Predatory Lenders' Partner in Crime
Predatory lending was widely understood to present a looming national crisis.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge?
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative
Eliot Spitzer - Predatory Lenders' Partner in Crime
FBI saw threat of loan crisis
"It has the potential to be an epidemic,"
A top official warned of widening mortgage fraud in 2004, but the agency focused its resources elsewhere
"We think we can prevent a problem that could have as much impact as the S&L crisis,"
They ended up with fewer resources, rather than more.
FBI saw threat of loan crisis - Los Angeles Times
The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence
William K. Black: The Two Documents Everyone Should Read to Better Understand the Crisis
NOW WHICH PARTY OF THE TRANSACTION HAD A FIDUCIARY RESPONSIBILITY TO THEIR SHAREHOLDERS AGAIN?
"I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it." --Benjamin Franklin 1776
The mortgage brokers are still largely underregulated.
The community banks weren't the ones who made the risky loans. Generally speaking, they kept their same standards as they've maintained for years.
Janet Yellin, President and CEO of the Federal Reserve Bank of San Francisco recently made this point, saying "Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans, and studies have shown that the CRA has increased the volume of responsible lending to low- and moderate-income households."
It's Still Not CRA | New America Blogs
Given CEOs' proclivity for government bashing, any lenders being driven to write bad loans by the CRA would have been on CNBC screaming at the top of their lungs.
But that dog that didn't bark.
Nobody forced the big five investment banks to do what they did; they were not subject to CRA or other regulations common to depository banks. In fact, they mainly bought and sold loans rather than originate them. They did it because they thought they would make money.
The historical "originate and hold" mortgage model was replaced with the "originate and distribute" model. Incentives were such that you could get paid just to originate and sell the mortgages down the pipeline, passing the risk along. The big investment banks simply connected the investors to the originators, helped by the AAA ratings.
CRA? CLINTON? LOL