...That’s how Mike Hudson, who broke a story in early 2005 on Ameriquest’s aggressive tactics in selling subprime loans, described the media’s performance.
“There’s been good reporting all along the way, but it’s been intermittent. There just wasn’t a sustained look at the subprime market and the sustained questionable lending practices.”
Had the issue earlier received one-fifth of the media attention it has garnered in the past year and a half, the meltdown could have been averted or lessened considerably, he maintains. The coverage didn’t hammer away at the connection to Wall Street and the capital markets until too late in the game....
...the borrowers often hurt the most were ones that didn’t make good sources for reporters. They were less sophisticated, often living close to the edge economically anyway....
...the financial services industry employed an army of lobbyists and publicists that often squelched the political and regulatory will to be more aggressive in putting a stop to questionable tactics....
.... In 2000, New York Times reporters Diana Henriques and Lowell Bergman wrote a story on the fleecing of subprime borrowers that led to a segment on CBS’ 60 Minutes. The story outlined why Wall Street investment firms had become interested in lending companies that served the subprime market. It also told stories of borrowers burned by the experience.
Perhaps it was too early.
S&L reduxThe parallel to the S&L scandal is alarming, says Stephen Pizzo, co-author of “Inside Job: The Looting of America’s Savings and Loans.” He began writing about suspicious deals by his local S&L bank as early as 1983.
He maintains the repeal of the Glass-Steagall Act in Congress in 1999 set the stage for the current crisis, which will dwarf the S&L scandal in total financial impact. Glass-Steagall served to separate commercial banking from investment banking, prohibiting commercial banks from making investments in the same manner as a Wall Street banking firm.
“It’s a flat learning curve,” said Pizzo. “They did it (deregulate) again. And only five years after the S&L scandal.”...
Dennis Bernstein writes on ConsortiumNews (Feb 28, 2008, Obama's Sub-Prime Conflict):
...My pop gave me a powerful push in the right direction, when it came to savings: A penny saved really was a penny earned.
Unfortunately, this wasn’t the case for the 1,406 people who lost much of their life savings when Superior Bank of Chicago went belly up in 2001 with over $1 billion in insured and uninsured deposits. This collapse came amid harsh criticism of how Superior's owners promoted sub-prime home mortgages. As part of a settlement, the owners paid $100 million and agreed to pay another $335 million over 15 years at no interest.
The uninsured depositors were dealt another blow recently when the U.S. Supreme Court let stand a lower court decision to put any recovered money toward the debt that the bank owners owe the federal government before the depositors get anything.
But this seven-year-old bank failure has relevance in another way today, since the chair of Superior’s board for five years was Penny Pritzker, a member of one of America’s richest families and the current Finance Chair for the presidential campaign of Barack Obama, the same candidate who has lashed out against predatory lending.
During a recent campaign stop in south Texas, Obama met with San Antonio-area residents who had been particularly hard hit by the sub-prime meltdown. He expressed dismay over how lobbyists for the sub-prime lending industry had spent more than $185 million in the last several years for their cause.
“To give you a sense of what that kind of lobbying gets you,” Obama said, a “CEO of the largest sub-prime lender was promised a $100-million severance package at a time when more than two million Americans were facing foreclosure, including nearly 14,000 right here in San Antonio.”
Though Superior Bank collapsed years before the current sub-prime turmoil that is rocking the world’s financial markets – and pushing those millions of homeowners toward foreclosure – some banking experts say the Pritzkers and Superior hold a special place in the history of the sub-prime fiasco.
“The [sub-prime] financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages,” Timothy J. Anderson, a whistleblower on financial and bank fraud, told me in an interview.
“The sub-prime mortgages,” Anderson said, “were provided to Merrill Lynch, by a nation-wide Pritzker origination system, using Superior as the cash cow, with many millions in FDIC insured deposits. Superior’s owners were to sub-prime lending, what Michael Milken was to junk bonds.”In other words, if you traced today’s sub-prime crisis back to its origins, you would come upon the role of the Pritzkers and Superior Bank of Chicago.
One Failure to the Next
Superior was founded at the tail end of 1988 in the wake of the failed Lyons Savings Bank. The Feds were trying to keep a lid on the magnitude of the S&L post-deregulation crisis and were selling failed or failing thrifts for a song, along with a lucrative package of special benefits.
