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Leo W. Gerard

By Leo W. Gerard
International President

Ever since President Obama announced his plan to forestall foreclosures, many of those lucky enough to have burned their mortgages have angrily suggested that less frugal homeowners get the Creep of the Week award.

While acknowledging such prodigal-neighbor-resentment, I am giving the award this week to a much more malevolent, seriously more depraved subprime creep: Stanford L. Kurland. This is a guy who profited from creation of the sub-prime mortgage crisis as former president of Countrywide Financial and who is now profiting from the wreckage caused by those sub-prime mortgages – both at the expense of taxpayers.

The best description of this appeared in the New York Times in a column by op-ed writer Gail Collins: “It’s like Jeffrey Dahmer selling body parts to a clinic.” Or this, in a Times story by Eric Lipton: “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it.” That’s from Margo Saunders, a lawyer with the National Consumer Law Center. The center tried to stop abusive lending by the likes of Countrywide, which during the heyday of sub-prime was the largest mortgage lender in the nation but in the past nine months has been sued by several states contending it defrauded borrowers by hawking defective mortgages that quickly went to foreclosure.

The guy in the bungalow next door may have made some mistakes. He bought a house he couldn’t afford with a mortgage he couldn’t pay and then slid his credit card to get a big screen TV and a dirt bike for his kid. But here’s the thing, when Countrywide sold him on that loan, he just didn’t understand it. All the old fogies out there with their glorious fixed-rate mortgages can call him stupid. But he wasn’t. He was duped. There’s a reason these were called predatory loans. The prey was that guy in the bungalow next door.

The predator was Stanford L. Kurland and his ilk who all profited a plenty from little guys not understanding that the low “introductory” interest rate would balloon into one that made the monthly payments completely unaffordable. Yes, some applicants lied about their income to qualify for loans, but often that was encouraged by loan processors, who made money on each loan they sold. And in other cases, the loan processors provided those false wage figures themselves for what’s now known as liar loans.  Ultimately, it was the banks that weren’t requiring income verification or any income information at all.

The neighbor reaching for the American Dream isn’t at fault. It’s the bankers – Kurland and company – who urged dreamers to sign the dotted line knowing the loan would never work out, knowing a bank would never grant such a mortgage if it were going to remain on the books of a local institution.

That didn’t happen. Mortgage brokers like Kurland pushed these loans because they knew they were going to immediately dump that trash. These loans became that oxymoron: “toxic assets.” They were packaged and peddled on Wall Street in bundles as securities. Then companies like AIG sold insurance on them.

It all started falling apart when the real estate market slipped. That wasn’t supposed to happen. None of those Wall Street wizards who had made untold billions on this scheme had calculated a drop in the market. Suddenly, no one knew the value of the “bundles,” because each contained an unknown number of good and bad mortgages. Banks started to fail. Taxpayers provided $700 billion to prop them up – including Bank of America, after it bought the financially-sputtering Countrywide.

But Kurland’s not hurting. He cashed out of Countrywide before its stock tanked, taking $200 million with him. He used some of that money to set up a new company: PennyMac. For about 38 cents on the dollar, PennyMac buys bad mortgages from the federal government — which got them with taxpayer money from failing banks. Then PennyMac gives homeowners the opportunity to refinance at affordable rates – perhaps rates that Kurland, as president of Countrywide, should have been offering in the first place. Fine, Kurland’s PennyMac gives the guy in the bungalow next door payments low enough to let him stay.

But the cycle of mortgaging is costing taxpayers 62 cents on the dollar.

Kurland’s got taxpayers coming and going. And for that scam, far more than any poor homeowner, he richly deserves the Creep of the Week Award.

Leo W. Gerard

By Leo W. Gerard
International President

The sky is falling.

For the average Working Joe or Jane in America, it is anyway. Unemployment is at 7.6 percent and rising. The Economic Policy Institute estimates that there are 4.1 job seekers now for every opening. The mortgage delinquency rate set another record last quarter, and foreclosures are predicted to top 1 million this year. Because of reckless speculation by Wall Street financiers, the stock market is plummeting, taking with it a third of the value of the retirement accounts of hard-working Americans.

If the average Jane and Joe have not lost their jobs, they’ve seen a big chunk of their retirement savings slip away. Or their kid can’t find work. Or a neighbor’s been foreclosed on.

