U.S. lawmakers tried it in 2002. They tried it again in 2005, but some like Bob Ney of Ohio went to prison instead. Now they are trying it again. The most comprehensive legislative response to the subprime crisis emerged on Thursday as the House of Representatives passed a bipartisan bill imposing liability on companies that package mortgages into securities and setting new standards for mortgage origination. Now it reminds me of a time when rustlers stole all the cattle, killed the rancher’s dog, and burnt the barn to the ground. Too little too late. Where was the OCC while the problem built up over the years? What the Bush administration did might surprise you.
Let us assume that Ameriquest’s predatory lending settlement of 2006 and Household International’s predatory lending settlement of 2002 were not alarming. Regulatory approval was needed when HSBC was buying subprime lenders such as Champion Mortgage. Where there no alarms? Over time the OCC decided to offer full protection and control over federally regulated banks, actively trying to overturn or ignore state anti-predatory lending laws. Today’s problems were fostered by a lack of action at the federal level. Ameriquest and Household were nationwide settlements at the state level. Yesterday we saw four states take action against another mortgage lender.
At the federal level we saw tightening of bankruptcy laws, changes to class action laws, and new postal service regulations made it easier for lenders to scam consumers. Businesses argued against Sarbanes-Oxley while wanting a watered down version of the law. One foreign bank – HSBC – argued for changes to the U.S. Soldiers and Sailors Civil Relief Act. Even with the war in Iraq the law was changed to benefit banks and other lenders. The evidence clearly implies that since 2002 the federal government knew there would be big problems ahead. Quietly placing roadblocks for the consumer the pro-business pro-bank federal government continued to tell Americans that the economy was good.
At the state level we saw frustration as the National Association of Attorney’s General knew there were problems with mortgage lenders. Who is the big loser when foreclosures increase? Cities, counties, and states lose tax revenue. Infrastructure suffers due to lower revenue. Businesses struggle at the local level as some decide to relocate.
Jeremy Grant in Washington said “The House move comes as leading Democrats are pressing ahead with efforts to tackle predatory mortgage lending, seen by some as the root of the problem.” (see more) but that should not come as a big surprise. Consumer advocates and watchdog organizations like Household – HSBC Watch, The Center for Responsible Lending, ACORN, and many others have been asking for help for many years. The cases I mention above should have alerted the Bush Administration to the fact that federal regulators were asleep. Finding itself in a bad position to justify new anti-consumer laws and changes to existing laws the administration did nothing.
The OCC, the Bush Adminsitration, and lawmakers should have looked at HSBC. The bank bought Household International, stayed quiet for a while, and started buying subprime loans, entire subprime mortgage companies, and made subprime loans through Decision One and many other mortgage brokers. Please take a brief look back at history and the Hunt Brothers failed attempt to own the entire silver market. HSBC and the Hunt brothers could not stop until it was too late, and disaster followed. HSBC bought the paper in today’s subprime market and blindly funded mortgage brokers and mortgage companies as late as April of 2007. It was too late. You cannot tell me the Fed, the OCC, Treasury Department and others did not know of pending disaster.
Like bumbling fools lawmakers who attempted to pass new laws in 2005 should have checked the facts. A bill co-sponsored by Bob Ney looked good at first glance. It looked bad when Ney went to prison. Informed consumer advocates knew Bob Ney was one of the most vocal proponents for overturning state protection and state anti-predatory lending laws. We knew the 2005 bill was a self-serving sham. We wrote a letter to Bob Ney, asking if he forgot the local people who elected him in the first place. His 30 month prison sentence answered our question. As with today’s initiatives it is again too little too late. The cattle are gone, the dog is dead, and the barn is still on fire.
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This article, Lawmakers and subprime – a joke again this time?, is just one of our articles from our Mortgage Crisis Daily
The Subprime Mortgage Crisis Before, During, and After
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