By Edward Luce
May 6, 2009
It shows that most of the top 25 originators, most of
which are now bankrupt, were either owned or heavily
financed by the nation's largest banks, including
Citigroup, Goldman Sachs, Wells Fargo, JPMorgan and
Bank of America. Together, they originated $1,000bn in
subprime mortgages in 2005-07 - almost three-quarters
of the total.
The banks, which have received the vast bulk of the
$700bn in troubled asset relief funds issued since last
October, also supported the lobbying effort to prevent
tighter regulation of the subprime market.
Nine of the top 10 lenders were in California, one of
the states badly affected by the housing crisis that
emerged after a surge in lending to riskier, or
subprime, borrowers, many of whom were forced to
At least eight of the top 10 were backed at least in
part by banks that have received bank bail-out money.
Eleven of the lenders on the CPI list have made
payments to settle claims of widespread lending abuses,
including four recipients of Tarp funds.
'Their unbridled political contributions and massive
lobbying created the lack of regulation and oversight
that led to this -crisis,' said Bill Buzenberg, who
headed the CPI investigation. 'Despite the signs,
Congress, the White House and the Federal Reserve all
dithered while the subprime disaster spread.'
Top of the list was Countrywide Financial, which made
$97bn in subprime loans between 2005 and 2007, and
which is now owned by BofA, which has received $45bn in
troubled asset relief funds from the federal
government. Countrywide spent about $11m in campaign
donations and lobbying in Washington between 1999 and
Among the other leading originators, which then bundled
the loans to be securitised in the secondary markets,
were First Franklin, now owned by Merrill Lynch, which
made $68bn of subprime loans in that period and spent
over $3m in Washington.
The financial industry was also one of the largest
donors to election campaigns in the past decade, giving
$2.2bn in contributions, according to the Centre for
Responsive Politics, an independent watchdog. Among the
top recipients was Barack Obama, who took $14m and
whose presidential campaign broke all records by
raising more than $700m in contributions.
No one has alleged any connection between Mr Obama's
campaign, which raised most of its cash from small
donors, and his administration's handling of the
crisis. However, some liberal critics say the
administration is too close to Wall Street and have
criticised it for its policy continuity on the
financial bail-out with Bush administration. George W.
Bush was also a large recipient of campaign funds from
the financial and real estate sectors.
The US Treasury will tomorrow release the results of
its stress tests of 19 leading banks.
Copyright The Financial Times Limited 2009