Anorak News | Banks Lobbeyed Washington Against Tighter Subprime Regulation

Banks Lobbeyed Washington Against Tighter Subprime Regulation

by | 6th, May 2009

greedy-bankers-petition12A REPORT for the Center For Public Integrity finds that the leading 25 US originators of subprime mortgages invested over the past ten years $370m lobbying Washington against tighter banking regulations.

Given the profits made and the size of the bailout, this seems like money well spent.

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.

The facts:

…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.

U.S. and European banks poured huge sums into the subprime lending market due to unceasing demand for high-yield, high-risk bonds backed by home mortgages. The banks — including household names like Lehman Brothers, Merrill Lynch, Citigroup, Credit Suisse First Boston, and Goldman Sachs & Co — made huge profits while their executives collected handsome bonuses until the bottom fell out of the real estate market.

According to the analysis:

* 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.

Good to know. But what does it teach us – that banks can afford to take great risks in an industry the politicians aren’t able to understand, or don’t want to?

Or that money makes money..?

Posted: 6th, May 2009 | In: Money Comment | TrackBack | Permalink