The subprime lenders that helped send the financial system — and broader economy — into a tailspin are now getting billions of taxpayer dollars to help fix the housing crisis.
A new report by the centre for Public Integrity shows Washington is subsidizing them in what could be the next major credit bubble:
CPI: Firms that fed off the subprime lending frenzy that devastated the banking system are lining up to collect more than $21 billion in taxpayer funds meant to help bail out borrowers now in trouble on their loans.
The funds come from the federal government’s Home Affordable Modification Program (HAMP), begun in February by the Obama administration to coax lenders into modifying mortgages that might otherwise result in foreclosure. According to a centre for Public Integrity analysis of public records, of the 25 top participants in the program, at least 21 were heavily involved in the subprime lending industry. Most specialised in servicing subprime loans, but several both serviced and originated the loans.
As the Washington Post reports, at least 21 of the top 25 participants in the $75 billion program specialised in servicing or originating subprime loans. That includes JPMorgan, Wells Fargo and Countrywide, now owned by Bank of America,
As we’ve written, mortgage modification is essentially subprime lending all over again so this is to be expected. Our strategy is, basically, to pay the same-old firms to undo the mess they created. No surprisingly, it’s been slow-going so far. And it’s frustrating to see companies — such as AIG and Lehman subsidiaries — collecting more taxpayer dough.
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