On Wednesday, Barack Obama unveiled a $275 billion plan to shore up the housing market and forestall some future home foreclosures. It prompted an impassioned, scattershot, and ultimately clownish response from CNBC's Rick Santelli. Without apparently reading the plan, he railed that "government is promoting bad behavior" and that the plan was an effort to "subsidize the losers' mortgages." He then turned to rally the traders around him who booed. Waving his arms like a frustrated conductor, Santelli asked: "How many of you people want to pay for your neighbor's mortgage for a house that has an extra bathroom and can't pay their bills?" A fellow on the trading floor yelled: "How about if we all stop paying our mortgage. It's a moral hazard." Someone may also have yelled "Go Bears!"
The clip—soon known as the Santelli Rant—became an instant overhyped sensation. The Drudge Report linked to it, and NBC put it into heavy rotation. Santelli was the top story on the NBC Nightly News, and he was replayed or interviewed across NBC, CNBC, and MSNBC. (He may also have been on the CCTV in Rockefeller Center. These network executives are no dummies. As of Friday afternoon, the clip had been viewed 1,277,015 times on CNBC.com, six times as often as the next most-viewed clip.)
The rant started a populist face-off. Obama and his aides have been arguing for the last several weeks—particularly in the middle of the stimulus debate—that they were more in touch with the views of regular Americans than the elites in the newsrooms and on the cable television channels. Now, Santelli was using a version of their charge against them. He was speaking for regular people against the administration's elitist economic theories.
The White House shot the charge right back. "I think we left a few months ago the adage that if it was good for a derivatives trader, that it was good for Main Street," White House press secretary Robert Gibbs said Friday. "I think the verdict is in on that."
It's definitely not White House policy to elevate cable talking heads. But Gibbs had to push back against the blanket coverage Santelli was getting. He did so pointedly and at length. "I've watched Mr. Santelli on cable the past 24 hours or so. I'm not entirely sure where Mr. Santelli lives or in what house he lives. But the American people are struggling every day to meet their mortgage, stay in their jobs, pay their bills, send their kids to school, hope they don't get sick or somebody they care for gets sick and sends them into bankruptcy," Gibbs said. He then offered to buy Santelli a coffee (decaf) and instructed him on how to print the president's plan so that he might inform himself. "I also think it's tremendously important that for people who rant on cable television to be responsible and understand what it is they're talking about. I feel assured that Mr. Santelli doesn't know what he's talking about."
To recap: Santelli is an out-of-touch elitist who is uninformed and too thick to know how to use a printer. (That he drools was implied.) It's rare that a press secretary gets to take a swing like this, particularly in an administration in which the boss is always talking about bipartisanship. But everyone agrees that cable blowhards can be treated roughly, so Gibbs could go beyond what he might dish out to a member of the opposition party.
Politically, Gibbs wants this fight because his bet is that Santelli is a good face for the opposition. He's a member of the media, and people don't like us very much. And Santelli's persona is well short of huggable. Plus, he can easily be tied to the financial interests that people blame for the current mess.
When I spoke to Gibbs after his counter-rant, he made a broader claim. "What Santelli is saying is that government should not be involved in any of this. That's why we are where we are, where derivatives could be leveraged 40-to-1. That's why we're in this mess to begin with."
Gibbs also had to push back because the White House has worried all along about the sentiment at the heart of Santelli's show. The New York Daily News has chronicled the public ambivalence about the bailout. And Willie Honig, a listener to the Slate political "Gabfest," who describes himself as "a pretty liberal guy, not some conservative nut," put it this way in an e-mail:
My wife & I realized that there was no way that we could afford to buy a home responsibly, so we reluctantly decided to rent for ever. Many of our friends who are financially reckless decided to buy condos with no money down adjustable rate interest only loans. I don't understand why the government should bail these people out to artificially keep real estate prices inflated to a point where we can't afford to buy, punishing us for acting financially responsible. I can understand the bailouts like T.A.R.P., because if the credit markets are frozen we all suffer. However, taking tax dollars from me while I am trying to save for a 20% down payment & giving it to my neighbor who bought a condo with no money down really feels unfair.
To combat this view, Gibbs and the president point out that much of the plan is aimed at people who have played by the rules and paid their mortgages on time but nevertheless have seen their home values fall below the value of their mortgage. These "underwater" borrowers merely need a hand from government to be in a position to refinance and make their payments easier. Treasury Secretary Timothy Geithner even suggested they might use that extra money from refinancing somewhere other than in their house, which would act as an economic stimulant.
If there is a potential political problem for Obama in selling the plan, it may not come from the underwater borrowers but the 3 million to 4 million who are "at-risk," whom Obama has also pledged to help. Some of these people did engage in riskier behavior, signing up for no-money-down loans and living beyond their means. If those borrowers become the face of this plan, then maybe the fairness argument will gain broad currency and opponents of the plan will get more of a hearing. But that will probably happen only if the voice of the opposition is that of Willie Honig and not Rick Santelli.