Bad Journalism 101

A guy I like to follow, Jon Favreau, recently linked an article from AP titled: “Trump voter lost her home to new treasury secretary”.

There is so much wrong with this article that I scarcely know where to start. First of all, I get it, that headlines are sometimes sensationalized, and that there is a very appealing chance of going viral by having a bit of left-leaning schadenfreude. As far as I can tell from the article itself, the only thing accurate about the headline is that the woman in question voted for Trump.

Let’s dig in a bit.

OneWest, a bank formerly owned by a group of investors headed by Mnuchin, had foreclosed on her Los Angeles-area home in the aftermath of the Great Recession, stripping her of the two units she rented as a primary source of income.

Slowly now: a branch of a bank that made her a loan foreclosed on that loan after she couldn’t pay it. Mnuchin and many others, including notably excluded George Soros and John Paulson invested in OneWest after it filed bankruptcy in 2009.

The kicker, this wasn’t even just a primary residence, she rented out two units. On at least some level, this was an investment property.

Interpretation later confirmed, she took on more debt to increase her rental portfolio:

She rented out two of the units and lived in the third. Colebrook refinanced her mortgage in order to renovate the property and help buy additional homes to generate rental income.

So what exactly was the problem?

By the time the financial crisis struck in 2008, she had an interest-only mortgage on the triplex known as a “pick-a-payment” loan. Her monthly payments ran as high as $2,000 and only covered the interest on the debt.

Now, I don’t know the details of the contract that the person in question had with the bank, but let’s assume it was close to market, which would have meant a rate at or below 5% by that point. If she’s making monthly payments of $2,000, she owes about half a million bucks. From earlier in the article:

In 1998, she bought a triplex for $248,000 in Hawthorne, California, not too far from Los Angeles International Airport.

Admittedly, I can’t tell if this is the triplex we’re talking about, because the writing is bad and vague, but I assume it’s not some bait and switch.

So she took out about twice as much debt as the original value of the property to make more investments. What happened next?

“All my tenants lost their jobs in the crash,” Colebrook said. “They couldn’t pay. It was a knock-on effect.”

This has literally been the risk of owning rental real estate since the beginning of time, that your tenants will not be able to pay. It has almost nothing to do with OneWest, who would have much preferred she just pay her mortgage, and even less to do with Mnuchin. This is exactly what banks do.

So what’s the moral of the story? That if you lever up with as much money as anybody will let you borrow to buy more investments that you might get hurt if there’s an economic downturn? That Mnuchin is part of some terrible group of people for being part of a group and buying a bank at auction after the crisis and then running it like a bank?

One final point (the voter talking about Trump):

“He doesn’t want the truth,” she said. “He’s now backing his buddies.”.


In 2004, he founded a hedge fund, Dune Capital Management, named for a spot near his house in the Hamptons. The firm invested in at least two Donald Trump projects and, in one of them, was sued by Trump before a settlement was reached.

I can’t take this garbage form of journalism seriously. It said absolutely nothing, mixed facts with commentary, ignored the economic realities of life, and had a title that bore little resemblance to the facts.

It’s more important than ever to be a critical reader of what articles actually say. Blindly trusting headlines to be accurate has never been a good way to form opinions or consume information, but in 2016 that’s more true than ever. When it comes to ‘fake news’, as far as I’m concerned, pieces with no connection to reality are just as bad as total fabrications, at least lies are easier to spot.

Disclaimer: I didn’t vote for Trump, but don’t have any sympathy for people surprised that the man without a plan isn’t doing things the way they expected.