The Washington Post and USA Today continued the media trend of blaming the mortgage industry and letting borrowers off the hook and presented support for more government regulation.
Democratic congressman Barney Frank (D-Mass.) “unveiled legislation aimed at curbing abusive lending practices,” according to the October 23 Post. Both the Post and USA Today seemed to favor the legislation.
“A public outcry against the mortgage industry is growing louder,” Noelle Knox and Sue Kirchhoff wrote in USA Today. “Lawmakers, regulators and consumer advocates say they are increasingly worried about the fallout from a record number of homes going into foreclosure. They're pushing the industry to move faster to aid homeowners, by forgiving past-due amounts, lowering rates and shifting people into fixed-rate loans.”
While the Post did include one critic of Frank’s bill, Kurt Pfotenhauer of the Mortgage Bankers Association, there was no indication that anyone else should be held responsible for failing mortgages—including the borrowers.
USA Today barely gave a nod to the responsibility of borrowers in its 1750-word article, saying only that: “Many of the subprime borrowers who got loans simply shouldn’t have.”
Instead, USA Today blamed lenders saying, “lending standards last year and early this year were recklessly low. Fraud was rampant.” Its story focused on the number of government regulatory solutions and quoted multiple proponents of regulation including Frank, but no statements overtly critical of more government regulation.
William A. Niskanen, chairman of the Cato Institute, said in the September 25 Cato Institute podcast, “Keep Capital Markets Free,” placing the blame entirely on the lenders doesn’t make a lot of sense.
Niskanen explained, “the mortgage lenders are being regarded as the villain. And, the whole idea of predatory lending has been invented. There is no formal definition of predatory lending.”
And what about the borrowers? Niskanen questioned the reasoning behind rewarding them when the borrowers should also be responsible. Brokers are being blamed, “not the people who may have misrepresented their income status or their employment status,” said Niskanen.
“Now at the same time, the lenders are now being subject to threatened regulation and the borrowers are going to be subsidized … I think this is a major mistake,” he concluded.
Also conspicuously missing from the Post and USA Today stories was a response from the ranking Republican on the Financial Service Committee, Rep. Spencer Bachus (R-Ala.), who questioned some congressional Democrats grandstanding.
“Spencer Bachus, Republican representative called on Democrats to ‘stop having press conferences’ and be more bipartisan in their approach to the issue,” Eoin Callan wrote in the October 4 Financial Times.
Bachus has said that increased regulation could have a detrimental impact on the mortgage market.
“Our goals should be to correct problems within the sub-prime market without choking off working Americans’ access to credit,” said Bachus according to the October 23 Los Angeles Times. “This is an important issue, and we need to get it right.”