Skip to comments.Banker Who Helped Crash Housing Market Helped Crafting Mortgage Reform
Posted on 04/10/2014 4:00:41 AM PDT by markomalley
Controversial housing finance reform legislation making its way through the Senate Banking Committee was co-written by a former mortgage trader for Countrywide Financial and Wachovia, two of the subprime mortgage behemoths at the center of the housing market crash in 2007.
Michael Bright, the senior financial adviser to Sen. Bob Corker (R., Tenn.), worked as a trader and member of the loan-pricing desk at Countrywide Financial from 2002 to 2006, and as a senior trader for Wachovia from 2006 to 2008.
Bright joined Corkers office in 2010, and has been a key figure in crafting the Corker-Warner housing reform bill and the successive legislation spearheaded by Sens. Mike Crapo (R., Idaho) and Tim Johnson (D., S.D.).
[Brights] running the show, said Tim Pagliara, a top bundler for Corker who has taken an active stance against the bill. And Corker listens to him.
Pagliara said Bright continues to play a leading role in the Crapo-Johnson legislation, which draws heavily from the Corker-Warner bill.
Ill be on Capitol Hill [on Wednesday], and hes dominating, hes a big part of the discussion, said Pagliara. Hes going to be in the main meeting.
Corkers office acknowledged Brights role in writing the Corker-Warner bill, and defended his past work for Countrywide and Wachovia.
Our office spent a good deal of time to hire someone who has extensive knowledge of housing finance to serve as our senior advisor on these issues and help craft the housing finance reform legislation the senator introduced last year, said spokesperson Tara DiJulio.
However, the former mortgage traders involvement is raising alarms with some government watchdogs and critics, who say the legislation is skewed in favor of the nations biggest banks.
Anyone who really participated in Countrywide and Wachovia before the collapse happened was fully participating in the types of financial arrangements that caused the collapse, said Public Citizens Craig Holman. Were seeing some of the rules evolving in this legislation that appear to be rigged for the bigger banks.
Edward J. Pinto, resident fellow at the American Enterprise Institute, said that Bright comes to this definitely from the perspective of those kinds of institutions and Wall Street, and that definitely has colored whats in the bill.
The bipartisan legislation would dissolve government-sponsored enterprises Fannie Mae and Freddie Mac and replace them with a new federal agency called the Federal Mortgage Insurance Corporation [FMIC].
Under the law, the FMIC would cover 90 percent of investor losses on mortgage-backed securities, and, in the event of a national financial crisis, 100 percent of these losses.
[The banks and mortgage lenders] think Fannie and Freddie are being too stingy, and they want to loosen the spigot some more with government support, said John Berlau, a senior fellow at the Competitive Enterprise Institute.
Pinto said one of the major concerns of the bills critics is the taxpayer-funded guarantee for mortgage-backed securities losses.
Anytime you have an explicit government guarantee, it will end up resulting in a taxpayer bailout at some point because the government is not very good at pricing for risk, he said.
Government watchdogs questioned whether someone with deep ties to the major financial institutions that contributed to the 2007 subprime crisis should play such an active role in crafting finance reform legislation.
Holman said it appeared to be a reverse revolving-door scenario.
We see this capture of congressional committees and even specific projects like this by the very same interests that have a great deal at stake in shaping that legislation, he said. This is the reverse revolving door spinning without any controls whatsoever.
While Bright speaks regularly about the housing finance reform legislation to industry groups and firms, Corkers office said he does not receive outside payment for these appearances.
Ken Boehm, chairman of the National Legal and Policy Center said this activity does not violate congressional rules, but raises questions about what Brights primary interests are as a senate staffer.
The question is, is he really doing the peoples business or is he feathering his own nest for future advancement? And the folks who do that a lot do things like run around the all the trade association meetings, said Boehm. The publics entitled to know what hes doing, and they can decide for themselves if thats what they want there.
This business is like an incurable virus, it comes around and it goes around.
Once a scamster, always a scamster. And the gummint gets ready to buy more snake oil.
The massive mortgage fraud ended in disaster for which no one has been held responsible. Taxpayers got saddled with billions of dollars in bailout bills.
These subprime activities were not simply the mortgage market at work. They were fueled by avarice, greed, stupidity--all enabled by Congressmen and other groups which leave a trail at the door of then-Cong Joe Baca (D-Cali). The subprime mortgage bank fraud network was spearheaded by then-Cong Joe Baca (D-Calif 43rd), in his powerful position as chairman of the Congressional Hispanic Caucus. Baca's district ranks No.5 among all US Congressional districts in percentage of home loans tailored to sub-prime borrowers.
Baca used tax resources, the legislative power of his office and his leadership position in the Congressional Hispanic Caucus to calculatedly launch a housing initiative called "HOGAR"-- Spanish for home. Then-Cong Baca calculatedly hyped the fact that the national Latino homeownership rate was 47%, compared with 68% for the overall population.
HOGAR was coached to call the figure "alarming," and to say "a concerted effort was required to ensure that by the end of the decade Latinos will share equally in the American Dream of home ownership." HOGAR and then-Cong Baca conned the public, failing to note that most of the "dreamers" were illegals, citizens of Third World countries who had violated US borders.
Predictably, HOGAR colluded w/ co-conspirators which included:
(a) shaky mortgage companies that ran into big trouble;
(b) Fannie Mae and Freddie Mac, both now under federal control after billions in taxpayer bailouts;
(c) Countrywide Financial Corp., sold to Bank of America Corp;
(d) Washington Mutual Inc., taken over by the US government and sold to J.P. Morgan Chase & Co.; and,
(e) New Century Financial Corp. and Ameriquest Mortgage Corp, both now defunct, killed by defaulted subprime Latino mortgages.
