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Debugging the rumor mill

Bookworm on Sep 05 2008 at 9:43 pm | Filed under: Media matters, Sarah Palin

Explorations has a comprehensive list of the rumors circulating around Sarah Palin, and explains which are true and which are false. It’s amazing how much dirt managed to flow down the media pipeline is a single week.

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25 Responses to “Debugging the rumor mill”

on 06 Sep 2008 at 7:03 am 1Zhombre

“And I looked, and behold a roaring snowmobile, and her name that sat on it was Palin, and Hell-to-Pay followed with her. And power was given unto her over the red states of the West and the South, and Ohio and Michigan, to injure the Messiah with irony, and with sarcasm, and with plain speaking like those of the red of neck who slay the beasts of the earth and humiliate the pharisees of Harvard and DC.”
on 06 Sep 2008 at 7:16 am 2suek

“It’s amazing how much dirt managed to flow down the media pipeline is a single week.”

Yeah…but it’s also enlightening. It’s been made totally clear that such rumors are deliberately started for political reasons. That tells you something about those who start them. In the past, the rumors just sort of floated up, and you just kind of wondered where they came from. No doubt this time. It’s unquestionably a political tool, and it has been exposed for all to see.
on 06 Sep 2008 at 7:26 am 3suek

People are noticing…

http://www.realclearpolitics.com/articles/2008/09/the_unexamined_life.html
on 06 Sep 2008 at 7:46 am 4kitty

I think that “Palin Rumors” post crashed that blog. I know Lucianne had it linked in her Must Reads and had to remove it. I checked Google and it’s not even cached. Too bad, because it was a long and witty list.

…
on 06 Sep 2008 at 8:13 am 5johnfromcolumbus

Zhombre, that is simply awesome. If you don’t mind, I’m gong to borrow it.

And Book, is the magnitude of dirt that flowed this week really a surprise? Can you imagine the stuff about Mormonism that would be out there on the sewernet if it was Romney?
on 06 Sep 2008 at 8:23 am 6Tap

I couldn’t get to that blog through Bookworm’s link or google, but it’s not crashed. I searched for it on ask.com and went right to it.
on 06 Sep 2008 at 8:32 am 7suek

This doesn’t really belong in this thread, but I don’t see another one handy where it does fit. A very interesting evaluation…

http://www.atimes.com/atimes/Front_Page/JI03Aa02.html
on 06 Sep 2008 at 8:36 am 8Zhombre

Yeah, John, pass it along. Only change “humiliate” to “mock,” better word choice.
on 06 Sep 2008 at 9:19 am 9Ymarsakar

and explains which are true and which are false. It’s amazing how much dirt managed to flow down the media pipeline is a single week.

It is one of the fundamental reasons why a person should study the Art of Propaganda, regardless of whether they are simply interested in advertisement, good writing, the media, politics, or war.
on 06 Sep 2008 at 9:26 am 10Ymarsakar

It’s unquestionably a political tool, and it has been exposed for all to see.

A lot of people, I wouldn’t say most people, like being lied to and reassured. They want to be followers and followers are people who listen to the leader, the big man ,the alpha male on issues.
on 06 Sep 2008 at 8:05 pm 111Lulu

Beautiful Zhombre. Have you thought about a career as a political satirist?
on 06 Sep 2008 at 9:35 pm 12Ymarsakar

The Left doesn’t like to be mocked. It reminds them of bad memories.
on 07 Sep 2008 at 11:07 am 13Ymarsakar

I notice Oz can’t deal here in this thread about facts, but will be glad to spread Democrat propaganda and lies in another thread more conducive to Oz’s prejudices.

A rather interesting refutation of Oz’s “independent” claims.
on 07 Sep 2008 at 11:44 pm 14Mike Devx

What is most interesting is a comparison between the media’s treatment of rumors and issues surrounding Republicans vs Democrats.

The touchstone in this is, of course, the reporting of Bristol’s pregnancy and the Trig-is-not-really-Sarah’s story, when you compare either one against John Edwards’ baby by his mistress. Oh, how the mainstream media refused to even dig into that one until ABC finally followed the final Enquirer proof. And ABC was castigated as a traitor by the blogs, you’ll remember…

The whole purpose of rumor-reporting is to instill doubt in the viewers’ minds. In the end, the hoped-for impression via the mainstream media is “Those Republicans, I dunno… they seem kind of dirty, and you just can’t trust them.” Mission Accomplished.

