Right-wing media are attacking President Obama over a recent Federal Reserve report that found that the median net worth of American families contracted between 2007 and 2010. However, right-wing media are ignoring the effects of the burst of the housing bubble and its central role in causing the decrease in the median wealth of families.
Fed Blames Housing Crisis For Most Of The Decrease In Family Net Worth
Fed: "Housing Was Of Greater Importance Than Financial Assets For The Wealth Position Of Most Families."
Housing was of greater importance than financial assets for the wealth position of most families. The national purchase-only Loan Performance Home Price Index produced by First American CoreLogic fell 22.4 percent between September 2007 and September 2010, by which point house prices were fully 27.5 percent below the peak achieved in April 2006. The decline in house prices was most rapid in the states where the boom had been greatest. For example, California, Nevada, Arizona, and Florida saw declines of 40 to 50 percent, while Iowa saw a decline of only about 1 percent. [Federal Reserve Bulletin, June 2012]
Politico: "The Drop In Net Worth Largely Stemmed From The Housing Crisis." Politico, in a June 11 article reported:
The drop in net worth largely stemmed from the housing crisis, the Fed said in its Survey of Consumer Finances: "Although declines in the values of financial assets or business were important factors for some families, the decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices."
The Fed pointed out that between 2007 and 2010, median net worth "fell dramatically for families living in all regions of the country, but especially for those living in the West -- a 55.3 percent decline. This pattern reflects the effect of the collapse of housing values in several parts of the West region. Median wealth in every other region fell 28.2 percent or more." [Politico, 6/11/12]
WSJ: "Much Of [The Net Worth] Drop Was Driven By The Housing Market's Collapse." The Wall Street Journal in a June 11 article reported:
As the U.S. economy roiled for three tumultuous years, families saw corresponding drops in their income and net wealth, according to the Fed's Survey of Consumer Finances, a detailed snapshot of household finances conducted every three years.
Median net worth of families fell to $77,300 in 2010 from $126,400 in 2007, a drop of 38.8%-the largest drop since the current survey began in 1989, Fed economists said Monday. Net worth represents the difference between a family's gross assets and its liabilities. Average net worth fell 14.7% during the same three-year period.
Much of that drop was driven by the housing market's collapse. Families whose assets were tied up more in housing saw their net worth decline by more. Among families that owned homes, their median home equity declined to $75,000 in 2010, down from $110,000 three years earlier.
Between 2007 and 2010, incomes also dropped sharply. In 2010, median family income fell to $45,800 from $49,600 in 2007, a drop of 7.7%. Average income fell 11.1% to $78,500, down from $88,300. That was a departure from earlier in the decade. During the preceding three years, median income had been constant, while the mean had climbed 8.5%.
Family incomes also dropped the most in regions of the country hardest hit by the housing market tumble. Median family income in the West and South decreased substantially, while those in the Northeast and Midwest saw little change. [The Wall Street Journal, 6/11/12]
Former Treasury Department Economist Rattner: Recession Driven Home Value Depression "Really Drove" The Change In Median Net Worth. During the June 12 edition of MSNBC's Morning Joe, guest, and former Obama Treasury Department economist Steve Rattner, stated that median net worth decreased in large part because of the housing crisis. From the broadcast:
So as Mika said, there was some interesting data that came out yesterday from the Federal Reserve -- their survey of family households. And what they found was quite extraordinary, which is that the -- after having pretty well in the '01-'04 period, at least increasing, after having a fairly robust period in the middle of the 2000s, the median net worth of a family dropped -- the median average net worth of a family dropped almost 39 percent between 2007 and 2010.
Now most of that is your home. That's what's really drove it. But here's an equally interesting chart. If you were at the top, you actually did pretty well. You're actually up 1.9 percent. If you were at the bottom, you lost 27.1 percent, which is not a great outcome. But if you were in the middle you lost anywhere from 29 percent to 35 percent because the people in the middle are the ones who depend most heavily on their houses for their net wealth. [MSNBC, Morning Joe, 6/12/12]
Right-Wing Media Disappears Housing Bubble's Effect To Attack President Obama
Drudge: "Net Worth Of American Family Falls 40% In 3 Years." The Drudge Report linked to a June 11 Washington Post article with headline that read, "Net Worth of American Family Falls 40% in 3 years." Drudge links to a Washington Post story on the Federal Reserve's findings. [Drudge Report, 6/11/12]
Weasel Zippers Falsely Claims "American's Net Worth Has Plunged 39% Since Obama Took Office..." Weasel Zippers reproduced a portion of the Washington Post column linked to by the Drudge Report, titling the post "American's Net Worth Has Plunged 39% Since Obama Took Office." [Weasel Zippers, 6/11/12]
- In Fact, The Report Does Not Measure Net Worth "Since Obama Took Office." The Fed report measures net worth between September 2007 and September 2010. Of that time, only about one year and eight months was under the Obama administration. [Federal Reserve Bulletin, June 2012]
Instapundit On Net Worth Statistics: "How's That Hopey-Changey Stuff Workin' Out For Ya?" [Instapundit, 6/12/12]
Breitbart.com: "American Family Net Worth Nosedives 40%, Obama Approval Still 50%." [Breitbart.com, 6/11/12]
Right-Wing Media Have Attacked Attempts To Mitigate The Effect Of The Housing Crisis
Fox Calls Bank's Agreement To Pay $25 Billion To Help Homeowners And Settle Claims Of Foreclosure Abuse A "Deadbeat Bailout." On February 10, various Fox News' shows called a $25 billion dollar settlement between major lenders and the Federal government a "deadbeat bailout" of home owners, without acknowledging the existence of foreclosure abuse. [Media Matters, 2/10/12]
Limbaugh Claimed Obama Mortgage Relief Plan Had "A Racial Component." During the February 9 broadcast of Premiere Radio Networks' The Rush Limbaugh Show, host Rush Limbaugh claimed that a mortgage relief plan by President Obama had "a racial component," and that it pit poor people against Wall Street bankers. [Media Matters, 2/09/12]
Fox Calls Obama's Mortgage Relief Plan "Purely A Political Stunt." On October 24, 2011, Obama announced a government sponsored mortgage refinancing program. Fox News responded by calling the plan "purely a political stunt," "a re-election ploy," and "a farce." [Media Matters, 10/25/11]