” Sensenbrenner says.

The problems created by the law were exacerbated by Fannie Mae and Freddie Mac, Sensenbrenner says. The private mortgage companies, which were recently taken over by the government, were able to borrow money at low rates thanks to the government’s implicit financial backing. Critics say they took too many risks with borrowers and grew too big, holding or backing about half the mortgages in the United States.

“I thought the agencies were out of control and the crisis proves it,” Sensenbrenner said, referring to some of the loans being given out by Fannie Mae, Freddie Mac and other lenders as “NINJA” mortgages, as in no income, no jobs, no assets. “Giving mortgages to those types of people was a recipe for disaster,” Sensenbrenner says.
Later in the story, Marrero offers a half-hearted "depends on who you ask" excuse for not calling Sensenbrenner on these falsehoods, given that lots of Republicans and Republican sympathizers have internalized the Fannie Mae/ Freddie Mac/ CRA line of crap as the truth. The problem is, that line of crap is in fact a line of crap. More responsible news organizations have done the research to lay that myth conclusively to rest:
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.

Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis. [. . .] Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market. [. . .]

Conservative critics also blame the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods. [. . .] What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
There's plenty more where that came from--including the fact that Fannie and Freddie make no loans to borrowers at all. If Sensebrenner truly told her that there were "loans being given out by Fannie Mae [and] Freddie Mac," than he was lying through his teeth. If he didn't say that, and Marrero just slipped it in herself, then she has done a poor job researching the question and is perhaps the wrong person to be writing about Congress and the financial crisis.

In addition, the funniest blog on the planet points to a study of CRA loans, and found that CRA loans constituted only 23% of all loans and 9.2% of high-cost loans; were twice as likely to be retained in the originating bank’s portfolio than loans made by other institutions; and were less likely to be foreclosed upon than other loans. That does not suggest to me that the CRA or Fannie and Freddie were at the root of this crisis--which is the result of bad loans, sold off like hot potatoes, that eventually go south. The data show CRA loans just don't fit that profile.

Marrero's job is to find those same studies and apply the facts to Sensenbrenner's baseless lies. It is not merely to reprint what he says with a weak he said-he said defense of blatant falsehoods. Sensenbrenner may be a biggity-wiggity in local politics. But a liar is a liar--and needs to be called one by the reporters who cover him.

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