I see Sally Quinn issued a quite reasonable apology on the OReilly Factor. My goodness, could NBC actually have decided that their partisanship towards Obama was becoming too rankly obvious even for them?
on 08 Sep 2008 at 10:30 pm 15dg

Campbell Brown from CNN asked McCain to name one decision or executive order that Palin made with the state national guard, given that the campaign is touting her control of the guard as foreign policy experience. She was castigated by McCain for crossing a line. What line? Since when can the press not ask about Palin’s professional experience???? What is McCain trying to hide???

On a related note, I found the following video rather amusing. I’m not the only one who demands logical consistency from would-be politicos…

Check out http://www.adn.com/sarahpalin/story/511471.html
on 08 Sep 2008 at 10:31 pm 16dg

Here is the correct link: http://www.youtube.com/watch?v=NYNfJ9SabFU
on 09 Sep 2008 at 5:03 am 17Ozzie

I notice Oz can’t deal here in this thread about facts, but will be glad to spread Democrat propaganda and lies in another thread more conducive to Oz’s prejudices.

A rather interesting refutation of Oz’s “independent” claims- Ymar

Oh, Geeze, Ymar. I haven’t even looked at this thread until this morning and I clicked on the link and saw one of the so-called facts and realized how ridiculous it was.

I’m not posting on this thread because I’m not interested.

I’ve learned enough to come to the conclusion that Palin is the darling of the Religious Right who needs to be shielded from the press, (after yesterday’s answer to the Fannie Mae bailout question, it’s clear why) and in my mind,( as well as in several honest conservatives’ minds) she isn’t remotely qualified.

She’s the manifestation of how powerful the Relgious Right has become and how much we’ve devolved as a nation.

I am not voting for McCain or Obama, but I am certainly going to vote against her.

And as for your frequent observations and declarations and expertise on ME: It was entertaining at first, but now it’s gotten creepy. . .
on 09 Sep 2008 at 7:14 am 18BrianE

This from Michelle Malkin in June 2003:

Martha Stewart is a too-easy target, an overstuffed pink pinata swinging in the wind, waiting to be thwacked by every last critic of capitalist excess. But the stock-dumping doyenne is no match for the real mother of all brewing financial scandals. That moniker belongs to the twin behemoths Fannie Mae and Freddie Mac.

Who, you say? Unlike Martha, or the three-piece-suited villains of Enron or Tyco or WorldCom, Fannie Mae and Freddie Mac haven’t been plastered all over the tabloids and prime-time TV. That’s because they are faceless, government-sponsored enterprises in a complex, loosely regulated, highly leveraged monopoly business that has engaged in questionable accounting practices and put billions of taxpayer dollars at risk — with plenty of private profiteering for company executives and Washington lobbyists, but almost zero accountability to the public.

As federally chartered “government-sponsored enterprises,” the two institutions have been exempt from normal securities regulations for almost their entire lives. Analysts unable to decipher Fannie Mae and Freddie Mac’s incomprehensible annual and quarterly reports have long suspected book-cooking with regard to their real cash flow. This week, the Wall Street Journal reported that Freddie Mac faces an SEC probe over possible accounting irregularities. Investigators will examine whether Freddie Mac may have deferred some income to smooth out results in future periods. The SEC will also probe the actions of the chief executive and chief financial officer, who were fired on Monday over an accounting review of earning restatements. The news sent stocks south and roiled some foreign markets as well.

Clothed in politically correct fashions (”Catch the dream,” beckons Freddie Mac’s program to boost minority home ownership; a “leader in diversity,” brags a Fannie Mae press release), these public-private hybrids are two dangerous pigs feeding at the federal trough. Congress created Fannie Mae (nickname for the Federal National Mortgage Association) in 1938 to bolster home ownership during the Depression. Three decades later, it was partially privatized, but retained a host of government benefits. In 1970, Congress spawned Freddie Mac (nickname for the Federal Home Mortgage Corp.) to provide a lending competitor to Fannie Mae. Both entities expand the pool of money for home purchasers by snapping up loans that lenders make to homebuyers, and then converting those loans into relatively safe mortgage-backed securities that are attractive to investors.

So, what’s wrong with this picture?

As Fred Smith, president of the Washington, D.C-based Competitive Enterprise Institute, has noted, these financial beasts are a textbook example of “profit-side capitalism and loss-side socialism.” When things go right for Freddie Mac and Fannie Mae, they keep the profits. But when things go wrong, taxpayers — not just private shareholders, managers, and employees — will be on the hook.

