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Monday, July 14, 2008

From the "Closing the Barn Door After the Horse Runs Away" file
Posted by Jill | 5:44 AM
It's tempting to regard the recent trend of newspaper ombudspeople smacking around their own papers' editors regarding stories that make said newspaper not even fit for wrapping fish as a laudable development, were it not for the damage that said stories have already done by the time the smackdown is delivered.

New York Times ombudsman Clark Hoyt usually does a good job of this, but again -- by the time he weighs in, the story is already out in the ozone, such as when he chastised Edward Luttwak for passing off speculation that overseas Muslims would be appalled at Barack Obama abandoning "the Islam of his father" as expertise. But even he ultimately dances with the one that brung him (and that signs the paychecks), as when he defended the paper against charges of sexism in its coverage of Hillary Clinton's presidential campaign.

Just before the July 4 weekend, the Washington Post ran a hit piece on a home loan that Barack Obama had taken out. (I wrote about this piece here.) That there's no there there is immaterial -- WaPo is a paper of note, and once they published this piece, the story was out there:





The coverage above debunks the "sweetheart deal" idea, but note how it includes mention of a staffer who resigned from his campaign, Sen. Chris Dodd's sweetheart mortgage, the notion that getting a house for below asking price is somehow sleazy, and even throws in the name of Tony Rezco, who had nothing to do with it. So the point is made. Sort of like invoking "terrorist fist jabs" and linking Obama with Jesse Jackson.

So please forgive me if I don't stand up and applaud Deborah Solomon's praising by faint damns the paper's hit piece:

Readers also objected to the story's prominent mention of controversial mortgage loans given two other senators and a prominent Obama supporter by the troubled Countrywide Financial Corp. James Duemer of Potsdam, N.Y., said that "the inclusion of information in the story about Countrywide is irrelevant: the Obamas got their loan from Northern Trust. The rhetorical purpose of the details about Countrywide is to create an appearance that the Obamas got a special deal because Mr. Obama is a senator."

Of the seven financial and mortgage experts I talked to, three were former reporters. The reporters thought the rate was low enough to merit a story. Financial experts who weren't journalists thought the rate was normal and something that any other wealthy, smart borrower might have gotten.

Keith Gumbinger, vice president of HSH Associates, was quoted in Stephens's story as saying that Obama "did better than average. It's a good deal." Gumbinger also told me that the rate "was not out of the boundaries" of what other borrowers were offered. "Frankly, any reasonably savvy borrower should have been able to do better than average. That context was missing" from the story, he said.

The story quoted an Obama spokesman as saying that the rate was lower because of a competing offer. It is common for borrowers to shop for the best rate. The story noted that the Obamas had enjoyed a surge in income. This came through higher-paying jobs for both and a $2.27 million book deal for him.

Northern Trust Vice President John O'Connell said in an interview, "This was not a unique situation -- it is common and consistent business policy which shows no favoritism toward politicians, celebrities or any public figures. His rate was based on the fact this is a client who could potentially bring us more personal business." The Obamas since have invested about $3 million with Northern Trust, the Obama spokesman said.

O'Connell said that Northern Trust's rate on this type of mortgage at the time was 5.81 percent and that a discount of 0.125 percent was available to clients or prospective clients based on the potential for more personal business; 0.060 percent was subtracted from the rate because it was a competitive bid.

Bob Bauer, the Obama campaign's general counsel, is familiar with the mortgage and reviewed the loan with bank officials. He said that the story "tilted over, to any reader, into a story of preferential treatment, not justified by the facts. The fact that Obama is a U.S. senator is immaterial." After reviewing the loan file from an ethics point of view, he said, "it was a walkaway, a piece of cake." To Bauer, the rate Obama got wasn't as relevant as whether another borrower in the same circumstances would have received the same treatment and gotten a loan at the same rate.

Then why hadn't the Obama campaign complained about the story? Bauer, an expert on ethics and campaign finance, said a Columbia Journalism Review critique of the story was so good that "we didn't have a whole lot to add." CJR's Campaign Desk blog said that there "there doesn't seem to be much of a story here" and that the story raised more questions than it answered.

Christopher Cruise of Silver Spring, a national trainer of mortgage brokers and loan officers, thought the story was "fair, broad and deep." A former reporter, Cruise suggested that Obama should not have bargained for a lower rate if for no other reason than to avoid the appearance of preferential treatment.

Holden Lewis, a reporter who covers mortgages for Bankrate.com, said, "I realize that the story annoyed some people, but this was a case of an enterprising reporter asking a question that had to be asked and who got it answered thoroughly. I wish I had written the story."

Would he have done anything differently with the story? "I would have stressed that the mortgage rate was normal for someone who has $3 million invested with the brokerage lending the money. The money they invested was more than the mortgage, so they are incredibly good credit risks.''

Guy Cecala, owner of Inside Mortgage Finance newsletters in Bethesda, said the rate was not typical for most lenders to offer good customers. "It certainly raises eyebrows and suggests that Obama got the deal because he was a U.S. senator," he said. "I don't think you will find that Northern Trust handed out any other 5.625 percent, 30-year fixed-rate loans that day or week." Cecala said he had negotiated hard with banks himself for several loans and the most he had ever gotten was an eighth of a percentage point discount.

O'Connell said information about the other loans given that week is not easily available. He said Cecala's statement does not reflect an understanding of Northern Trust's business. "Our core business is wealth management, and mortgages are one of many services we provide to our clients," he said.

Jill Hoogendyk, president and owner of HomePoint Mortgage Co. in Phoenix, said, "It's nothing for one borrower to get a quarter percentage point lower than another borrower on any given day. The industry is set up in such a way that owners have that kind of flexibility. If you have a high-net-worth customer, it makes perfect sense to develop a business relationship that would bring in more business to the bank" by giving a break on a rate. "There's nothing unethical or scary or anything else about it. It's good business. If you take away the fact that he's a U.S. senator, no one would have a problem with that."

I asked the advice of my longtime financial adviser and CPA, Stephen B. Smith of Williams-Keepers in Columbia, Mo., only because Smith is about the most Republican Republican I know when it comes to financial matters. And he's no Obama fan. After reading the article, he said: "No story. It's a very normal mortgage gotten by normal people, not even a sweetheart deal. The story quotes average rates. Averages have a range in this context. The rate charged is probably within the range of others in the sample who had no reason to get a favor. That is not a rate to shock the conscience."


Well. Reporters thought the rate merited a story. This is hardly surprising, after all, the nature of journalism today is about "gotcha", whether there's anything to get or not. I'm told that Barack Obama has two black daughters, too.

What's appalling is that the Washington Post is bending over backwards to try to make this look like something sleazy or illegal, which then allows CNN to pad the story by invoking Tony Rezco -- while the way John McCain is gaming the campaign finance system and the way he's a tax deadbeat in San Diego has received only a fraction of the coverage. If the mainstream press were perhaps a bit more even handed in their elevation of the trivial into the monstrous, perhaps they might have more credibility.

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1 Comments:
Blogger D. said...
The person who seemed to make "gotcha" journalism work was Orianna Fallaci, and that may have had something to do with (1) fearlessness and (2) having actual "gotchas" -- well, probing questions unexpected by the subject.

Personally, I think that one of the underlying problems with journalism is that there are too many Jimmy Olsens and too few (sorry; turn of phrase alert) Jimmy Breslins. (And as a side issue, the JOs need an annual refresher course in US history, because there have been howlers in the papers.)
7/14/08, 5:19 PM  
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