Chicago’s billionaire Pritzker family and their partners bought Lyons Savings for a quite reasonable $42.5 million, but were also given $645 million in tax credits. The kicker was that the buyers only had to come up with $1 million in cash, and got access to the $645 million, and all the bank’s deposits insured by the Federal Savings and Loan Insurance Corporation (FSLIC).
The Pritzker family’s Superior Bank “started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC assistance agreement,” said financial consultant Bert Ely in a Oct. 16, 2001, statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs.
Ely stated, “Superior’s trick, or business plan” under Penny Pritzker’s leadership was apparently “to concentrate on sub-prime lending, principally on home mortgages, but for a while in sub-prime auto lending, too.” In December 1992, the Pritzkers acquired Alliance Funding, a wholesale mortgage organization.
In a 2002 article in In These Times about Superior Bank’s collapse, business writer David Moberg reported that the bank’s operations were “tainted with the hallmarks of a mini-Enron scandal…And yet the bank’s owners, members of one of America’s wealthiest families, ultimately could end up profiting from the bank’s collapse, while many of Superior’s borrowers and depositors suffer financial losses.”
Moberg wrote that “the Superior story has a familiar ring. … Using a variety of shell companies and complex financial gimmicks, Superior’s managers and owners exaggerated the profits and financial soundness of the bank. While the company actually lost money throughout most of the ’90s, publicly it appeared to be growing remarkably fast and making unusually large profits. Under that cover, the floundering enterprise paid its owners huge dividends and provided them favorable loans and other financial deals deemed illegal by federal investigators.
“Superior’s outside auditor, which doubled as a financial consultant, engaged in dubious accounting practices that kept feckless regulators at bay. Many individuals—disproportionately low-income and minority borrowers with spotty credit records—had apparently been exploited through predatory-lending techniques, including exorbitant fees, inadequate disclosure and high interest rates.”
When it collapsed in 2001, Superior Bank represented the largest failure of a U.S.-insured depository institution for a decade.
“The failure of Superior Bank was directly attributable to the Bank’s Board of Directors and executives ignoring sound risk management principles,” said FDIC Inspector General Gaston Gianni Jr. in a Feb. 7, 2002, report.
Banking whistleblower Anderson noted that “Superior failed at a time of historically low interest rates, high employment, a strong economy, and a growing housing market. … There was no reason for it to fail unless you consider gross negligence, a flawed business plan, and a conspiracy to deceive the regulators who were clearly asleep and were negligent themselves in their duties of protecting the class of underinsured depositors.”
Pioneering WorkAnderson said the bank owners and board members used Superior for their pioneering work in sub-prime lending, developing the financial instruments that helped set the stage for the current sub-prime meltdown.
“The Pritzkers like to say they did sub-prime lending to help the disadvantaged get into the home equity business, [but] it would be more accurate to state they ran a very large nation-wide predatory lending operation,” Anderson said, citing criticism of Superior’s lending practices in a letter written to the Office of Thrift Supervision on July 3, 2002, by the National Community Reinvestment Coalition, an association of more than 600 community-based organizations that promote access to basic banking services.
As an owner and board chair of Superior, Penny Pritzker also was named in a RICO class action suit on behalf of the more than 1,400 depositors at Superior, who initially lost over $50 million of their life savings.
"This is a story of two Americas with two sets of laws, one for the rich and powerful and another for the rest of us,” said Clint Krislov, the depositors’ attorney, in a recent interview. “My clients will all be dead, before they get back their money, given the Supreme Court’s recent decision to uphold the lower court, which put the predatory owners on the front of the line, if any money is recovered.”
The Pritzkers arrayed a powerful and well-connected legal team including former President Bill Clinton’s impeachment lawyer Lanny Davis, two ex-comptrollers of the currency, and two former General Counsels to the FDIC, the American Banker Magazine reported.
Given the political sensitivity of the sub-prime mortgage crisis, Anderson said he believes Penny Pritzker should resign her post as Obama’s Finance Chair, the person who oversees the campaign’s fundraising.
Otherwise, Anderson said, Pritzker’s presence could undercut Obama’s credibility on the issue of predatory lending and create a possible conflict of interest if Obama is elected President and tries to crack down on sub-prime abuses.
Obama campaign spokesman Tommy Vietor had no comment about the controversy surrounding Pritzker, but added: "Barack Obama has already made it very clear that he's going to crack down on fraudulent brokers and lenders."
One might wonder why Hillary Clinton’s campaign hasn’t jumped on this issue. Maybe it’s because Penny’s little brother, J.B. Pritzker, is a mover and shaker in the Clinton campaign.