Freddie Mac and Fannie Mae each receive $2.25 billion lines of credit with the U.S. Treasury. These special pipelines give the institutions an implied federal guarantee available to no other private sector competitors in the mortgage market. That protection makes them immune to the costs normally associated with riskier and riskier behavior. Moreover, Fannie Mae and Freddie Mac are not required to pay state and local income taxes. In addition, the standard for how much money the government requires them to keep on hand in case homebuyers default on their mortgages is lower for Freddie Mac and Fannie Mae than for fully private banks and thrifts. The two corporations receive an estimated $10 billion a year in hidden taxpayer subsidies.

Political appointees to the companies’ boards pocket millions in stock options to bolster support on Capitol Hill. Clinton-appointed board members at Fannie Mae include Marc Rich lawyer Jack Quinn and Janet Reno’s lieutenant at the Justice Department, Jamie Gorelick. At the helm of Fannie Mae is another Clinton appointee, Franklin Raines, who was paid more than $4 million and had almost $6 million in unexercised stock options in his first year at the helm. Cheerleaders in both major political parties have opposed privatizing Fannie and Freddie.

If Martha Stewart is the face of capitalist excess, Fannie Mae and Freddie Mac are the poster children for government-sponsored gluttony. The potential fall of Freddie Mac or Fannie Mae could rival the savings and loan collapse of the 1980s. Too bad the Martha bashers, blind to the far greater catastrophes of market socialism, won’t pay attention until it’s too late.

They are too big and they are too expensive. Taxpayers are co-signers on every loan made by these two institutions. This is no gaffe on her part, just a recognition of the big picture. This may make the savings and loan bailout in the 80′s cheap.

What part is the gaffe– they are too big, or the bailout is too expensive?
on 09 Sep 2008 at 7:26 am 19dg

BrianE, Michelle Malkin is a MORON, full stop. There was no issue with analysts not understanding the financial statements of FRE and FNM. Unlike you and Malkin, I’ve actually read the 10-K’s and 10-Q’s and have analyzed the financials. All of the information that you would need in order to see that the two companies are under distress were clearly indicated in those statements. The two entities did have an implicit (now explicit) back-stop from the federal government that allowed them to borrow at preferential rates, but that was to serve the public good of making housing more affordable to more people on the reasonable theory that an ownership society–that is Bush’s goal and rhetoric, I believe–creates greater buy-in and engagement in America. Interesting, but not surprisingly, Malking fails to create a “control” for her analysis of the two lending giants, which would be the entirely private lenders, who actually were involved in the worst tranches of securitized loans–the infamous Z class–where the losses are much greater than what is expected in the conforming loans that Freddie and Fannie have backed. Malkin’s analysis is the equivalent of your doctor telling you that your heart attack is caused by the fact that you voted for Carter in 1980–she sees politics and partisanship, where the problem is entirely empirical.

And by the way, the equity holders will be effectively wiped out: the government will receive above market dividends, have warrants that dilute equity shareholders by 80% and the charter has been changed to maximize borrower utility rather than shareholder interest. The funds going to the institutions is needed to prevent a housing collapse, which is in the public interest, not the shareholders. And I would ask you and the economic “expert” Michelle Malking (who I don’t think has even studied the subject), why the bailout was needed? In case you don’t know, it was a combination of a Republican Fed Chairman holding interest rates too low and creating a bubble and a Republican Congress failing to regulate the worst lending practices seen since the 1920′s. Now, the laissez-faire approach is to tolerate the boom and bust cycles and suffer through a Great Depression–that is where Herbert Hoover took us. So maybe that is your solution and Malkin’s, but I think most Americans would rather see an orderly working out of the crisis that the Republicans have created, and the markets agree: foreign and domestic markets rallied on the news of the government intervention, and mortgage rates droped 50 bps (0.5%) on the news.

If you are going to quote stuff related to FRE and FNM, you should really cite experts, not partisan hacks that couldn’t draw a demand curve or describe the concept of economic utility if her life depended on it. Unless of course, you go to a shaman or witch doctor when you start coughing up blood.
on 09 Sep 2008 at 7:29 am 20dg

I forgot to mention, the reason that the regulation of FRE and FNM is different than private institutions is because there are different accounting and regulatory rules that govern them. They do not use GAAP accounting, but rules determined by OFHEO. They are not subject to SEC regulation and the oversight powers are weaker than the SEC. However, CONGRESS, which was controlled by the GOP during the run-up to the crisis, when action should have been taken, has the power to strengthen that regulation. The GOP CHOSE NOT TO. And now Malkin wants to blame the liberals for this too. If all the liberals left the country, Malkin would still find a way to cast blame on them to shield her own party from any reasonable responsibility. She is a travesty…but looked great in that cheerleader outfit on Youtube.
on 09 Sep 2008 at 7:55 am 21BrianE

Very interesting dg, but what part of Malkin’s piece is incorrect? I think you actually were making her case.

