From the report itself:
Key Findings
The top subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or backed by giant banks now collecting billions of dollars in bailout money - including several that have paid huge fines to settle predatory lending charges. The banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves, but enablers that bankrolled the type of lending threatening the financial system.
These are among the findings that emerged from the Center for Public Integrity's analysis of government data on nearly 7.2 million "high-interest" or subprime loans made from 2005 through 2007, a period that marks the peak and collapse of the subprime boom. The computer-assisted analysis also revealed The Subprime 25 - the top 25 originators of the high-interest loans, accounting for nearly $1 trillion and about 72 percent of industry-reported subprime loans during that period.
More specifically, the report goes on to say:
• At least 21 of the top 25 subprime lenders were financed by banks that received bailout money - through direct ownership, credit agreements, or huge purchases of loans for securitization.
• Nine of the top 10 lenders were based in California, including all of the top five - Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp., and Long Beach Mortgage Co.
• Twenty of the top 25 subprime lenders have closed, stopped lending, or been sold to avoid bankruptcy. Most were non-bank lenders.
• Eleven of the lenders on the list, including four recipients of bank bailout funds, have made payments to settle claims of widespread lending abuses.
This goes directly counter to the conservative narrative blaming "irresponsible lenders"--many of them minorities--and further confirms what ACORN has been saying since the last few weeks of the election, when the Republicans first attempted to lay the blame on them. It was institutions responsible for predatory lending who played a leading role in creating this whole catastrophe, not the people who being victimized by them, or who were fighting to stop them. But this time, it's an outside group providing the analysis, and it's based on millions of loan documents.
Here's a chart showing how the relationship between income and loans changed substantially over a few short years:
And here's what happened to the market as a result:
There's no doubt what was driving things, and it wasn't a conspirarcy of would-be homeowners out to hoodwink the world banking establishment. The namubers were staring the banks right in the face. If they were afraid of those numbers, they had all sorts of time to react. But the only reaction they had was to fight against regulation.
As part of the report, an article by Kat Aaron is particularly illuminating on this subject: "Predatory Lending: A Decade of Warnings Congress, Fed Fiddled as Subprime Crisis Spread"
Here is how it begins:
A little more than a decade ago, William Brennan foresaw the financial collapse of 2008.
As director of the Home Defense Program at the Atlanta Legal Aid Society, he watched as subprime lenders earned enormous profits making mortgages to people who clearly couldn't afford them.
The loans were bad for borrowers - Brennan knew that. He also knew the loans were bad for the Wall Street investors buying up these shaky mortgages by the thousands. And he spoke up about his fears.
"I think this house of cards may tumble some day, and it will mean great losses for the investors who own stock in those companies," he told members of the Senate Special Committee on Aging in 1998.
It turns out that Brennan didn't know how right he was. Not only did those loans bankrupt investors, they nearly took down the entire global banking system.
Washington was warned as long as a decade ago by bank regulators, consumer advocates, and a handful of lawmakers that these high-cost loans represented a systemic risk to the economy, yet Congress, the White House, and the Federal Reserve all dithered while the subprime disaster spread. Long forgotten Congressional hearings and oversight reports, as well as interviews with former officials, reveal a troubling history of missed opportunities, thwarted regulations, and lack of oversight.
What's more, most of the lending practices that led to the disaster are still entirely legal.
The article goes on to desccribe a number of efforts to raise warning flags, and change the rules to add protections--all of them thwarted. The parallels with the Bush Administration's refusal to heed warnings about al Qaeda are too painfully obvious to need any further commentary, except to note how much longer a period of time was involved in ignoring the growing, and inevitable threat.
Also accompanying the report is a commentary by CPI's director, Bill Buzenberg, in which he reiterates the reports findings, and sharpens the message of what they have to say to us:
There is something of a myth surrounding the current economic crisis, how it unfolded, and the precise role of the world's largest financial institutions in the global meltdown. That myth suggests these banks and investment houses were somehow surprised "victims" of unscrupulous subprime mortgage lenders, and that they could not have anticipated the damaging toxic assets that have so infected their balance sheets.
What's missing from this story is the fact that this was a self-inflicted wound for which the rest of us are picking up a massive tab. The largest American and European banks and investment houses were not the unwitting "victims" of an unforeseen financial collapse, as they have so often been portrayed. The mega-banks not only invested in subprime lending institutions - they were the enablers, bankrollers, and instigators driving high-interest lending, and they did so because it was so lucrative and unregulated.
Worse, in many instances these are the same financial institutions the government is now bailing out with tax revenues. How these bottomed-out banks helped cause the financial meltdown can be clearly seen in a new study by the Center for Public Integrity. The Center ran a computer analysis of every high-interest loan reported by the industry to the U.S. government from 2005 through 2007, a period that marks the peak and collapse of the subprime market. From this pool of 7.2 million loans, our investigators identified the top subprime lenders. The "Subprime 25" were responsible for nearly a trillion dollars of subprime lending, or 72 percent of all reported high interest loans.
Going back to the hissy fit that ignited the "tea party" movement, this, in a nutshell is what the rightwing pseudo-populists are desperately trying to hide, with their still-incoherent rantings that so easily slide off into accusations of socialism, and missing birth certificates.
Here' the table showing all of the top 25 firms involved:
This report makes it crystal clear where the blame lies--something that's already quite obvious to most readers of this blog. But it's clearly not obvious to a lot of others out there. Referring people to this new report is an excellent way to push back against the wide variety of obfuscation and blame shifting that's being pumped into the public discourse. |