In May of 2007, Jay Robert, aka, (J.B.) Pritzker, threw his support behind Hillary Clinton, representing a coup for her campaign by wresting the billionaire out of Obama’s home town of Chicago, and better still, the brother of Obama’s Campaign Finance Chair.
J.B. Pritzker announced he would head a new grassroots organization called Citizens for Hillary Clinton. Pritzker told reporters at the time, the new organization would go into states "where we haven't fully organized" and seek out campaign supporters as well as raise funds.
Apparently the Pritzkers will be sitting at the head table at the Inaugural Ball if either Democrat wins.
Mike Colpitts on OpEdNews (Feb 26, 2008, Real Estate Foreclosures Forecast to Double) writes:
...Housing Predictor forecasts foreclosures will nearly double to top a total of 5.6-million through 2011. The forecast is based on a thorough analysis of all 251 housing markets Housing Predictor tracks on a daily basis.
Creative new adjustable rate mortgages and subprime loans have acted to artificially inflate housing markets in the majority of states throughout the country combined with an epidemic of mortgage fraud.
The crisis has gotten so out of hand that nearly 2-million home owners have already been forced from their homes, and millions more fear losing their properties in foreclosure....
...Congress will need to act soon to stem the tsunami of foreclosures and stop the national economy from falling into a depression. Should Congressional action not be taken in major ways, Housing Predictor analysts forecast that the crisis has a 60% chance of developing into a full scale depression with even a higher number of foreclosures....
...More than 175 lenders have already failed as a result of the crisis. Investment manias like the one we have experienced have historically ended in depressions. There have been six depressions since 1837 in the U.S. All have been started by major land buying booms and more people have purchased land either as investments or for speculation since 2000 than ever before.
Meanwhile, Howard Dean of the DNC is running on the fuel of hope that the electorate are stupid and don't read up on the Pritzkers and their double-teaming support of both Democrat leading candidates (see Rebecca Adelman's Dean Ties McCain To Republican 'Culture Of Corruption', National Journal, Feb 21, 2008).
Mike Whitney on The Market Oracle (Feb 26, 2008, Subprime Mortgage Scam Lands US Tax Payer $739 Billion Bailout Bill):
...The financial innovations of the last decade have primarily focused on transforming the liabilities of dubious mortgage applicants into complex debt-instruments which are enhanced with massive amounts of leverage and exotically-named derivatives. The investments banks and brokerage houses fought hard to establish the present system which they call “structured finance”.
They spent over $100,000 million lobbying congress to remove the legislative firewall which kept investment and commercial banks separate. Those laws, particularly Glass Steagall, made sure that the public was protected from the Ponzi-scams which proliferated just prior to the Great Depression. But, now, 30 years later, the same scams are back with a vengeance. The cult of free market orthodoxy and Reagan-era flim-flam has put us on track for another stock market crash ala 1929. That's why Bank of America and their buddies in the industry have turned to the administration for a way out. Their flagging balance sheets can't take
another year of rising foreclosures and dwindling assets. They need Big Brother to cover their debts and rebuild their capital-base. Otherwise its curtains.
Other versions of the so-called “Rescue Bill” have been floating around Washington for the last three weeks, but they all follow the same basic guidelines. Under one of the plans, 600,000 subprime mortgage-holders, many of whom are already delinquent on their payments or in some stage of foreclosure, would be able to
refinance their loans under the Federal Housing Authority (FHA) which would
federally guarantee the mortgage in the event of default.
Great idea, eh? So, now the taxpayer is going to have to pay for the people who lied on their applications (and who really can't afford the homes they're in) so the banks can recoup their losses. This plan doesn't make sense....
...Consider this: If the banks didn't know that the mortgages were bogus, than why are all the various types of mortgages; including Alt-As, piggybacks, home equity loans, ARMs, prime, and "interest only"---defaulting at the same time? It is not just subprime mortgages that are failing; it runs the gamut.
The reason is obvious; it's because the banks were making windfall profits and didn't want to rock the boat. They knew they were peddling garbage. How could they not know? The banker's primary task in life is to figure out who can pay him back "with interest". And they're pretty good at it, too. So why did they start handing out hundreds of billions of dollars to anyone who could fog a mirror? In fact, it got so out-of-hand that (according to The New York State Commission of Investigation) "a homeless woman earning $10 an hour was recently approved for a $470,000 adjustable rate mortgage". In a similar incident, two Hispanic migrant workers in Bakersfield, California, who made roughly $45,000 in combined income, were approved for a mortgage on a home valued at $725,000.
