Who’s to Blame for the American Dream Deferred?
Listen to the full discussion between Scheer and Glantz as the two point fingers at the people who most benefited from the detriment of working Americans, and those who helped hand them the U.S. economy on a silver platter. Read a transcript of the interview below the media player and find past episodes of “Scheer Intelligence” here. And read Glantz’s report for Reveal, “American Cities Are Becoming Shell Companies for the Rich,” here.
—Introduction by Natasha Hakimi Zapata
Robert Scheer: Hi, this is Robert Scheer with another edition of “Scheer Intelligence,” and I always say at this point ”where the intelligence comes from my guests,” which is of course, an expectation and a hope. In this case, I’m saying it as a cautionary tale to myself. I am [interviewing] the author, Aaron Glantz, of a book called Homewreckers, which is not about marital dispute; it’s about the destruction of housing in America, or the opportunity for fair housing. And the reason I want to stress the intelligence coming from my guests is I think this is the best book on the subject of housing and what it represents in America that you can read. And I say this even though I’ve got criticisms of it; we’re going to have an interesting discussion.
But I myself, full disclosure, wrote a book called The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street, which is a book that deals with how did we get into the big housing recession? And then the end of my book is Obama is president, and what is he going to do, he’s got an opportunity to make it different. And this book by Aaron Glantz, published by HarperCollins–and you know, I do these podcasts basically on books and documentaries that I’m trying to advance. Full disclosure. And I just think it’s–even though I have quibbles with it–it’s really the one book you have to read, more than The Big Short or any of the other glitzier books out there, if you really want to understand the function of housing.
And I just want to set the stage here. Housing is the great, what, hope or fantasy of the American democratic experiment. It was recognized by the founders, that if they were going to have a republic of the people–even though they had their prejudices, deep prejudices–they had to have, at least among white folks, an emerging middle class of landholders, stakeholders. And that has carried us through up to this most recent crisis. It’s always invoked by republicans, by democrats: We have to have people who are stakeholders. And being a stakeholder, first of all, begins with owning something, a piece of land. It is also for that reason there’s been tax benefits for homeownership, all kinds of programs, most famously the GI Bill, helping veterans get into homes.
And so when we talk about a housing crisis in America, we are talking about a crisis, really, in the American dream. In fact, the subtitle of Homewreckers is How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream. And just as one statistic to back up that subhead, the Federal Reserve of St. Louis did a very serious study using the best, most reliable data on the impact of the housing meltdown. And while whites, of course, being in the majority, suffered most, the heaviest-hit groups were black and brown people. I forget the exact statistics, but black people lost somewhere between 60 and 70% of their wealth; brown people lost 60 or some, in that range, percentage of their wealth. We’re not talking about annual income, we’re talking about everything you have. To my mind, those statistics indicate a reversal of the gains of the Civil Rights Movement. Let me throw it to you with that quote, and you tell me what this book gets at.
Aaron Glantz: Yeah, I mean, Homewreckers is about who won when we all lost. Right? Eight million Americans lost their homes in the Great Recession. The homeownership rate in America declined every year of the Obama administration–not only in 2008 and 2009, when we were at the bottom, but all the way, ’10, ’11, ’12, ’13, ’14, ’15, ’16. And as you mentioned, you know, working people in America, our houses are pretty much the only way that we can save money. The average American has about $4,000 in the bank. It’s a paycheck-to-paycheck society. If you can take 40% of your paycheck that you’re paying for housing and put it in the land underneath your feet, so that you can own something, then you have the ability to live the American dream.
And if you’re stuck in a situation where you’re paying that money in rent, then that wealth goes to your landlord. And, you know, we’re living in an era where rents are going up and up and up, so that means that you are left with less and less and less. And so what I wanted to do was look at the people who have benefited from this historic decline of homeownership in America–which as you mentioned has disproportionately hurt black and brown people, white people as well–and ask, you know, who wins when we all lose? And it turns out that it’s a lot of people who are very, very close to our current president.
RS: OK, and this–you kind of got to the end of your book, which ends in a really devastating analysis of Trump and what he’s done. And he’s, of course–one of the major homewreckers, Mnuchin, who’s now our treasury secretary–here Trump takes one of the great villains of your book, and legitimately a great villain, and makes him the treasury secretary.
But we’re going to take our time on this, let me give a tip-off to our podcast listeners. As you know, I tend to go way beyond the 28 minutes that NPR stations find comfortable, and they can edit it as they want. I plan to take just about an hour. And one reason I do these podcasts–I’m twice the age of this author. At the age of 83, I find this a learning experience, which I hope the listeners do. And I’m not looking for sound bites here, I’m trying to–I think we could come out at the end of this hour with a kind of definitive understanding of this housing shortage. And it means stretching a bit.
