Here's a beautiful brochure from ten years ago that is Exhibit A in the Secret History of the 2000s:
The American Dream of Homeownership: From Cliché to Mission
Presentation by Angelo R. Mozilo
Chairman, President and Chief Executive Officer,
Countrywide Financial Corporation & Chairman, Countrywide Home Loans, Inc.
The Joint Center for Housing Studies of Harvard University
John T. Dunlop Lecture
Sponsored by The National Housing Endowment
Washington, DC February 4, 2003
And here's another document of that era, from the New York Stock Exchange magazine, May 2005:
American Dream Builder: CEO Angelo Mozilo targets U.S. “multicultural market communities” as core Countrywide customers.
When I call this kind of thing the "Secret History of the 2000s," I don't mean that Mozilo's Harvard address or Bush's mortgage speeches were given in a secure location dug out deep under the Greenbrier Country Club. No, they were heavily publicized to all interested parties. But they might as well be secret today because they don't fit into any of the standard, respectable models of "Who Are the Good Guys and Who Are the Bad Guys?" There's no pre-existing team to push this analysis of What Just Happened, so it might as well be secret.
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37 comments:
I love you Steve. Keep fighting the good fight.
That picture of Mozillo looks like a cross between a used-car salesman and a mafia don.
My brother worked for Countrywide in the early 90's on their trading desk. Although my brother was a fairly new hire and only in his 20's, Angelo Mozilo knew my brother well enough that Mr. Mozilo's young sons came on skiing trips with our family.
Back then, Countrywide only dealt in prime loans and only traded AAA bonds. It was a fortune 500 company built from the ground up by someone of modest means.
I'm probably biased, but the fact that Mr. Mozilo became the poster boy of the subprime debacle has more to do with his name not ending in stein or berg than anything else.
I'm not sure where I'm going with this, but one funny anecdote my brother told me was how the senior execs would routinely call the trading desk during trading hours for the latest baseball spreads.
Oh and how Mr. Mozilo's first secretary still worked for him even after he made her a millionaire.
Wow Steve, you're getting to these quick! Slow night. I must be a loser.
I'm probably biased, but the fact that Mr. Mozilo became the poster boy of the subprime debacle has more to do with his name not ending in stein or berg than anything else.
I worked for CFC for a brief time during the height of the bubble. Everyone I talked to said that Angelo was the rah-rah salesman, and his Scots-Irish partner, David Loeb, was the voice of restraint that kept him in check. Once David passed away the brakes came off and Angelo went crazy.
Well, some Democratics stated that both housing bubbles then one in the late 1980's and the 2000's were the faults of Reagan and Bush deregulating the system. And Phil Gram pushed to deregulate before Bush was into office. I think there is something to this. The S and L's caused housing to go up by lots of loan schemes and the same under Bush I don't think you can blame it all and Freddie and Fannie like Republicans do. Another reasons why the Republicans have lost some of the white vote by Bushes stupidly in trying to get Mexican votes again.
Not talking about Mozillo but the whole pushed minority lending lead to loose standardsa and bad loans period were done even for whites. Politically Bush caused Nevada and Florida who were hit by this to go more Democratic particulary Nevada. Rubio would be another politician that wouold try Bushes loading practices since he is pretty deregulation and pushing the HIspanic vote, I thought that Mittens would have avoided this since he came from Ma and is less of a deregulation Republican.
"Secret history," just so.
This week, I've been reading in the Wall Street Journal about The Great And The Good -- that would be Eric Holder's warriors at the Justice Dept. -- suing Standard & Poor's for the rating agency's part in the debacle.
Not a mention -- not a peep -- not an allusion, concerning the collusion of the GW Bush administration, Congressional Democrats, and Progressives in pushing lenders to adopt the postures that caused the meltdown.
It never happened.
Steve, my understanding is that the banks made plenty of stupid loans and blew themselves up evin in iceland and ireland. Isnt ths evidence that if the usa was a completely white nation the us banks would have still blown us up ?
i just really don't understand... how could anyone thing making cheap credit available would do anythig but create a bubble.
I didnt' buy during this 'boom' (though I am in NYC and probably could have 'profited') i had plenty of friends who did and now are under water...
but really it's just common sense right? If everyone has a million dollar line of credit then the price of the property they are bidding on goes up, no???
Right, Countrywide wasn't the typical subprime sleazeball, it had been a class operation. That's what makes the story good.
Christopher Dodd comes to mind.
Steve, i dont understand. There were no nams in iceland. But the banks blew up their country
Hey everyone look at this:
http://www.upworthy.com/this-is-the-most-depressing-version-of-google-maps-i-ve-ever-seen
It's the Sailer thesis in living color but with a sad face.
