According to an investigative report released this week by the ""Center for Public Integrity"":http://www.publicintegrity.org, the top subprime 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.
Bill Buzenberg, executive director at the Center for Public Integrity, said, ""The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves. These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system.""
The findings in the Center's report, """"Who’s Behind the Financial Meltdownx"":http://www.publicintegrity.org/investigations/economic_meltdown/the_subprime_25/full_list/"", are based on the agency's computer analysis of government data on nearly 7.2 million high-interest or subprime loans made from 2005 through 2007, a period that marks the peak and collapse of the subprime boom. The analysis reveals that the top 25 originators of these high-interest loans accounted for nearly $1 trillion and about 72 percent of industry-reported subprime loans during that timeframe.
The Center found that U.S. and European banks poured huge sums into the subprime lending market due to unceasing demand for high-yield, high-risk bonds backed by home mortgages. According to the agency, 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.
+_The Center's subprime analysis shows: _+
- At least 21 of the top 25 subprime 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 topfive — Countrywide Financial Corp., Ameriquest Mortgage Co., New Century Financial Corp., First Franklin Corp., and Long Beach Mortgage Co.
- Twenty of the top 25 subprime 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 emerging from the analysis details the troubling history of congressional oversight involving abusive lending practices, the Center said. The agency traces how obscure laws passed by Congress in the 1980s paved the way for the 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 report are extensive maps and tables detailing the extent of the companies’ subprime lending nationwide, the banking industry’s backing of subprime lenders, and political contributions and lobbying expenditures by the real estate and financial industries.
The Center for Public Integrity, founded in 1990 and based in Washington, D.C., is a nonprofit, nonpartisan, and independent digital news organization specializing in investigative journalism and research on significant public policy issues. Organizational support for its ""Who's Behind the Financial Meltdownx"" project was 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 other institutional and individual donors.
To view the Center's full list of ""The Subprime 25,"" ""click here"":http://www.publicintegrity.org/investigations/economic_meltdown/the_subprime_25/full_list/.