Center for Public Integrity investigation identifies top 25 sub-prime lenders and their Wall Street backersMortgagePress.comsub-prime lenders, Center for Public Integrity, Bill Buzenberg
The top sub-prime lenders whose loans are largely blamed for
triggering the global economic meltdown were owned or backed by
giant banks now collecting billions of dollars in bailout money,
according to "
Who's Behind the Financial Meltdown?," a new investigation by
the Center for Public Integrity.
"The mega-banks that funded the sub-prime industry were not
victims of an unforeseen financial collapse, as they have sometimes
portrayed themselves," said Center Executive Director Bill
Buzenberg. "These banks were deliberate enablers that bankrolled
the type of lending that's now threatening the financial
system."
These are among the findings that emerged from the Center's
computer analysis of government data on nearly 7.2 million
"high-interest" or sub-prime loans made from 2005 through 2007, a
period that marks the peak and collapse of the sub-prime boom. The
analysis also revealed
The Subprime 25--the top 25 originators of the high-interest
loans, accounting for nearly $1 trillion and about 72 percent of
industry--who reported sub-prime loans during that period.
The Center found that U.S. and European banks poured huge sums
into the sub-prime lending market due to unceasing demand for
high-yield, high-risk bonds backed by home mortgages. The
banks--including household names like Lehman Brothers, Merrill
Lynch, Citigroup, Credit Suisse/First Boston, and Goldman Sachs
& Co made huge profits while their executives collected
handsome bonuses until the bottom fell out of the real estate
market. According to the analysis:
At least 21 of the top 25 sub-prime lenders were financed by
banks that received bailout money--through direct ownership, credit
agreements, or huge purchases of loans for securitization. Nine of
the top 10 lenders were based in California, including all of the
top 5--Countrywide Financial Corporation, Ameriquest Mortgage
Company, New Century Financial Corporation, First Franklin
Corporation and Long Beach Mortgage Company.
Twenty of the top 25 sub-prime lenders have closed, stopped
lending, or been sold to avoid bankruptcy. Most were non-bank
lenders.
Eleven of the lenders on the list, including four recipients of
bank bailout funds, have made payments to settle claims of
widespread lending abuses.
A second story in the package,
Predatory Lending: A Decade of Warnings, details the troubling
history of congressional oversight involving abusive lending
practices. The story traces how obscure laws passed by Congress in
the 1980s paved the way for creation of the subprime lending
industry, and documents how lawmakers essentially ignored repeated
warnings that high-cost loans represented a systemic risk to the
American economy.
Included in the Center's online package are extensive maps and
tables detailing the extent of the companies' sub-prime lending
nationwide, the banking industrys backing of subprime lenders, and
political contributions and lobbying expenditures by the real
estate and financial industries.
Organizational support for this project and the Center for
Public Integrity is provided by the Carnegie Corporation of New
York, the Ford Foundation, the John S. and James L. Knight
Foundation, the John D. and Catherine T. MacArthur Foundation, the
Open Society Institute, the Park Foundation, the Rockefeller
Brothers Fund, and many other generous institutional and individual
donors. The Center also received assistance from Palantir
Technologies.
For more information, visit www.publicintegrity.org.
