Fannie and Freddie coverage lack context, history

Former Wall Street Journal writer Dean Starkman writes for Columbia Journalism Review that the slew of stories about the government’s takeover of Fannie Mae and Freddie Mac lacks context and historical perspective.

Starkman writes, “As I argue in the current print edition of the Columbia Journalism Review, the business press has largely missed the extravagant corruption that overtook the mortgage-lending leaders, which threw away any semblance of underwriting in favor of what can only be called boiler room-style sales tactics — deception on a mass scale and as a matter of corporate policy — in order to meet Wall Street’s demand for product.

“The Orange County Register found a neighborhood where a staggering 75 percent of home loans were subprime, i.e., non-Fannie and Freddie.

“That’s crazy.

“And let’s not forget that Wall Street firms themselves, to cut out the middleman, bought their own subprime retail operations as the frenzy continued, as Bloomberg reminds us. It’s interesting to note how late Wall Street continued its push into retail, subprime lending. Now-floundering Merrill Lynch bought First Franklin in September 2006; the now-defunct Bear Stearns bought Encore Credit in October 2006; Morgan Stanley bought Saxon Capital in December 2006.”

Read more here.