Attorney’s General and others are piling on as they focus on Countrywide in the subprime debacle. Countrywide was not the only lender involved. Some insiders at HSBC claim HSBC (HSBC Finance) was just as bad. There’s no question that Countrywide made billions in high-cost loans to risky borrowers that have ended up in foreclosure. But the economic calamity known as subprime lending has become a political drama as regulators, public officials and prosecutors sift through the rubble to determine how much of it was an unavoidable disaster, how much a lack of personal responsibility and how much involved underhanded and even criminal conduct.
Some lenders continue to say they priced loans based on risk. The risk was the main factor, and many borrowers were turned down. Other lenders gave loans to anybody. Don’t forget – the United States government wanted to “help communities increase home mortgage loans to minorities.” Lenders took that as a sign, and as an excuse. Even with such initiatives, blacks kept track of the rates charged to whites and cried foul. Allegations of predatory lending followed. Household International and Ameriquest gave credibility to such allegations because they were predators. Now consider the Bush administration, as a perfect storm started to build:
Manufactured growth and created wealth was a house of cards. You decide whether subprime lenders were doing exactly what the nation’s public officials wanted them to dofinding new and creative ways to boost home ownership among people who would not have qualified for traditional loans because of their poor credit histories, low incomes or lack of assets. The Bush administration made it an explicit goal to boost home ownership to record levels, and it succeeded as the rate approached 70 percent in 2004.
In 2005 changes were made to toughen bankruptcy laws, even though people asked why, saying there was no reason to do so. The government cited abuses, while facts showed very few abuses. New creative financing and refinancing was invented and the wheels fell off of Bush’s manufactured (read as ‘invented’) wealth by 2007. Poisoned paper spread around the world from the summer of 2007 through early 2008. Can all of this be attributed to Countywide and poor people? Never – not even in your wildest dreams!
To jump-start the economy Bush gave “tax rebate” checks to Americans but the oil companies ate up the cash. That bailout did not work, and Bush now wants to bail out the mortgage lenders. More than any other telling sign, a lender bailout signals the deal made between lenders and the United States government. If a bank loaned based on risk we would not be in the position we find ourselves in right now.