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“The Subprime 25”

Posted by Larry Doyle on May 6, 2009 8:09 PM |

I came across the Center for Public Integrity in my travels today. I commend them and those supporting this initiative.

They produced a very interesting piece today: Who’s Behind The Financial Meltdown?

WASHINGTON, D.C., May 6, 2009 — 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, according to Who’s Behind the Financial Meltdown?, a new investigation by the Center for Public Integrity.

“The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves,” said Center Executive Director Bill Buzenberg. “These banks were deliberate enablers that bankrolled the type of lending that’s now threatening the financial system.”

These are among the findings that emerged from the Center’s computer 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 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 — who reported subprime loans during that period.

The Center found that 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 5 — 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.

A second story in the package, “Predatory Lending: A Decade of Warnings,” details the troubling history of congressional oversight involving abusive lending practices. The story traces how obscure laws passed by Congress in the 1980s paved the way for creation of the subprime lending industry, and documents how lawmakers essentially ignored repeated warnings that high-cost loans represented a systemic risk to the American economy.

Included in the Center’s online package are extensive maps and tables detailing the extent of the companies’ subprime lending nationwide, the banking industry’s backing of subprime lenders, and political contributions and lobbying expenditures by the real estate and financial industries.

Although this particular piece does not present any new information, I always appreciate a venture dedicated to bringing increased integrity and transparency into our business and political worlds. I am adding this site to my favorites.

LD

  • fiscalliberal

    Some how misrepresenting loan viability has to be fraud and none of these articles / books discuss what is being done to prosecute this stuff.

    The new law is passed in the House and will be in the Senate shortly. However I cannot belive that existing laws were not broken AND NOTHING IS BEING DONE ABOUT THIS

    My understanding is the Feds cut off the state prosecutions. However if they did that, who in the Federal level is responsible to prosecute this before the statute of limitations precludes prosecution.

    Our government is either corrupt or disfunctional

  • Fiscal….I agree with you and think the government may very well be both corrupt AND dysfunctional.

    It seems as if there is lots of talk but very little action.

    Do not be surprised to see citizens act out more as a result.

    Financial bloggers may also become more aggressive as well!!

  • TeakWoodKite

    were based in California, including all of the top 5 —

    Is this because of state reulations or is it just
    by chance they are located in CA?

    The Financial whiplash is just beginning.

    LD, are you aware of any similar transitional economies preceding a socialist state?






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