Skip to comments.Report says mortgage lenders helped fuel global economic crisis (Indymac, Schumer, Frank, Dodd)
Posted on 05/30/2009 7:03:55 PM PDT by Libloather
Report says mortgage lenders helped fuel global economic crisis
By Kevin Smith, Staff Writer
Posted: 05/06/2009 06:10:29 PM PDT
PASADENA - A new report places failed mortgage lender IndyMac Bancorp Inc. among the top 25 lenders whose subprime loans are largely blamed for triggering the global economic meltdown.
In a study released Wednesday by the Center For Public Integrity, IndyMac ranked 14th on the list, with at least $26.4 billion in subprime loans issued.
Collectively, the top 25 lenders were responsible for nearly $1 trillion in subprime loans, according to the report entitled "Who's Behind the Financial Meltdown."
John Dunbar, project manager for the report, said IndyMac's collapse and subsequent takeover by federal regulators in July was a grim precursor of more financial woes to come.
"When they went down it was sort of at the beginning of this cascade of horrid events," he said. "There is no question that this was a real warning sign. But by then it was too late to do anything. That's the real scary part about this, these loans are on the books ... and they can go on for decades."
Not everyone agrees with the center's report.
The report notes that Citigroup chairman Richard Parsons said that "demonizing the bankers as if they and they alone created the financial meltdown is both inaccurate and short-sighted."
"Everybody participated in pumping up this balloon, and now that the balloon has deflated, everybody in reality has some part in the blame," Parsons said.
Primarily IndyMac fell victim to the adjustable-rate, Alt-A mortgage loans it issued to borrowers, many of whom had limited financial resources and ultimately couldn't make their monthly mortgage payments.
Although those low-documentation loans are technically not considered subprime, Dunbar said his report placed the two in the same general subprime category.
"As far as I'm concerned it's a silly distinction," he said, adding that any responsible lender would have steered clear of Alt-A loans.
The study also says the top subprime lenders were "owned or bankrolled by banks now collecting billions of dollars in bailout money - including several that have paid huge fines to settle predatory lending charges."
Those big banks, the report said, were "enablers" that bankrolled the type of lending that has threatened the financial system.
Investment banks Lehman Brothers, Merrill Lynch, JPMorgan & Co. and Citigroup Inc. both owned and financed subprime lenders, according to the center's report.
Others, including RBS Greenwich Capital Investments Corp., Credit Suisse First Boston and Goldman Sachs & Co. were "major financial backers" of subprime lenders, the center said.
Dunbar said IndyMac had loans secured by Goldman Sachs and JPMorgan Chase.
Indymac's $26.4 billion in subprime loans was significant. But other financial institutions racked up far bigger numbers.
Countrywide Financial Corp. topped the center's list of the top 25 subprime lenders, with at least $97.2 billion in subprime loans, followed by Ameriquest Mortgage Co./ACC Capital Holdings Corp. (at least $80.6 billion), New Century Financial Corp. (at least $75.9 billion), First Franklin Corp./National City Corp./Merrill Lynch & Co. (at least $68 billion) and Long Beach Mortgage Co./Washington Mutual (at least $65.2 billion).
IndyMac's problems grew severe last year when many of the bank's Alt-A loans began to reset at higher interest rates. As loan defaults began ramping up, the bank's stock plummeted.
The final blow came when a June 26 letter from Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee, was made public.
In his letter to federal regulators, Schumer said IndyMac "may have serious problems with its current loan holdings, and could face a failure if prescriptive measures are not taken quickly."
In the following 11 business days, depositors withdrew more than $1.3 billion from their IndyMac accounts, according to the Office of Thrift Supervision.
On July 11 of 2008 the bank's charter was revoked and the Federal Deposit Insurance Corp. took control, converting it to IndyMac Federal Bank FSB.
OneWest Bank Group, a newly formed thrift, purchased IndyMac on March 19 of this year.
The bank may have a new name, but there are still scores of former IndyMac depositors who lost money during the bank's turmoil and are looking to get it back.
Nasim Ahmed said he plans to participate in a depositor class-action lawsuit against IndyMac. Nasim said he lost a significant amount of money because the bank didn't properly structure his deposits so they were all FDIC insured.
"I got 50 cents back on the dollar of what I should have gotten," he said. "They were greedy. They were running their business without justifying the risk for depositors."
No investigation is scheduled...
Home loans for Illegal aliens!!
Caldera, The AF1 pilot was CEO of IndyMac. Yeah..he's the chump that terrorized NYC in April. What a surprise!
I neglected to leave you with a source.
The global financial crisis, eh?
So what made Austria loan more than its annual GDP to Eastern Europe? What made Switzerland give all the Hungarians mortgages? Why did house prices in Spain triple?
A. George W Bush
B. Barney Frank
C. World-wide stupidity
No investigation is scheduled...
The CEO of Wachovia paid himself millions of dollars of bonuses on the golden west deal, never did anything but cost tax payers bailout money. No investigation are charges pending.
Yes, now coming to roost:
Just once I would like to see one of these jerks get punished.
The key issue in this article is that they admit that sub-prime lending was the trigger to this mess. And is sub-prime lending a Republican idea? Or, for that matter, a lending institution idea? Hardly. So we all know who’s idea this was....the Dims!
The ONLY reason the large banks and investment firms took those mortgages on the Secondary market is because they were, in effect, guaranteed by Fannie Mae and Freddie Mac. That situation was set up by Congress, who created those two entities. They thought they wouldn’t have to ultimately bear the cost of them going under, but could reap the profits if the investments went well. Privatize the profit, socialize the risk.