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Rick Santelli got a mess of air time this morning not on his home channel, CNBC, but on NBC’s The Today Show; he was encouraged to continue his ugly “little man” rant about the use of taxpayer dollars to bail out so-called irresponsible homeowners who are facing foreclosure.
It was more than over the top; the segment was at least five minutes long, a ridiculously unethical free-for-all since no journalist worth the time of day becomes the story. Journalists are supposed to report facts and this was not journalism.
(My eleven-year-old son pointed out that The Today Show not only put this at the top of their hour, but they had NO reporting on the situation in Iraq. It’s ridiculous when even a schoolboy finds this kind of news production lacking.)
But the real problem here is Santelli’s role in redirection. He is either stupidly (at best) or willfully (at worst) providing cover for the real problem underpinning the foreclosure crisis in this country, as well as the underlying basis for the entire global economic crisis.
The real problem has been fraud.
Not just the little Madoff/Stanford frauds. We’re talking much, much bigger numbers.
A former law enforcement official tried to point out in February last year that all 50 states’ attorneys general wanted to investigate subprime mortgages and predatory lending. Regardless of their politics, all of them unanimously felt there was enough evidence of wholesale illegality in lending to warrant investigations.
But the same law enforcement official – a person with national name recognition and deep experience investigating financial institutions — pointed out that the White House pulled some weaselly moves to prevent the states from investigating. (And somebody may have pulled some weaselly moves to ensure this former law enforcement official was discredited and ignored.)
Other more responsible news outlets have taken note of the fraud, although they haven’t yet tackled the full story. A lawyer representing homeowners was quoted,
"We have strong reason to believe that a majority of the mortgage loans made in the last 10 years are defective – unenforceable for various reasons…”
And CBS only last week during its 60 Minutes news program aired a feature in which Scott Pelley interviewed World Savings’ former employee Paul Bishop; Bishop said in no uncertain terms that fraudulent loans were sold by World Savings.
(You know how that turned out…World Savings was bought by Wachovia, who discovered too late that much of the mortgage business they purchased was bad. The losses exceeded the amount Wachovia paid for World Savings, forcing them into a partially subsidized purchase by Wells Fargo. Taxpayers have already been committed to taking the lumps for World Savings’ fraud with TARP monies.)
Now were some of the subprime mortgages made to people who were abusing the system? Absolutely. But watch the 60 Minutes feature and you’ll see the face of the typical subprime mortgage client – someone who trusted implicitly the expertise of the mortgage seller, having no idea that they were being scammed and in this case, multiple times.
I’m sure some lawyers out there will recognize a defense here: reliance on expertise. Most Americans are not financially savvy; they don’t read every single word of their mortgage contracts, and even if they did, they wouldn’t recognize fraudulent terms. Nor would a substantive number of Americans question a bank’s insistence on selling a bigger mortgage to them since the bank would in theory not act against their own corporate interests.
But we also know that even the savvy were pressured to take bigger loans with loosey-goosey terms. I personally know two people – a math teacher with a Master’s degree, and a financial planner who is registered to sell investments – who in the last handful of years were pressured to take much larger loans than they asked for. Both were told they could afford loans at least two times the amount they asked for; until they walked away from the banks’ offers, they could not get the banks to stop pressing them to take bigger loans.
Watch that 60 Minutes segment, and remember the woman in the video and ask yourself if she would have pushed back against the bank under similar pressure.
This is why it’s called “predatory lending.”
But here’s Rick Santelli perched on an NBC-subsidized soap box – scratch that, General Electric-owned soap box — yelling from the trading floor about the inappropriateness of bailing out the 8% of irresponsible homeowners at the expense of the responsible 92% of homeowners.
If there’s irresponsible behavior here, it’s Santelli’s since he’s neglected to disclose his corporate master’s role in this situation. Not only has Santelli ignored the role and magnitude of fraud involved in the foreclosure crisis, but he’s stupidly/willfully ignored his employer’s relationship.
General Electric, you might recall, is a diversified entity, more of a holding company structure. It includes not only NBC and CNBC in its holdings, but financial institutions. At one time GE owned Genworth Financial, which dealt in mortgage insurance; it conveniently began spinning off Genworth in 2005, selling the last of its stock to Genworth itself in March of 2006. How did Genworth fit into the mortgage industry at the height of the subprime mortgage sales, while GE still owned it?
And how does GE Capital, the remaining financial services that GE still owns fit into this picture?
