Fool's Gold and Teabags

Growing up my father told me there is only one sin in this world and it's willful ignorance. For thirty years, ever since the rise of supply-side economics, there has been almost wholesale acceptance that 'if something is making somebody money, then that something must be good'. But what if that 'something' amounts to wholesale robbery? Just because the thief ends up rich that does not make it good. With the chicanery still going on in the financial markets you'd think even the Teabaggers would get the score. No such luck. Their chosen candidates look less like small government 'reformers' than a Wall St. "Dream Team". Some, like Dino Rossi, oppose even Congress' timid and tepid attempt at regulation.

Now that we are mired in the Global Recession brought on by Wall Street's shenanigans it is instructive to look back at some of the signposts that were pointing us to the Road Not Taken. From way back in 1997 a reporter for the Roanoke News named Michael Hudson wrote “Merchants of Misery: How Corporate America Profits From Poverty” in which he ripped subprime lending and other shady credit practices.

Turns out Hudson wasn't the only one.

From the late 1990s, ACORN, you know those shady advocates slandered by Andrew Breitbart and the NYTimes, saw the dangers of subprime mortgages. They had seen first-hand how unscrupulous lenders were enticing people to buy homes they couldn't afford or convince them to strip out all of their equity.

Back in 2001, ACORN helped sponsor anti-predatory lending laws in Oakland and a few other cities around the nation. Oakland's ordinance, approved by the City Council in October 2001, was ahead of its time. The law would have prohibited subprime mortgage lenders from making a loan unless the borrower could afford it and had obtained a written certification from an independent credit counselor stating that the borrower had received financial advice. In other words, subprime lenders would have had to make sure that people could pay back a mortgage before getting one. "Given the number of foreclosed properties that we eventually had, it would have made a huge difference," Oakland Councilman Larry Reid told Full Disclosure.

Then, as now, ACORN did not realize just how much they were up against. In 2005, the California Supreme Court promptly struck down Oakland's law along with a similar Los Angeles' ordinance. Siding with the majority in the 4-3 decision, Judge Janice Rogers Brown, a Bush II appointee known for being hostile to the New Deal and FDR, wrote: "should other cities adopt a similar extension of liability, subprime lending could conceivably be sharply curtailed in the state." Well, she was right about that.

Later that very year, Ameriquest, the industry leader in subprime mortgages announced that it was setting aside $325 million to settle attorney-general investigations in 30 states to settle allegations that it had preyed on borrowers with hidden fees and balloon payments. In at least five of those states—California, Connecticut, Georgia, Massachusetts, and Florida—Ameriquest was forced to settle multimillion-dollar suits. Brian Montgomery, the FHA commissioner said he "was shocked to find customers had been lured away by “fool’s gold”. Fools gold is apparently Wall Street's favored currency. In 2007 , Citigroup acquired Argent Mortgage Ameriquest's wholesale origination-lending unit along with its loan-servicing unit.

Here's how all that fool's gold the country's largest financial institution was busy repackaging for its global customers was being concocted:

At companywide gatherings, Ameriquest managers and reps guzzled alcohol while swapping tips for fooling borrowers and cooking up phony paperwork. As Michael Hudson lays out in his latest book, "The Monster" say a customer insisted on a fixed-rate loan, "but you could make more money by selling him an adjustable-rate one? No problem" ... (just) position a few fixed-rate loan documents at the top of the stack of paperwork to be signed by the borrower then bury the real documents -- the ones indicating the loan had an adjustable rate that would rocket upward in two or three years -- near the bottom of the pile. Then, after the borrower had flipped from signature line to signature line, scribbling his consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash."

None of that drew a blink from Citigroup guru, Robert Rubin. From InnerCity Press:
"As President George W. Bush and Federal Reserve chairman Ben Bernanke Friday wrung their hands in Washington about the subprime mortgage meltdown, New York-based Citigroup announced it was buying a chunk of admitted predatory lender Ameriquest. Citigroup is a meta-predator, taking advantage of the foreclosure boom to scoop up one of the most abusive lenders at a temporarily reduced price. The head of Citigroup's "global securitized markets" unit, Jeffrey Perlowitz, said the takeover "allows Citigroup to secure valuable and scalable platforms in a market undergoing significant change."

Oh, so that's the change Wall Street wants us all to believe in ... profits earned from deceit and outright robbery.

Yes, you could argue that such is the consequence of human greed and failing to read the fine print, but that really begs the question. The question the teabaggers and the rest of us need to answer is whether encouraging predatory behavior by jettisoning all rules and regulations ends up doing anybody but the bankers and the scoundrels any damn good. But then, again, as Dad would say: you can't reason with willful ignorance.