HOGAR's ties to Countrywide and the subprime mortgage industry were substantial. Bribery and self-dealing were rampant: Companies that donated $150,000 to then-Cong Baca got the right to have their own research fellow who would conduct fraudulent studies, which were cunningly used by industry lobbyists to pump fraudulent lending. Bribery and extortion in the form of $100,000 annual donations to then-Cong Baca, for which HOGAR provided phony news releases from then-Cong Baca's Hispanic Caucus promoting a lender's commercial products to the Latino market,
The most shocking example of bribery well-substantitated by Hogar's literature..... HOGAR announced it worked with Freddie Mac on a self-serving two-year examination of Latino homeownership in 63 congressional districts. The "study" found Hispanic ownership on the rise thanks to "new flexible mortgage loan products" that the industry was adopting at the urging of Cong Baca's collusive coterie.
HOGAR conned lenders into even more lenient down-payment and underwriting standards. As the subprime debacle unfolded, HOGAR declined repeated requests for comment despite the economic havoc their activities precipitated. The fraudulent mortgage schemes demonstrated the criminal activities of border violators with multiple identities---perhaps violent, terrorist-connected foreigners---colluding and conspiring to defraud private companies and public entities. And mortgage racketeering enterprises which employed sub rosa finance and business practices to carry out deceptions and frauds.
The alleged ring of swindlers---a Congresman, individuals with multiple identities, banks, insurance companies, mortgage brokers--might be charged with cheating the US govt, taxpayers and bank share holders out of hundreds of millions of dollars via an elaborate web of mortgage and bank frauds. The mortgage "Dreamers" used multiple phony identities, fraudulent Social Security numbers (purchased from identity forgers) in order to obtain govt-subsidized benefits. L/E will find that individuals with multiple identities obtained fraudulent mortgages then flipped the houses at ever-higher prices to family member who then absconded to foreign countries, sticking banks (and taxpayers) with hundreds of millions in fraudulent mortgages.
BACKGROUND A Wall Street Journal investigative report related that, according to the Federal Financial Institutions Examination Council examination of the borrowing spree, uncovered financial schemes by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, all colluding in fraduent schemes to increase homeownership among Latinos with forged documents which enabled massive fraud.
Baca and the separatist tax-funded "Hispanic Congressional Caucus" has been close-mouthed about its role in financing, and, earmarking the blood-thirsty America-hating La Raza. Race-pimping "La Raza" was given tax dollars...... and Congressional earmarks...... to finance its so-called "mortgage activities." La Raza's "strategic partnerships with Wachovia and Bank of America forced the falsification of mortgage-applications. The dumbing down of mortgage requirements and documentation standards caused taxpayers to be socked w/ billions of dollars in bailouts...and decimated the US economy.
La Raza aided and abetted risky federal and private-home loans to latinos over the last decathanks to the lending industrys version of dont ask, dont tell.
Plus----in addition to pocketing millions of federal tax dollars, La Raza also collected a $1 million Democratic earmark that funded community-development projects. Analysts report that much of it went to "mortgage counseling."
All of the official documents need to be scrutinized for fraud and falsification (a felony); as well, the Bank Secrecy Act needs to be mobilized to uncover the whereabouts of tax dollars and whether money laundering and tax-financed terrorism took place.
The gal who wrote the article is a fan of Hillary. The Huffington Post likes her. This banker did nothing wrong as the problem was in the law and the CRA. Yes, the Community Readjustment Act and all the NINJA loans. We went over this some years back. This is nothing but an attempt to blast Corker and the Reps.
A federal jury has found Bank of America (and a current JPMorgan executive) liable for a Countrywide Financial program that knowingly sold piles of cruddy home loans to Fannie Mae and Freddie Mac, meaning the bank could face nearly $850 million more in penalties added to the $40 billion-plus court tab it has tallied since acquiring the cratering mortgage-lender in 2008.
The Justice Dept.s lawsuit against BofA and former Countrywide exec Rebecca Mairone alleged that, through a program called the High Speed Swim Lane (or the Hustle), the lender deliberately removed the standard speed bumps and tollgates to loan approval. Doing away with these underwriting safeguards allowed Countrywide to quickly sign off on hundreds of millions of dollars in loans that should never have been made, all with the goal of selling these mortgages off to Fannie and Freddie as quickly as possible.
About 43% of loans sold by Countrywide to Fannie and Freddie while the Hustle was running turned out to be defective.
Having someone who worked in a high level in the mortgage industry would seem to be a requisite for any project whose task is to develop reform legislation. Absent any prior bad acts, criticism of the legislation should be directed at the politicians sponsoring it, not the people working for them who developed it.
Gibson and other lawyers say any appeal by Bank of America would likely focus on a ruling made by the judge before the trial that endorsed a government position that it can bring a FIRREA case against a bank when the bank itself was the financial institution affected by the fraud. “Amazing indeed.”
Holder can try these cases, but; he cannot do anything else except this and other discrimination based allegations. Congress is not important nor is Fast and Furious or his Contempt to a State Court.
This is indeed new law, but; Holder and pals were yelling the race card again this week. It is not fashionable to work hard and be successful the old fashioned way like a Ben Carson, a Condoleeza Rice, or a Herman Cain did.
Nancy Pelosi’s son sold mortgages for Countrywide, so I’m surprised they didn’t hire him to work on this....or maybe they have quietly. That means “we will not be able to read it until we pass it!”