Obama's home loan modification program was talked up by the bailout-friendly news media as a potential "ray of light" for struggling homeowners.
But on June 21, Associated Press reported the mortgage assistance program is "falling flat."
The broadcast networks supported the mortgage modification and housing bailout when Obama launched it in 2009, after criticizing Treasury Secretary Henry Paulson's plan for not doing "enough" to fix the problem. ABC, CBS and NBC haven't mentioned the new figures since AP reported them.
"More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out," AP said. "That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes."
The "ambitious" Home Affordable Modification Program was supposed to help 3-4 million people. As of last month the number of dropouts (436,000) exceeded the permanent modifications by almost 100,000 (340,000).
This was part of the same housing bailout Rick Santelli condemned on CNBC saying "the government is promoting bad behavior." Santelli's rant against the housing bailout helped inspire thousands of Americans to protest bailouts and runaway government spending at Tea Parties around the country in 2009 and 2010.
But Santelli's opposition to a bailout was an exception among the pro-bailout news media. As recently as Feb. 18, 2010 ABC's Robin Roberts was praising the program as "what may be a ray of light for the millions of homeowners struggling to hold on to their piece of the American dream."
Roberts and Bianna Golodryga downplayed problems saying that there had been "hiccups" in the program, but placed the blame for those problems on banks unwilling to work with homeowners, rather than on the government.
Golodryga's report also included an expert who criticized the program from the left saying it was "nowhere near the size and scope of what we need to, to stem this tide." Golodryga is engaged to White House budget director Peter Orszag, who announced his resignation June 22, 2010.
ABC's Jeffrey Kofman also found left-wing criticism of the program to incorporate in his story. On Feb. 18, 2009, Kofman mentioned concerns "that a $75 billion bailout can't single handedly turn around an $11 trillion housing market. But they say it is a start."
Roughly a month later, CNBC's Diana Olick acknowledged that the $75 billion program had "fallen short" of helping the 3-4 million homeowners on "Nightly News" March 26, 2010. At that time, she reported that only 200,000 permanent modifications had been done. But Olick didn't criticize the Obama administration's decision to expand the plan to more borrowers.
In 2009, when Obama's two-part mortgage bailout was launched, CBS had no criticism or difficult questions in its "Early Show" segment March 5. The night before, Katie Couric described the plan as "relief for struggling homeowners" on "Evening News."
Now it appears the bailout didn't work and may jeopardize the economic recovery, according to CNBC's Larry Kudlow.
Kudlow reacted to the latest mortgage modifications data on June 22, saying that "Housing in particular looks vulnerable to that double-dip [recession]. And all these goofy, temporary tax credits and mortgage modifications and other forms of temporary stimulus nearly steal activity from the future and never work permanently, as Milton Friedman argued [years ago]."
‘Controversial' Program Struggles, Despite Network Support
Like other bailouts, the networks favored the mortgage bailout and loan modification program when it was announced in 2009. Now that the program is a failure don't expect a retraction. So far the networks have ignored the new data Treasury released on June 21.
Since the broadcast networks haven't done much reporting on the problems with the loan modification program, people might wonder why it isn't working.
According to AP, "A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out."
AP also warned that more foreclosures could be ahead as people leave the program.
The Washington Post reported that about half of the program dropouts "received another type of loan modification from their banks." Only 7 percent have gone into foreclosure, according to CNNMoney.com.
The timing of the news was bad for politicians trying to pass another housing bailout - this one $3 billion in loans for homeowners who are out of work.
Politicians should be wary given the outrage already directed against mortgage bailouts, since it was the potential housing bailout that angered many and led to tea parties across the country. Santelli's initial rant condemned the proposed housing bailout and touched a nerve with traders and America at large.
"And in terms of modifications, I'll tell you what, I have an idea. You know the new administration's big on computers and technology," Santelli declared.
"How about this, (Mr.) President and new administration - Why don't you put up a web site to have people vote on the Internet as a referendum to see if we really want to subsidize the losers' mortgages, or would we like to, at least, buy cars and buy houses in foreclosure and give them to people who might have a chance to actually prosper down the road, and reward people that could carry the water, instead of drink(ing) the water."
After traders reacted with claps and cheers, CNBC's Joe Kernen replied, "Rick, they're like putty in your hands."
Santelli denied that and continued saying, "This is America! (turns around to address pit traders) How many of you people want to pay for your neighbors' mortgage that has an extra bathroom and can't pay their bills? Raise their hand. (traders boo; Santelli turns around to face CNBC camera) President Obama, are you listening?"
Networks Back Mortgage Rescues, or Complain They're Not Big Enough
Obama's mortgage bailout was praised by the many in network news media, after an earlier mortgage rescue designed by former Treasury Secretary Henry Paulson was attacked from the left by the broadcast networks because it wouldn't help "enough people."
"It sounds as if it doesn't help anybody who had their mortgage rate increased or got foreclosed in 2007," ABC "World News" anchor Charles Gibson complained on Dec. 5, 2007.
"CBS Evening News" sympathized with a Texas couple who "can't afford" to keep their large ranch home (complete with horses), supposedly because of the rate increases on their mortgage.
CBS also ignored skepticism of a homeowner bailout on April 2, 2008, arguing that since the government had bailed out banks, mortgage holders should get the same assistance.
"Now to the foreclosure crisis that has so many Americans worried about losing their homes," "Evening News" anchor Katie Couric said that night. "After the government helped rescue Bear Stearns, calls grew louder for Washington to help struggling homeowners as well. Today on Capitol Hill, there was at least the promise of some assistance."
In July 2008, ABC's Golodryga called "a sweeping housing bailout bill" "good news for potential homeowners."
The networks also endorsed the $700 billion "rescue" package in 2008 that was voted down by 228 representatives including 132 "rebellious" conservatives and 94 Democrats.
Rep. Mike Pence, R-Ind., was one of those who voted against it because "The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts a basic truth of our free market economy."
The list of reporters and anchors who championed the first bailout that failed and ultimately the bill that passed on Oct. 3, was long and included CBS's Anthony Mason, ABC's Betsy Stark, Bianna Golodryga and Jake Tapper, NBC's Tom Brokaw and CNBC's Jim Cramer all called for the government to be the knight in shining armor with taxpayer dollars. Cramer was interviewed repeatedly on NBC and CNBC and even appeared on rival network ABC during "Nightline."
It wasn't just housing bailouts. ABC, CBS and NBC also promoted the nearly $800 billion stimulus bill. They campaigned for the biggest spending bill in history, picking pro-stimulus speakers more often than opposing speakers and almost completely failed to ask how the enormous bill would be paid for.
Like this article? Sign up for "The Balance Sheet," BMI's weekly e-mail newsletter.