Barack Obama was on the teat, George W Bush was too: is it any wonder no one had any interest in correcting, blowing the whistle of stopping the subprime crisis?
A report published in the US overnight by the Centre For Public Integrity shows that the top 25 originators of subprime mortgages gave around $US370 million over a decade to grease wheels in Washington.
Those thoughtful folk at the Financial Times obviously got the drop because they published a great interactive graphic. It is both depressing and explanatory.
Now many of those same politicians, and the Democratic Party have attacked banks, subprime mortgage originators, lenders, brokers, advisers, bankers, anyone who they can take aim at. And yet they have studiously ignored their complicity. Two senior Democrat senators received concessional loans from one subprime lender and originator, Countrywide Financial Services.
Many right-wingers in the US, UK, Australia and elsewhere have blamed either the Carter Administration, or that of President Clinton for changing the rules to virtually force banks and financial groups to lend subprime mortgages. But the CPI report shows for example (as explained by the FT in this report) that President Bush made a man who ran a company that originated $US80 billion of mortgages, and who donated to Bush and the Democrats, an ambassador.
Take Roland Arnall, founder and chief executive of Ameriquest Mortgage Co, the California-based company that made more than $80bn in subprime mortgages between 2005 and 2007.
Ameriquest was repeatedly held up by regulators and courts for abusive lending practices, most recently in 2006 when it agreed to pay a $325m fine after it was shown it had misled borrowers, falsified documents and pressed appraisers to inflate home values.
The company, which has since closed, gave $263,000 to George W. Bush in campaign contributions. Mr Arnall, who died last year, went on to become Mr Bush’s ambassador to the Netherlands. To keep things even-handed, his company donated $1.57m to the Democratic party.
More worryingly the report shows that many of the top 25 subprime mortgage originators were owned by some of the largest US banks, such as Citigroup, Goldman Sachs, Wells Fargo, JPMorgan and Bank of America. All of these banks are now recipients of tens of billions of dollars in US Government/taxpayer capital (so-called TARP money), especially City and BofA. According to the FT, “between 2005 and 2007, which was the peak of subprime lending, the top 25 subprime originators made almost $1,000bn in loans to more than 5m borrowers, many of whom have had their homes repossessed”, says the Center for Public Integrity, a Washington-based journalistic watchdog.” The banks, which have received the vast bulk of the $700bn in troubled asset relief (Tarp) funds issued since last October, also supported the lobbying effort to prevent tighter regulation of the subprime market.
At least eight of the top 10 were backed at least in part by banks that have received bank bail-out money. the reports shows that 11 of the lenders on the CPI list have made payments to settle claims of widespread lending abuses, including four recipients of TARP money.
Top of the list was Countrywide Financial, which made $US97 billion in subprime loans between 2005 and 2007, and which is now owned by BofA, which has received $US45 billion in troubled asset relief funds from the federal government. the CPI reports shows that Countrywide spent about $US11 million in campaign donations and lobbying in Washington between 1999 and 2008.
Another report quoted by the Financial Times says the financial industry was also a big donors to election campaigns in the past decade, giving a total of $US2.2 billion in contributions, according to the Centre for Responsive Politics, an independent watchdog. Among the top recipients was Barack Obama, who took $US14 million and whose presidential campaign broke all records by raising more than $US700 million in contributions.
“No one has alleged any connection between Mr Obama’s campaign, which raised most of its cash from small donors, and his administration’s handling of the crisis. However, some liberal critics say the administration is too close to Wall Street and have criticised it for its policy continuity on the financial bail-out with Bush administration. George W. Bush was also a large recipient of campaign funds from the financial and real estate sectors,” the paper reported.
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