Fannie Mae's bailout tab

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Journalists love a scandal. All too often that means the rest of us get fed round-the-clock coverage of Michael Jackson or enough celebrity gossip to make even a Hollywood agent blush. Sometimes that scandal is closer to home, and what's closer to your home than your mortgage?

Fannie Mae, the government-sponsored mortgage association, has been battling a mounting scandal since last year. It has accounting errors of about $11 billion. That's more than nineteenfold Enron's $567 million error. Then there's a Justice Department inquiry, a Securities and Exchange Commission investigation, and an Office of Federal Housing Enterprise complaint.

Fannie Mae's whole mess caused the departure of Chief Executive Officer Franklin Raines and several other top executives. At the same time, Fannie Mae stock has dropped roughly 30 percent: from nearly $80 a share to around $55. That's an added loss of more than $20 billion. This is news -- $30 billion worth of news -- but only print reporters are out there covering it regularly. TV news is out to lunch.

It's not like network news has ignored this kind of story in the past. When the Enron scandal hit, the networks delivered what Peter Jennings called "the Enron story for the day." They had every reason to do so. What's puzzling is their absence of coverage of the Fannie Mae disaster.

Charles Gasparino, a Newsweek reporter who has covered the story, gave his theory on a Dec. 28, 2004, edition of CNN's Newsnight with Aaron Brown. Mr. Gasparino called Fannie Mae a "politically correct company." He said: "I mean, they do all the things that, let's face it, liberal journalists like, like put home mortgages out there for poor people. And so right now, beating up on Fannie Mae is kind of politically incorrect."

Whether Mr. Gasparino's theory is correct almost doesn't matter. What does matter is network news is AWOL on an enormous story that threatens one of the nation's largest companies, one with implied guarantees of support from the federal government and our tax dollars. In other words, if Fannie Mae has problems, not only does it hurt the mortgage market, but we all might have to share the bill.

This analysis of network news noncoverage is the result of a new study by the Media Research Center's Free Market Project titled "Government-Sponsored Enron: Billion-Dollar Scandal Not Ready for Prime Time." We compared how much coverage TV networks -- ABC, CBS, NBC, and CNN -- gave Enron versus how much they gave Fannie Mae. The analysis focused on the nine months around the breaking of each story.

Just doing a LexisNexis search produced 3,017 hits for "Enron." A search of CNN alone produced 1,385 hits. During that nine-month period, Enron disclosed it had overstated earnings by $567 million since 1997.

A similar LexisNexis search was performed for the term "Fannie Mae" for those same media, from June 1, 2004, to March 1, 2005, again when the story was breaking. This search discovered a paltry 37 matches. Through those nine months, Fannie Mae was asked by its regulator to revamp its accounting practices, key executives resigned and about $11 billion in accounting errors were revealed.

Even Fannie Mae's announcement it couldn't deliver its 2004 financials and the subsequent 4 percent drop in its stock price weren't enough to push the story on to the TV news. But Enron remains a staple for the networks -- an interview with former Enron CEO Ken Lay was on "60 Minutes" on March 13.

The print media have done strong work on the story. Papers such as the Wall Street Journal and The Washington Post deserve credit for alerting the public to the mortgage giant's enormous problems. Look how an Oct. 4, 2004, Wall Street Journal editorial referred to the crisis: "The company was cooking the books. Big time."

Matters since have only worsened. Fannie Mae announced March 17 it would miss the filing deadline for its 2004 financial report. The Journal says it still hasn't filed its third-quarter report either.

Mr. Gasparino summed up his criticism of network news: "This is a huge story, and it's going overlooked." That problem continues. All that has changed is reasons to cover it keep growing. Thanks to mismanagement at Fannie Mae, there are already about 30 billion reasons TV news should be reporting on this scandal. Since all of us might end up paying for the Fannie Mae failures, make that 30 billion and one.

Dan Gainor is director of the Free Market Project (www.freemarketproject.org).