Wednesday, December 12, 2007
When I head home for the holidays, my relatives sometimes have a hard time grasping what I do as a "reformer" and how that impacts their daily lives. This year, I'll point them to a recent story in the Seattle Times that describes how 96-year old Francis Taylor is about to lose her home of more than 40 years when banks foreclose on loans she took out from the now defunct lender Ameriquest.
After inventing the "sub-prime" mortgage industry, the collapse of which now threatens to throw the country into a recession, Ameriquest has gone into bankruptcy and sold its remnents to Citifinancial. The company settled a lawsuit with 49 states recently for $325 million out of claims of predatory lending. They also recently paid a fine for violating the do not call list. Greed has no bounds, certainly not privacy in your own home (that they plan to take away from you.)
The sad thing is, things didn't have to work out this way. Years ago, consumer advocates saw the crisis coming and urged state governments to put stricter regulations in place. Today's Sacramento Bee reminds us how the California legislature failed to enact reforms back in 2001. Ameriquest and others said this would make it harder for first time homeowners to buy their first abode, but it turns out that almost all of Ameriquest's loans went to existing homeowners -- many of whom the company probably knew could not make the payments and would end up losing their houses.
But rather than casting a skeptical eye toward Ameriquest's arguments, California legislators went to Hawaii on trips financed by Ameriquest. They ate $170 worth of cookies, supplied by Ameriquest lobbyists.
Common Cause has documented here and here how the mortgage industry spent millions lobbying Congress and doling out campaign contributions to try to get a federal law passed that would have pre-empted states from protecting folks like Francis Taylor. One small, but telling part of the story is how Ameriquest owner Dawn Arnall bundled hundreds of thousands of dollars for president Bush's campaign and was then rewarded by being made ambassador to the Netherlands. No wonder many observers are saying that the new mortgage relief plan announced by the White House appears more aimed at bailing out the industry and preventing more sweeping reforms than at helping strapped homeowners.
The good news is that there are things we can do to make this better. Congress, to its credit, recently enacted ethics legislation to cut down on lobbyist funded trips. California legislators could do the same, but it would mean giving up those nice cookies in Hawaii.
Even more significantly, congress and the states could enact full public financing of campaigns as several states have now done. That would mean that politicians wouldn't have their hands outstretched to take campaign cash from the mortgage industry. Had they done so a decade ago, Francis Taylor might still have her house, and the house you live in might now be going down in value as the entire county's real-estate market goes down the tubes.
All too often, business groups fight political reforms that would weaken their grip on decisionmakers. But as the Ameriquest, and others like Enron who have gone before them (not to mention the whole Savings and Loan crisis -- remember that?) when greed goes unchecked by a government that looks out for the common good, we all wind up suffering.