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Unregulated banks

September 8, 2013 - Harry Eagar
In the New York Times, Gretchen Morgenstern has an interesting suggestion -- pierce the veil behind unregulated lenders (in this case, a financial corporation operating under Indian law on a reservation with, it is safe to say, no financial experts in its structure) to learn who's really behind it.

There's a lot of it going around. The Times is among several papers to have called attention to the way the biggest banks put money into questionable microlenders operating among the poorest of the poor, so while the Rez may not be implicated in the bulk of abusive lending, the problem is a big one.

Followers of RtO may want to read the whole thing, because, as so often happens in good print journalism, there's a nugget way, way down in the story. This goes to the phony claim that the CRA (and not a market failure) was behind the crash of '08. Morgenstern is an expert on the subject, one of a handful of reporters who saw it coming and published stories that were ignored in the frenzy to make easy money. So her passing remark carries weight:

"The funding arrangements used by Western Sky and Cash Call are reminiscent of what occurred in the recent mortgage mania. The most egregious predatory lending wasn’t done, for the most part, by big national banks. It was done by smaller subprime mortgage companies like New Century, NovaStar and Fremont General, which made thousands upon thousands of loans.

"But these companies wouldn’t have been able to make even 100 loans had they not gotten the money they needed from the big Wall Street banks. The warehouse lines of credit provided by those banks, therefore, enabled the underwriting of billions of dollars in dubious mortgages. Without access to that money, most of the worst loans would not have been written. When Wall Street cut off the credit spigot, these companies folded almost overnight."


Article Comments



Sep-09-13 5:55 PM

Hey doppess its called duct tape, unless you are taping your duck cutouts into your junior workbook at day camp.

Again you show off your ignorance, so do not take my word, just order the annual reports for the top ten or more non-profits (health,hunger, Red Cross, etc...) and you will learn just how under informed you are.

You can reply with all the bile and nastiness you

want to, but you are still totally clueless in regards to CEO reumeration.

Party on doppess.


Sep-08-13 6:13 PM

HEY DOPPESS,again you spout off without the any knowledge of what a non-profit can CEO earn. Do your homework and inquire what the CEO of the AHA,MDA,Komen Foundation,American Cancer and others earn annually. They all must annal issue reports and make this info available to anyone that asks.

By the way they and other junior level workers often receive bonuses.

For someone who calls for thinking out of the box you you are still stuck under the adhesive tape that seals the play dough

Wikipedia is not going to save you, so do some real research and look up these reports.

Party on doppess.


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