So when I read your book I said, my God, I learned a lot from this book. And by the way, not just the critical analysis, which is spot on, but the human cost of it all. This book is interwoven in a kind of a Studs Terkel fashion with, you know, very good analysis, solid–and yet, OK, but what’s the human cost? And the human cost brings tears to your eyes. Because as Aaron just said, most of us have a view of our family, our ability to send children to school, our retirement, our economic work, maybe even our whole moral and human worth, tied up with: What do we end up with? Do we have a nest egg? Do we have a nest? And these people, these homewreckers, wreck the nest. My quibble–maybe it’s more than a quibble with the subtitle of your book.
And again, How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks, and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream. Yes–demolished the American dream is real. But you leave out politicians. You leave out–and I just want to say, that’s going to be the major source of tension.
AG: It’s interesting that you say this, Bob. Because when I wrote this book, you know, I didn’t set out to write a book that was pro or anti any politician. Right? I started thinking about this in 2016, when Donald Trump was running for president. And we had this right-wing politician who was a populist who was gaining all this support, and then we also had Bernie Sanders on the left, another populist who was getting all of this support. And I asked myself, how could it be that people feel so insecure at a time when the economy is supposedly going great? When unemployment is low, when the Dow Jones Industrial Average is high? Why are people so pissed off? And so that’s when I decided to look at housing. And as I’ve had a lot of feedback now from the book, one of the things that people constantly say that they’re most shocked about is the way in which the Obama administration allowed this to happen.
You know, in your work and the work of others about the subprime bubble and the way that deregulation left us so vulnerable, right–that in the wake of that, there were a lot of opportunities to do better, to rebuild us on firmer ground. And instead, what the Obama administration did was it just shoveled a ton of money to people like Steve Mnuchin, people like Wilbur Ross. That we had this opportunity to rebuild America in a more just way, and instead we just, like, flushed a lot of money down the toilet, and our wealth went with it. And so Obama–it’s funny, like, some people say oh, Aaron, it’s an anti-Trump book. You know, like Steve Mnuchin and Wilbur Ross and Donald Trump are having a party on the cover.
RS: And to be fair to your book, Soros is in there. There are liberals in there as culprits–
AG: George Soros was a major backer of Steve Mnuchin as he foreclosed on over 100,000 people, including 23,000 seniors. You know, it’s bipartisan Wall Street money-making, right? But the people who come out looking the worst in some ways are the politicians during the Obama administration, who time and time again are given the opportunity to back the little guy, and instead back Wall Street.
RS: The power of this book is not in whether he’s pro-Trump or anti-Trump or anything else. It’s a must-read if you want to understand the sort of major engine of our democracy, and our attempt to have some kind of class balance. And in fact, the statistic we just had in the last couple of weeks: three Americans, Bill Gates–help me here–Jeff Bezos, and who was the third one–
RS: –Warren Buffett, have as much wealth as the bottom half of the American population.
AG: The top one-tenth of 1% of people in this country have as much wealth as the bottom 90% of the population. And this is because of the decline of home ownership. We do not own as much as we used to. And there is a difference between wealth, which is what you own, and income, which is what you make. You know, we even see this in the Bay Area where–you know, I live in San Francisco, you have techies who make $100,000 a year–they still feel poor, because they’re shoveling a lot of that income to their landlord every month. They’re not left with much at the end of the month. And then if you’re a person at the lower end of the income scale, forget it, right. So it’s about–wealth is not about how much money you make. It’s about what you own, and your stake in the system.
RS: Right. Income is an illusion, wealth is a reality. And as you say, you could make–I think $100,000 is even low. $200,000, probably, in San Francisco would leave you feeling poor, and you, what, have a one-bedroom somewhere. But I want to trace this politics, because there’s–the facts, the analysis in your book–yes, it not only points to Obama, but we’re talking about a four-decade trajectory of rapidly increasing income inequality. And I must say, one reason I’m pushing it so hard, I just read the review in the New York Times. Which you know, people would say, oh, that’s a favorable review, it reviewed two books–it was insipid! And it’s so superficial, it said oh, this is a reminder of “Groundhog Day, ” where you keep, government keeps making the same mistakes of the movie. You know, that’s not what happened. Government didn’t make mistakes. Government pursued the bidding of the crooks of Wall Street. And it starts with deregulation under Bill Clinton and his–
AG: Or Reagan, even.
RS: Well, Reagan, but the ones who made it a reality were Bill Clinton and Phil Gramm, the republican who pushed through the reversal of Glass-Steagall. But not only that, the Commodity Futures Modernization Act, which made all these newfangled debt obligations and collateralized debt obligations, and credit default obligations, that the bankers said they didn’t even understand–made all these gimmicks legal, OK. So it made loan sharking legal for the banks, not for the mafia. And you can trace it from the Clinton people, Robert Rubin, who like Mnuchin comes out of Wall Street, was Clinton’s treasury secretary, and sold Clinton on the whole–this was “Government Sachs.” And you go up to Obama. And in my book, I end with Obama saying, wow, we’ve got this new president and he in April, when he was a candidate, clearly outlined the housing crisis, blaming Wall Street, saying it was bipartisan.
