Making the Process Honest: Meaningful Financial Reform

For the last seven years I've repeatedly exposed the underbelly of the subprime lending market. Meanwhile, Washington did nothing.
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Record profits. Record bonuses. The party on Wall Street never ends. While the rest of us pick up their tab and suffer the hangover.

For the last seven years I've repeatedly exposed the underbelly of the subprime lending market. Meanwhile, Washington did nothing. Investigating some of the largest subprime lenders - Wells Fargo, Countrywide, Ameriquest, Household Finance - I've seen how their terrible, toxic loans were closed by any means necessary and eventually packaged, sold as securities and bet upon until they exploded and decimated our economy.

They rigged the system so only they could possibly win - while millions lost family homes and suffered the disastrous effects this calculated housing crisis has had on our economy. More than 2 million Americans have lost their homes since 2006. Almost 8 million have lost their jobs.

Rather than show remorse, Wall Street and the big banks are on the offensive. They are lobbying furiously to weaken any real financial reforms at the federal level. They continue to blame the victims. They want you to believe that millions of scheming Americans took advantage of innocent mortgage lenders to purchase homes they knew they could not afford.

That simply isn't true. In fact, an FBI study indicates 80 percent of mortgage fraud was committed by the lenders. A recent U.S. Senate investigation confirmed it. Eighty-three percent of loans originated by one of Washington Mutual's top producing retail loan officers were fraudulent.

Most of these failed loans were refis. Many were home-equity loans taken out by seniors who had long ago paid off their mortgages. I've repeatedly seen unscrupulous lenders use every con in the book to charm and lie to homeowners. Lenders actually paid brokers a premium to put people in higher-priced loans with toxic features, such as adjustable rates and prepayment penalties.

Strip away the purposeful confusion and here's what really happened: Big banks and Wall Street engaged in a gigantic equity-stripping scam and gambled with the profits they extracted from hardworking Americans. And like in a real casino, many of the gamblers didn't stop until their wallets were empty.

But unlike a real casino, the big players knew they wouldn't walk away destitute. They knew they were too big to be allowed to fail simply because their luck ran out. They knew the government would use our money to bail them out - consequences be damned.

Your mortgage shouldn't have been treated as a wager - it should be a way to provide a home and financial stability for you and your family.

Why then didn't anyone in Washington D.C. stop them from gambling with our money, our lives, our futures? Everyone on Wall Street knew what they were doing. Every big bank knew what they were doing. Every mortgage lender knew what they were doing. Even the Fed knew what they were doing.

Let me be clear, this disaster could have been prevented if anyone at the federal level was on guard. Instead, they were enablers. They're responsible for diminishing our futures.

Years after the housing market was pushed off a cliff, Congress has yet to pass any meaningful reforms. What more will it take?

I'm among the handful of people who investigated and sued some of the largest subprime lenders for their illegal acts. I've testified repeatedly before Congress. They all act like this situation is dizzyingly complex. It isn't. If they can create a trillion-dollar bailout in a few days, they can demand meaningful reform in less than a decade.

I have been in this fight for years. I welcome Washington's newfound interest in cleaning up the mess, but I worry about its commitment to real change. Now, as Congress is on the verge of passing reforms, it appears they're going to bargain away state enforcement powers. That's not meaningful reform, and Congress knows it. It is vital the state Attorneys General retain authority to pursue fraudulent financial practices to make the process honest.

The American government should work for the American people. It won't until it passes reforms protecting hardworking Americans from the schemes that destroyed so many lives and nearly brought down our economy.

It's time the party include those who are paying for it.

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