These aren't innocent mistakes. They're part of a broader pattern to fudge the paperwork so unqualified "high-risk" loan applicants would look like J. Paul Getty and secure a mortgage. That way, the banks could continue to rake in lavish origination fees and maximize their profits....
...In their present condition, many of the banks will be back for another handout in a matter of months. Next will be commercial real estate (CRE) which is already slumping and on its way down. Then it'll be the $160 billion in private equity deals and leveraged buyouts (LBOs) which need refinancing. Then it'll be the maxed-out credit cards, and delinquent student loans and defaulting car loans all of which are failing at a faster and faster pace. It is not just the “structured investment” market that's unraveling now; it's the whole speculative paradigm of hyper-inflated assets, toxic bonds, over-priced equities and bizarre-sounding derivatives which are crashing down in one great debt waterfall. The investment banks are at the very center of the problems....
Anyone remember in 2000, when the USG was going after the mob for muscling in on Wall St. brokerage firms? The mob was infiltrating and setting up "pump and dump" schemes? That's what the mortgage crisis is, at its very core - pump & dump. The investment banks appear to have adopted that racket.
Investigations into the Savings & Loan scandal (see my previous post) identified - at nearly every institution involved in that - someone with organized crime ties, who had connections to the intel community, and who had connections to another institution).
Meanwhile, the NSA is prying into every aspect of communication for Americans (NSA's Domestic Spying Grows As Agency Sweeps Up Data, SIOBHAN GORMAN, March 10, 2008, Wall St. Journal):
...According to current and former intelligence officials, the spy agency now monitors huge volumes of records of domestic emails and Internet searches as well as bank transfers, credit-card transactions, travel and telephone records. The NSA receives this so-called "transactional" data from other agencies or private companies, and its sophisticated software programs analyze the various transactions for suspicious patterns. Then they spit out leads to be explored by counterterrorism programs across the U.S. government, such as the NSA's own Terrorist Surveillance Program, formed to intercept phone calls and emails between the U.S. and overseas without a judge's approval when a link to al Qaeda is suspected.
The NSA's enterprise involves a cluster of powerful intelligence-gathering programs, all of which sparked civil-liberties complaints when they came to light. They include a Federal Bureau of Investigation program to track telecommunications data once known as Carnivore, now called the Digital Collection System, and a U.S. arrangement with the world's main international banking clearinghouse to track money movements.
The effort also ties into data from an ad-hoc collection of so-called "black programs" whose existence is undisclosed, the current and former officials say. Many of the programs in various agencies began years before the 9/11 attacks but have since been given greater reach. Among them, current and former intelligence officials say, is a longstanding Treasury Department program to collect individual financial data including wire transfers and credit-card transactions....
...NSA gets access to the flow of data from telecommunications switches through the FBI, according to current and former officials. It also has a partnership with FBI's Digital Collection system, providing access to Internet providers and other companies. The existence of a shadow hub to copy information about AT&T Corp. telecommunications in San Francisco is alleged in a lawsuit against AT&T filed by the civil-liberties group Electronic Frontier Foundation, based on documents provided by a former AT&T official. In that lawsuit, a former technology adviser to the Federal Communications Commission says in a sworn declaration that there could be 15 to 20 such operations around the country. Current and former intelligence officials confirmed a domestic network of hubs, but didn't know the number....
If this Treasury Department program is so longstanding, why is it they didn't identify any of the wire transfers to the 9/11 hijackers while they were in this country, for example, the ones from Pakistan to Atta?
What if all this surveillance isn't for what its claimed to be for? What if its for identifying those who would present problems should martial law be declared? Perhaps we should use the Department of Homeland Security's verbage ... when its declared, not should or if.
A century of looting the middle class of their wealth. A century of false-flag operations used to declare war in order to profit from war. In just this nation.
But this time, its different, right?
And this time when you attempt to contact anyone to gather up a little band of folks to stand up to tyranny, "My Space" on the supercomputers at the NSA have already IDENTIFIED your potential cohorts, everyone you've ever phoned/emailed/faxed, where everyone lives, where they bank, where they shop, what they buy, what they look like, what they drive, what they wear, etc.
Makes you wonder what their excuse is going to be come the next 9/11?
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