Who Were the “Predatory Lenders” Who Caused the Subprime Mortgage Crisis?

“Predatory lenders” have been blamed for the black and Hispanic subprime mortgage crisis in a new study published in the American Sociological Review (ASR) — with the obvious implication that “white racists” are to blame.

In an article titled “Racial Segregation and the American Foreclosure Crisis,” ASR correspondents Jacob S. Rugh and Douglas S. Massey (both from Princeton University) assert that “predatory lending aimed at racially segregated minority neighborhoods led to mass foreclosures that fueled the U.S. housing crisis.”

The study does not specifically name who the “predatory lenders” are, but the obvious implication is that they are whites who deliberately tricked blacks and Hispanics into taking loans that they could not repay.

Their study, which drew on data from the 100 largest U.S. metropolitan areas, found that living in a predominantly black area, and to a lesser extent Hispanic area, were “powerful predictors of foreclosures” in the nation.

In other words, the august academics found out what everyone already knows: that nonwhites were the main users of subprime loans, were unable to meet the payments, and sparked off the housing crisis.

This housing crisis, in turn, sparked off a worldwide banking crisis which has plunged the global economy into its worst crisis since the Great Depression.

Professor Massey’s bias was obvious from his previous publications, which include a book entitled Return to Aztlan (a sympathetic account of annexation of America by illegal Mexican immigration), and a 2003 article in Caliber, the journal of the University of California Press delighting in the subtitle “doing race with a white face.”

Mr. Rugh, a doctoral candidate in public policy at Princeton, is best known for his February 2010 work co-authored by Professor Massey titled “The Geography of Undocumented Mexican Migration” published by the Mexican Studies Department in the Caliber journal.

Given these credentials, it is not a large leap for these two gentlemen to latch onto the usual “blame whitey” mentality which is used for all ills affecting nonwhite communities.

So, who was the originator of the subprime idea?

There are two aspects to that market offering: the major companies behind the subprime concept, and the actual sellers of the loans to the black and Hispanic communities.

The man behind the subprime concept was Ameriquest Mortgage founder Roland E. Arnall, “who became a symbol of the subprime lending industry he helped create,” according to his 2008 obituary published in the Washington Times.

Mr. Arnall, who was described in his obituary as a “Holocaust survivor who co-founded the Simon Wiesenthal Center,” was plunged into controversy after Ameriquest, the nation’s largest subprime mortgage lender, “was accused of improper practices that included lying about borrowers’ income to qualify them for loans they couldn’t afford,” the Washington Post reported.

That newspaper continued: “Ameriquest advertised heavily on television, sent blimps soaring above stadiums bearing the company’s name and Liberty Bell logo and sponsored a Super Bowl halftime show and a Rolling Stones tour.

“Former employees said Ameriquest ran ‘boiler rooms’ of loan agents who socked borrowers with hidden fees and higher-than-promised interest rates while steering customers into loans they couldn’t afford.

“Mr. Arnall blamed the problems on rogue agents and said they were fired. While he was under investigation by a task force of state attorneys general, his appointment as ambassador to the Netherlands was held up in the Senate until his company agreed to pay $325 million to settle with 49 states and the District.

“A major supporter of Bush and Republican Gov. Arnold Schwarzenegger, Mr. Arnall and his second wife, Dawn, gave more than $12 million to GOP causes and candidates, becoming the heaviest donors to the 2004 election cycle, according to campaign finance records.

“Mr. Arnall said he backed Bush because of his support for Israel. He said he supported people, not parties, and continued to donate to certain Democrats, including many members of the Latino caucus in the California legislature.”

So who were these ‘boiler rooms’ of ‘loan agents’ which Mr. Arnall was accused of training?

According to the ASR study, the “financial institutions likely to be found in minority areas tended to be predatory — pawn shops, payday lenders and check cashing services that charge high fees and usurious rates of interest.”

“As a result, from 1993 to 2000, the share of subprime mortgages going to households in minority neighborhoods rose from 2 to 18 percent.”

In other words, the prime sellers of these loans to the black and Hispanic community would have been businesses based in those areas.

According to a 1992 article in the magazine American Demographics titled “Reaching for the Dream,” various surveys in the 1980s and 1990s “showed a pronounced increase in the number of minority business enterprises.”

This rapid growth, suggested American Demographics, “is changing the profile of America’s business owners.”

The magazine noted, for example, that the number of minority-owned businesses rose from less than 750,000 in 1982 to more than 1.2 million in 1987, nearly one-tenth of all of the nation’s businesses.

This marked an increase of 66 percent during a period when the total number of all American businesses grew by only 14 percent.

“The mid-1980s were good years for minority business owners,” wrote American Demographics contributor William O’Hara. “Every significant minority group experienced an increase in the number of businesses owned and in rates of business ownership. But some minority groups have much higher rates of business ownership than others, and the increases of the mid-1980s were not evenly shared.”

In other words, the average white American had nothing whatsoever to do with the subprime crisis, and attempts to blame the ubiquitous bogeyman of “white racism” are a liberal blame game attempt to explain the racial disparities in home ownership, credit records, and the housing market.

This they do by attributing the causes of that disparity to anything except the truth, namely that European Americans simply display a greater degree of social stability than other groups.

In fact, the subprime loan scheme was designed specifically to undercut sensible loan policies and artificially “correct” the imbalance between whites and nonwhites — affirmative action on steroids.

Billed as a “democratization of the credit market,” subprime loans were extended to people with flawed credit records and who would otherwise have been regarded as loan risks.

The concept was pioneered by a handful of now discredited bankers and sold to the black and Hispanic population by agents from within those communities.

The subprime market’s collapse was, therefore, as predictable as it was inevitable, and now we all must suffer as a result.

Tags: American Demographics, American Sociological Review, Ameriquest Mortgage, anti-white racism, blame whitey, Caliber, Douglas S. Massey, Jacob S. Rugh, predatory lenders, Princeton University, Roland E. Arnall, subprime mortgage crisis

Category: Establishment News