From Byron York: (Is he a moron also)

On May 23, 2006, as a jury in Houston deliberated the case against top Enron executives Kenneth Lay and Jeffrey Skilling, a little-known regulatory agency in Washington, the Office of Federal Housing Enterprise Oversight (OFHEO), released a study with the dryly bureaucratic title “Report of the Special Examination of Fannie Mae.” The document received far less attention than the news from Enron, but its conclusions were stunning. In meticulous detail, it outlined a culture of corruption at the Federal National Mortgage Association — better known as Fannie Mae — that rivals the most serious corporate scandals in recent years. In this case, however, the main players are Washington insiders — some of them prominent veterans of the Clinton administration — and the scandal’s effects could ripple through Congress for years.

Fannie Mae is the biggest single source of money for mortgages in the United States. From 1998 to 2004, the years covered by the OFHEO investigation, it was headed by former Clinton budget director Franklin Raines, whose top management team included former Clinton Justice Department official Jamie Gorelick, sometimes mentioned as a future attorney general in a Democratic administration. During that period, the report says, Raines and his team grossly overstated Fannie Mae’s earnings — to the tune of $10.6 billion — for the purpose of paying themselves big bonuses. “By deliberately and intentionally manipulating accounting to hit earnings targets,” the report says, “senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders.”

In doing so, the report says, Raines and his team steered Fannie Mae far afield from its original mission, transforming it from a stable business into a risky one. Fannie Mae has its roots in the New Deal, when it was established to increase the amount of money available for mortgages. Over the years, its main business has been to issue debt and then use the proceeds to buy mortgages from lenders, allowing those lenders to give out new mortgages. Originally a government agency, Fannie Mae went private in 1968, with the goal of “increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans,” according to its mission statement.

But which is the gaffe,
They are too big, or they are too expensive?
on 09 Sep 2008 at 8:44 am 22dg

BrianE, let’s take your final question and set aside the partisan hacks for a moment… I would ask you, are Citibank and Merrill Lynch too big? C and ML have outstanding debt of $900B, while FNM and FRE have debt of roughly $800B. Now, the former two private companies have taken on the riskier tranches of the mortgage market to chase yield, while the latter two remained within the conforming loans segment. FNM and FRE are right to do this, since they are prohibited from diversifying outside of mortgage lending. FNM and FRE control 80%+ of the conforming loans, but the major money centers and regional banks control the other 20% as well as the entire market for non-conforming loans. It was this latter area that went haywire. For reference, the bonds on FNM and FRE imply that 12% of all conforming loans will default with an assumed 50% recover; but we are seeing less than 1% default rates to date and the worst prior housing bust yielded less than 2%. In other words, the crisis is only one of confidence, which makes it tough for the firms to refinance debt. THey are not losing money on loans in any size that threatens their balance sheet. Also, while the government charter certainly helped them get big, there also are economies of scale in mortgage lending, so be careful how you answer the question… It seems likely that without FRE and FNM, C and ML or a few other private companies would be seeking the very same bailouts that these government chartered entities seek. So you tell me, are they too big? Also, should they be forced under without government help in a crisis that could greatly injure the economy, a crisis caused by Republican lack of oversight (as well as Democratic), and one that is based on investor fears rather than real economic losses?