Steve, the government did not cause the housing bubble. Federal support for the mortgage market rapidly declined as prices went up. Fannie/Freddie might have paid lip service to minority homeownership, but the real driver was that subprime loans, backed by PRIVATE investors, became extremely easy to get.
This "dumb money" that lost a bundle was a combination of rich people worldwide who stupidly invested in hedge funds that bought subprime loans, plus a mixture of large European banks, mostly German, plus AIG, bear stearns, and Lehman.
Steve, my understanding is that the banks made plenty of stupid loans and blew themselves up evin in iceland and ireland. Isnt ths evidence that if the usa was a completely white nation the us banks would have still blown us up ? THis true but the bad loans to minorties got a lot of folks who loan money to give whites also bad loans in places like Ladera Ranch-an upper-middle white city of Orange County where houses once was going for over a million bucks that now are price at 600,000 to 800,000.
2/9/13, 11:01 AM
most of the high cost because of cash buyers now are Chinese or Canadian investors.
"There were no nams in iceland. But the banks blew up their country."
You mean the central banks - e.g., banks like our Federal Reserve or the Bundesbank or Bank of England.
Central banks are the nationally syndicated privately held institutions that create money out of thin air and use it to buy a host government's debt.
The biggest commercial banks are then granted the exclusive right to sell a national government's debt via the awarding of primary dealer status.
Those very large, too-big-to-fail commercial banks - the central banks' owners - also engage in what is called fractional reserve banking. So do smaller banks. So does your local credit union.
Fractional reserve banking and the process of creating money out of thin air work hand in hand to fuel inflation, eventual bubbles and even manias.
Federal Reserve Chairman Alan Greenspan's money printing spree, in response to the dot.com bust, functioned as the booster rocket that propelled the housing bubble into the stratosphere.
If by now you're thinking the game is rigged and you're on the wrong side of the table, you'd be right. But the game is not infallible. Tragedies happen.
That's when we the taxpayers are called upon to bail out those too big to fail commercial banks and keep them in the game.
cipher
Google 'Helocs are making a comeback'
You're blaming Mozillo and lots of others for human nature and American attitudes to debt.
(Yes Countrywide wasn't big in Helocs, but its the same idea)
"You're blaming Mozillo and lots of others for human nature and American attitudes to debt."
Human nature and American attitudes to debt are why we had regulation of mortgage lending (such as requiring downpayments and good documentation of creditworthiness), which is what Bush, Mozilo, and Cisneros (and a lot of others, but B,M, and C are representative of the broad swath of elite consensus) went to war against in 2002-2005 in the name of fighting racial inequality.
Was it all a self-interested sham? Sort of. But Bush, Mozilo, and Cisneros would have worked themselves up into a moralistic hissy fit if you suggested to them that there were good reasons why things were the way they were, and people still get themselves into high dudgeon when reminded of the moralistic shaming language used by B, M, and C to justify their strategy.
So if NAMs had still continued to pay their mortgages in 2007 and beyond, would we have avoided this mess?
So if NAMs had still continued to pay their mortgages in 2007 and beyond, would we have avoided this mess?
The mess would have been -- or would be -- smaller, but nonzero.
Steve, i dont understand. There were no nams in iceland. But the banks blew up their country
It's because they invested in NAM mortgages disguised as AAA.
I worked for CFC for a brief time during the height of the bubble. Everyone I talked to said that Angelo was the rah-rah salesman, and his Scots-Irish partner, David Loeb, was the voice of restraint that kept him in check. Once David passed away the brakes came off and Angelo went crazy.
I'm not going to argue with that, except to point out without his "rah-rah salesmanship", he probably would not have made it out of the Bronx, as far as he did.
But that still doesn't begin to justify him becoming the poster boy when Countrywide actually came late to the party and not the first or biggest to go bankrupt. Every other bankruptcy had a lower level fall guy, but not Countrywide.
"Steve, i dont understand. There were no nams in iceland. But the banks blew up their country"
Read up on the Iceland banks. They were growing like crazy with worldwide investors, a lot of the financial assets they were flipping were ultimately backed by US mortgages that the US Wall Street investment bank types had "securitized" into shiny new financial instruments to be bought low and sold high worldwide by guys like the Iceland banks. A lot of the investors in Iceland banks were in the UK, I think the UK briefly considered military action (uh, woops, I mean "anti-terrorist action") when Iceland just let the banks fail. ("woops, sorry about that, it seemed to good to be true and it was!") It's the modern age. Money can move at the speed of the internet.
BTW, you could go into any Bank of America branch in California during the bubble and you almost had to squeeze through a maze of lifesize cardboard-cutout-standup pictures of happy minority couples getting their mortgage. Kind of creepy. Lots of big slogans in espanol. It was almost funny. It worked though. You would often see who the loan officers were talking to... Does anyone else remember California BA branch interiors in those days? All the cardboard minority people disappeared in about a week after the mortgage-backed securities collapsed. I took it to mean something.
