The Democratic senator from Massachusetts had a straightforward question for them: When was the last time you took a Wall Street bank to trial? It was a harder question than it seemed.
Well, of course it’s a harder question than it seems, because it’s an irrelevant question.
The issue is whether regulators achieve regulatory goals, not whether there is a show trial.
I think an even better question might be what the regulatory goals actually are.
President Bill Clinton’s National Homeownership Strategy aimed to create 8 million new homeowners by 2000 through an “unprecedented collaboration of private and public housing industry organizations.” The program was going to “help moderate-income families who pay high rents but haven’t been able to save enough for a down payment; to help lower-income, working families who are ready to assume the responsibilities of homeownership but are held back by mortgage costs that are just out of reach; (and to) help families who have historically been excluded from homeownership.”
Ameriquest, a subprime lender whose slogan was “Proud Sponsor of the American Dream,” became the first subprime lender to have its loans financed by Fannie Mae (the Federal National Mortgage Association). The lender that pioneered “no-document” loans eventually settled for $325 million with several attorneys general over charges of predatory lending, in 2006. Ameriquest closed in 2008.
By 2002, the administration had changed hands, but the American-dream language was still going strong.
“We must begin to close this homeownership gap by dismantling the barriers that prevent minorities from owning a piece of the American dream,” President George W. Bush said in a June 2002 radio address. The Bush administration’s “ownership society” framed homeownership as an engine to help eliminate persistent racial inequalities. Building on Clinton’s goal seven years earlier, Bush set out to create 5.5 million new minority homeowners by the end of decade.
President Bush put cash behind the ownership society goals. From 2002 to 2006, the administration spent $412 million on its American Dream Downpayment Initiative to help first-time homebuyers with costs associated with down payments. His administration also ramped up spending on housing counseling, the thinking being that education led to responsible homeowners. Grants for counseling totaled $176 million over the same four-year period. And more than $440 billion was committed by Fannie Mae, Freddie Mac (the Federal Home Loan Mortgage Corp.) and the other government-backed mortgage players, targeted toward making loans available to minority homeowners.
Despite more than 15 years of commitments to the American dream, almost all of the gains in homeownership made since Clinton launched his plan have been erased. Nearly a quarter of Americans owed more on their homes than they were worth in the first quarter of 2011. For underwater borrowers, their homes are not building household wealth, but draining it. Fewer Americans own homes now than in 1998. The gap between African-American and white homeownership has actually grown by 2 percent since 1995.
The truth is that the regulatory goals of these agencies have been politicized by a succession of administrations to disastrous effect – but Princess Fauxcohantas isn’t about to ask the regulatory agencies about something like that. Still, as long as we are talking about jail, let’s see if we can find out how many regulators and politicians – who bear ultimate responsibility for the financial disaster – have been brought to trial or jailed.