You also ask if they are too expensive (presumably to the tax payer), and that is tough to answer since we don’t know yet the final cost. As I just mentioned, the expected/projected foreclosures are much, much higher than what C and ML have written down for and FNM and FRE have noted on their financials (and their publicly traded bond prices are implying). But I would note first the long line of government bailouts of private companies that have also been very expensive in the short-term (e.g., Bear Stears (where the shareholders did get a bailout, unlike FNM and FRE), as well as Chrysler in 1980, US airlines like USAir in 2002, all the private S&Ls in the late 80′s and early 90′s, Continental Illinois in 1984, Lockheed Aircraft in 1971, etc.). I would also ask whether the lack of regulations, which is the real cause of the crisis, wasn’t what was expensive…

Finally, I would address the partisan framing of the issue by both the authors you cite… The earnings smoothing that he describes was common practice in the 1990′s and early 2000′s. My finance professor showed us in 1998 how Microsoft and GE smoothed earnings every quarter to manage analyst expectations, nail their stock option targets, etc. It was not unique to Fannie and Freddie. Nor were the accounting scandals that followed the 1990′s boom. For example, Weill had to step down from Citibank following a set of scandals at that private institution, and we all know about Bush’s backers at Enron. Malkin seems to make a big deal about the salaries paid; however, unlike the $10M paid to Raines, Weill was collecting paychecks nearly north of $100M annually, and actually no major private bank CEO would get up in the morning for $10M. Of course, analysts know this, but the average public does not, which is why partisans like Malkin frame it this way, contrary to the facts: i.e., that any accounting manipulation that happened at FNM and FRE was somehow unique and the fault of the liberals, and that the managers of those institutions were grossly overpaid, and that a huge fraud was perpetrated in the filings, etc. As I mentioned before, the overextension of the company’s balance sheet was clearly laid out in the filings for anyone to see them, which is not the implication of either of the authors you cite. The government guaranty did not lead them to take greater risk, as FNM and FRE only participated in the safer conforming loans, unlike the entirely private banks. Finally, the asymmetry of risk that York describes has applied to many private companies as well, given all the government bailouts of private companies.
on 09 Sep 2008 at 8:47 am 23dg

I think I clearly am making a different argument than Malkin, who studied English and Music at Oberlin College and appears to know little about economics. Her husband, on the other hand, is a conservative economist with impressive credentials. Maybe she should ask him to write these types of stories next time…
on 09 Sep 2008 at 9:06 am 24BrianE

Without shocking you, here’s testimony before congress by Raines:
By Franklin D. Raines
Wednesday, July 16, 2008; Page A17

Don’t bail out Fannie Mae and Freddie Mac. They don’t need it. The losses they face are not surprising, given what’s happened to housing prices. They have more than enough capital to meet their cash obligations when those become due, which is the most basic definition of solvency. They also have hundreds of billions of dollars’ worth of unencumbered assets that can be used as collateral for secured borrowing, were that to become necessary. The recent Treasury proposals do not change these facts.

What the companies need from Washington is policy clarity. I say this not just on the basis of my experience as an executive at Fannie Mae but also because of my experience as director of the Office of Management and Budget and my time as an investment banker in the 1980s, when I helped solve the problems of cities and states in financial crisis.

The Treasury proposals, curiously, substitute government capital for private capital. Fannie and Freddie have served their housing mission for decades by marshalling private equity from around the world. Federal capital funds are inherently limited, while private capital is essentially unlimited. The goal of any rescue plan should be to restore unfettered access to the private markets.

The administration and Congress need to recodify the basic understanding between the two companies and the capital markets that has worked so well for so long. While recent efforts have quelled short-term concerns about an imminent collapse, we should be focused on what’s needed for the longer term.

Here are a few sentences for policymakers to start with:

Fannie Mae and Freddie Mac remain and will continue to be integral parts of the U.S. housing finance system. Their central role in housing policy, not a federal guarantee, is what has attracted trillions of dollars of debt capital.

This would not be an easy statement for the White House or the Fed to make. It would require them to abandon their multiyear effort to eliminate the companies by talking them down to the financial markets. Buyers of long-term debt are not interested in investing in entities that are opposed by their national government or are slated for extinction. Treasury Secretary Henry Paulson appears to be trying to make such a declaration, but the silence from the Fed and the White House on whether the companies have a future is deafening.

Fannie and Freddie will be permitted to operate as for-profit companies able to earn a competitive return on invested equity capital.

It has been confusing, at best, for equity investors to hear officials call for Freddie and Fannie to raise more capital while simultaneously restricting their ability to earn a profit on that capital. The government needs to remove impediments to the companies’ investing in on-balance-sheet assets, creating new products within the secondary mortgage market and managing risks in the most cost-effective manner. Also, Congress needs to make clear that the companies are not going to be a cookie jar to be raided whenever housing funds are needed elsewhere. If Fannie and Freddie can earn a competitive return on capital invested, there will be no limit to the amount of equity capital they can raise.
on 09 Sep 2008 at 9:25 am 25dg

And your point, exactly, is what?