Let’s assume for a moment that everything is completely above board here at GE and its financial subsidiary. Why would Santelli have a problem with the federal government helping qualified homeowners in keeping their homes, which in turn would improve all residential property values and boost other all other real estate holdings over the long run, at a price that is a pittance compared to the losses already realized in property values?
Like the banks that so many trusted to act in their best interests, we assume that people in the financial industry would act in their own best interests.
Which makes Santelli’s “little man” rants all the more bizarre – stupid or willful, you can take your pick again.
There is one more data point about which most Americans are unaware – and instead of letting Santelli continue his unseemly rant, about which we should be asking him.
Have any federal agencies been conducting audits of financial transactions at GE recently?
Because I know of at least one Fortune 50 firm which had such a visit; in the history of this financial services subsidiary this has never previously happened.
Maybe real journalists could ask Santelli what’s really bugging him.
And maybe some real journalists will pick up the ball where NBC’s competitor CBS left it with their 60 Minutes piece and start asking exactly how big was the systemic fraud and why so-called financial reporters like Santelli are pointedly ignoring or avoiding it, or blaming somebody else who can’t fight back.
8 Comments
Yup. This confirms what my tipster told me about certain unusual audit-like activities going on right now:
SEC to Examine Boards’ Role in Financial Crisis
It’s not “planned,” meaning sometime in the future.
Get off your freaking high horse, Santelli, and do some reporting.
I wrote this about the problem of “sub prime” mortgages last October. The Cliff’s Notes version is that any damn fool could have seen it coming, and many of us did. ;) Hard to imagine the banks and the government couldn’t put two and two together, isn’t it?
Thanks for writing a justification I needed. Heh.
Actually, I’d run into the wall back in 2002-2003 time frame, could see then that we were at the height of a housing bubble. In this middle-class suburb I could not find a 2,500 square foot 3- or 4-bedroom house on the market. To be accurate, there were exactly 6 that size, but all of them needed about $50-100K in remodeling; it’d be cheaper to build new than refurb them. So we built a new home. Unfortunately we were competing with a crapload of new building at the same time, driving up demand for raw materials and labor. It was havoc to keep the price down on the house.
After finishing our house in 2005, my contractor said he was thinking about building a spec home for resale. I told him not to do it, that the market was surely going to tank soon because the rate of building was completely unsustainable. We argued about it in a friendly fashion for nearly a year.
And presto, the rest is history. Too bad I couldn’t point to your article then; the contractor couldn’t wrap his head around the idea that housing would tank.
The banks were interested in one thing, only: Booking loans. The risk people inside many of those institutions did their work, handed it off to senior management, and then SM did exactly what they wanted to do, never mind the facts.
Senior management can always (and very often do) override the legitimate findings of the auditors, accountants, risk examiners and other financial people. I’m not suggesting that’s anything like the entire problem, but I’ll guarantee you it’s a big-ass part of it.
“pointed out that the White House pulled some weaselly moves to prevent the states from investigating. (And somebody may have pulled some weaselly moves to ensure this former law enforcement official was discredited and ignored”.
Are you talking about Elliott Spitzer and his letter to the NY Times 2 weeks before they leaked the investigation about his use of call girls?
Or is this something else? Because as Attorney General they HATED him on Wall Street.
But, wouldn’t it be wonderful to shut the republicans up about how this is a democratic screw(?) up if the former Bush White House was involved and could be prosecuted?!!!!
Certainly have to wonder why Wall Street hated him so much, yes? Was it because he actually expected them to operate legally, or because he cut into their ability to kite off big chunks of ill-gotten booty?
Both, I think. Spitzer’s problems were certainly self-created, but I have little doubt that somewhere on Wall Street there’s someone who helped that problem find the light of day.
It’s not like a LOT of guys were buying entertainment of an intimate nature; that purchasing such entertainments on company credit cards was common among the Wall Street set should have made Spitzer’s personal peccadilloes a non-starter.
Unless somebody wanted to shut him up. We still don’t know how his indiscretion got “turned in” to the feds, do we? If all kinds of Wall Streeters were paying for hookers on credit cards, why’d Spitzer ONLY get caught?
But we do know that Spitzer had already sued AIG for civil fraud and Countrywide on predatory lending.
It’s really a bloody shame that the Bush administration was so damned corrupt; Spitzer probably could have kept us from the economic maelstrom had he not been muzzled by obstruction and selective exposure.