Anyone have pictures of this? There must have been a name for that ad campaign. "Cardboard Customers?"
"Ireland and Iceland"
I've said this before, but it's worth repeating. When something really big happens, it's worth finding out why.
For example, it's worth studying Pearl Harbor and the Gulf of Tonkin Incident in detail rather than just saying, "Hey, look at the War of Jenkin's Ear and the Ethiopian-Eritrean War -- Wars just happen. So why try to understand the causes of America's wars?"
and it's not as if nobody was warning about it :
http://www.city-journal.org/html/10_1_the_trillion_dollar.html
"Looking into the future gives further cause for concern: "The bulk of these loans," notes a Federal Reserve economist, "have been made during a period in which we have not experienced an economic downturn." The Neighborhood Assistance Corporation of America's own success stories make you wonder how much CRA-related carnage will result when the economy cools.
Prof. Bill Black has been beating the fraud drum for a long time. His book "The best way to rob a bank is to own one" lays out his experience as a regulator during the S&L crisis. He also had a very good interview with Russ Roberts on his Econtalk podcast if you'd prefer the short version of how fraud works.
I think the main point is that it's not about minorities per sey, it's about finding people who are willing to take stupid loans. Real Estate is one of the best places for finding morally... compromised people.
The classic S&L fraud was somebody new to the business who generally came into it from Real Estate. They figured out they could loan an unqualified developer say 10 million bucks to build a strip mall. Then 3 years later when the project is a mess, they find (or pay) somebody else to take a 20 million loan for the same property. Book the profit and push the reckoning down the pipe a ways. They rinse and repeat for as long as they can. They've made huge fake profits for years which are now real dollars in their bank accounts. The bank is closed, but if they don't have to give the money back or go to jail then it's a big win.
The housing bubble was pretty smilar except low future time orientation minorities played a bigger part. The core problem for the fraudster bankers is finding people to take the loans. The more documentation they have to provide the harder it is to find somebody to take out or make the bad loan because of the paper trail. As the sector was deregulated, less and less documentation was required so it was off the races for everybody on both sides.
Even a quick glance at the sales history of a lot of the sand state homes shows the basic pattern above- sold at 150, 1 year later 250, another year 400 and so on until the system broke.
It's not all minorities of course and it extends to other countries without minorities, but the bottom line is that the crisis was built on relaxed bank regulation and fraud everywhere.
In Santa Ana during the bubble there were a lot of homes averaging 600,000 in a Hispanic barrio with lots of illegal aliens, the city had lots even in 1986
Well, I think the California estimates on Asian growth is a little down, granted they are having less babies than Hispanics but a lot of them seem to be coming over and buying real estate. I think the State might be 20 percent asian in the next decade and the real estate voted make money off the Asians with cash than whites or poor Hispanics that are becoming more renters but do the actual construcation work.
We want more Euroepan immirgaton instead of latin American changed the cista on low skilled jobs to include people from underrepresent countries in Eastern Europe like Poland, Moldiva and Albania for farmwork tht a little dangerous since they are more Muslim. Also changed tech immirgation where folks from Greece, Italy and so forth can be included.
In conflict with the "minorties caused the subprime mortgage crisis" theory you keep pushing all the families I personally saw with their stuff kicked out on the street were white caucasian. defintely reaching to say its a cover up.
"In conflict with the "minorties caused the subprime mortgage crisis" theory you keep pushing all the families I personally saw with their stuff kicked out on the street were white caucasian. defintely reaching to say its a cover up."
Well, that answers that, no need to bother thinking any more about any of this! I think Bush gave some public speeches outlining the "cover up", though, didn't he?
I quess you were not in Hispanic areas they had some of the highest in the Country, Anaheim and Santa Ana a lot less Mexicans are currently home owners, either the Mexicans walk away from their default and went home to Mexico or they shared renters with relatives.
In past battles over immigration reform, business leaders have demanded a new, broad-based guest worker program, while organized labor has opposed it. Maria Elena Durazo, the chairwoman of the AFL-CIO's immigration committee, summarized labor's longstanding objection to guest workers as follows: "Guest workers have no rights and no voice and no possibility of ever becoming legalized," she said. "If they protest about wages or unsafe conditions, they risk getting deported." (The New York Times, Feb. 7, 2013) But business objects to existing guest worker programs as burdensome and ineffective. "You have to go through four government agencies and often hire a lawyer and an agent," said Shawn McBurney, of the American Hotel and Lodging Association. "It's unbelievably complicated, cumbersome and expensive." (Id.) he governemtn regualtion of business is how business is able to con Republcians.
Well, in your state Steve, the coastial counties are way overpriced because of the stupidly of the 2000's.
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