Still, Republicans in Congress couldn’t find it in their hearts to vote for the American Recovery and Reinvestment Act of 2009, commonly called the stimulus bill. They just can’t vote to support the American people – they’re “Republicants.”

An official description of the act the Republicants rejected says it:  “Makes supplemental appropriations for FY2009: (1) for job preservation and creation; (2) to promote economic recovery; (3) to assist those most impacted by the recession; (4) to provide investments needed to increase economic efficiency by spurring technological advances in science and health; (5) to invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits; and (6) to stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.”

In the House, not a single Republicant voted for this bill to create jobs and restore economic growth. In the Senate, three brave members of the GOP stood up to the Republicants gang to pass the Recovery Act and aid suffering Americans – Susan Collins and Olympia Snowe of Maine and Arlen Specter of Pennsylvania.

The GOP made it malevolently clear during their majority years in the Bush administration that they opposed anything that would strengthen America’s middle class, but its votes this week were based on deep, and frankly justified, fear of the Recovery and Reinvestment Act.

New York Times Columnist and Nobel Prize winning economist Paul Krugman explained it earlier this week at the Thinking Big Thinking Forward conference conducted in Washington D. C. by EPI, Institute for America’s Future, The American Prospect and Demos.

Republicans are terrified of the Recovery and Reinvestment Act because if it works, if it creates jobs and helps stimulate the economy, then Americans will think good thoughts about government action and spending.

And that could lead to new public support for government payments for important social safety net programs like health care.

Republicans have invested decades, untold millions of dollars and countless hours on Sunday morning blathering-head shows persuading Americans that government is too big. They’ve contended that taxes should be cut to force curtailment of government. Bush supporter Grover Norquist, who is president of Americans for Tax Reform and a director of the American Conservative Union, expressed it best for the group: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

They did cut taxes – for the rich. And they cut services – crucial ones, like inspection of toys so that millions of toxic trinkets imported from China got into the hands – and mouths — of American toddlers. And inspection of food and the factories producing it, so it’s possible that salmonella-tainted peanut butter has sickened 500 and killed eight.

And they placed bunglers in charge of important government agencies. This, of course, was deliberate, to make government look incompetent — an entity deserving of drowning in a bathtub. One of them was the infamous “Brownie,” Michael P. Brown, who headed the Federal Emergency Management Agency, which, in fact, drowned when called to respond to Hurricane Katrina. Brownie’s qualification to head FEMA was his service as commissioner for the International Arabian Horse Association. By contrast, he replaced James Lee Witt, former President Bill Clinton’s FEMA director. Witt won acclaim for good performance in office. His qualification to head FEMA was his tenure as director of the Arkansas Office of Emergency Services.

In addition to cutting service, conservatives eliminated government regulation. The result for America was the subprime mortgage crisis and credit default swaps, an unregulated risky transaction that helped push the nation’s financial institutions to the brink.

Americans put up $700 billion to bail out those bankers last fall. But the Republicants don’t talk about that when they say, as Republicant Congressman Jerry Lewis of California did on Friday, that the American Recovery and Reinvestment Act of 2009  is a recipe for bloated government programs that will saddle taxpayers with debt “well, well into the future.”

“Facts are stubborn things,” Mr. Lewis said.

Fact is, Mr. Lewis voted to indebt Americans for $700 billion to bail out banks.

So, clearly, spending American taxpayers’ money is not a problem for him.

Spending it on taxpayers is.

The Recovery and Reinvestment Act contains about $50 billion for shovel-ready road, airport, bridge and other infrastructure projects nationwide that will create construction and manufacturing jobs. The nation’s electricity grid is to be upgraded with $11 billion, creating similar jobs. States will get $54 billion, which will help out Mr. Lewis’ California, now $42 billion in debt. That money can go for highway and school building as well as to prevent layoffs of teachers, firefighters and other state workers.

Altogether, the $790 billion Recovery and Reinvestment bill is designed to create or preserve between 3.5 and 4 million jobs.

When the sky is falling, that’s some shelter for America’s little guys. If President Obama is right and this act succeeds in creating jobs and stimulating the economy, he will have performed a great service for struggling and suffering workers.

He will also have revived what Norquist and Brownie, Carl Rove and Bush tried so hard to waterboard: the concept that government can do good.