And then when I read Aaron Glantz’s book, yes, you’re forced to the conclusion: Trump is the pus in the wound. But Barack Obama, and George Bush before him, did nothing to heal the wound. And Bill Clinton, in my estimation, opened that wound. Maybe Reagan, Clinton opened that wound, just to be honest about it. The subtitle of my own book is How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street. Well, the Aaron Glantz book really looks at what happened once somebody I certainly voted for, even contributed money to, Barack Obama, got in. He had a choice.
Let’s cut to the chase. He could have said, this housing crisis is a major crisis affecting Americans, when he took office, OK, ‘08. And he could have said, I’m going to invest political capital in this. He avoided that. Instead he picked Lawrence Summers, who was one of the goniffs who got us into this, who was Bill Clinton’s treasury secretary. He picked Timothy Geithner, who was head of the Federal Reserve and was a big supporter of all this, to be his treasury secretary. What is the distance between a Timothy Geithner, who was in the Clinton administration, and a Mnuchin, who you single out in the Trump administration? It’s bipartisan. It’s not government making the same mistake over and over like in “Groundhog Day “; it’s government working for some of the worst characters on Wall Street.
AG: Well, there were people who came to Obama early on and said, let’s do this a different way. I write about how former members of the Federal Reserve, even representatives of the Reagan administration and the neoconservative American Enterprise Institute, they went to not just Obama, but Schumer and Pelosi, who then as now were in positions of power. And you have to remember, in 2009 the democrats controlled everything–both houses of Congress and the presidency, democrats, right.
And so these people said hey, look, back in the 1930s when America faced an even greater depression, here is what Franklin Roosevelt, the most popular democratic president in recent history, did. He created a new government-run bank called the Home Owners’ Loan Corporation. It refinanced one out of every five home loans in urban America. It saved a million people’s homes. When it did have to foreclose on families that couldn’t pay, they found other families who were able to buy those homes and pay them off.
This intervention into the economy made money for the taxpayers, because when you bet on the American people, they pay back their debt. And we entered into an era of shared prosperity. After World War II, you mentioned we had the GI Bill, another government-run lending program. Four million American veterans were able to buy their homes. Now both of these programs, the GI Bill and the Home Owners’ Loan Corporation, were overseen in the most racist fashion humanly possible. Government planners drew lines on maps, they discriminated against minority neighborhoods, they labeled them hazardous if they were, quote unquote, “infiltrated by Negroes,” or “threatened with Negro encroachment.”
So these people go to the Obama administration, they go to, you know, Schumer and Pelosi, and they say hey, let’s just do this over again, but just not be racist about it. Right? We can save the American dream, we can exit this crisis in an era of shared prosperity. And they just get laughed out of the room. And instead of–
RS: Who’s in the room when they’re laughed out?
AG: You know, sometimes–
RS: Lawrence Summers is in the room.
RS: Geithner. Think about–let’s think about these two guys. Timothy Geithner, who was head of the Federal Reserve in New York when this whole swindle was happening–
AG: And then he becomes the treasury secretary.
RS: Yes. He becomes treasury secretary in the Obama administration. And Lawrence Summers, who was treasury secretary under Bill Clinton–who told us, by the way, and told congressional hearings, when he destroyed one human being who really understood this, Brooksley Born, who was head of the Commodity Futures Trading Commission. He said this is terrible, we have to do something to get rid of her. And Lawrence Summers gets Congress, Bill Clinton gets Congress to pass the Commodity Futures Modernization Act that says all of these swindles are perfectly legal. And then Obama comes in and he says he’s not going to find–he did the same thing he did with torture: I’m not going to visit old wounds, I’m not going to find out how we got in this. And then he turns down–and not, you didn’t mention one important person who shows up in your book quite frequently, George Stiglitz–
AG: Joe Stiglitz, yeah.
RS: Joseph Stiglitz, I’m sorry–
AG: Yeah, he was one of the people who was–
RS: –a Nobel Prize winner who clearly warned them. So this is not a case of we didn’t know what to do. We listened to the bad people, is what this is really about.
AG: Well, they were in a hurry, right? They felt a pressure of time. This is what the people who made these decisions told me: we felt the pressure of time. If we didn’t act fast, we would be in an even greater depression. And the kind of ideas that, like, restarting a government-run bank, or later after the government ends up with hundreds of thousands of foreclosed homes. What it does is it bundles them together 1,000 at a time and sells them to private equity groups instead of selling them off to individual families who could build the American dream.
Or to affordable housing providers, or to cities–to anyone who is interested in something besides profit and debt. Right? They basically were of the opinion, at every stage of the game, that the kind of solutions like selling homes to families was too complicated. Bundling homes to Wall Street was considered easy and simple in the way that they viewed things. They just felt–you know, I don’t know, I don’t know that I would use a word like “corrupt.” I just think that they were lazy in a way, and just fell back on the same way that they knew how to do things with their other Wall Street friends. And so people like Steve Mnuchin, George Soros, you know, Michael Dell, JC Flowers. Tom Barrack, Steve Schwarzman, all the people I name in the book as benefiting from this–they’re just part of the same club. They never let it leave the club.
RS: Yeah, but one thing Obama did–and I’m glad we have, we’re going to have time to stretch this out. And I don’t want to just do finger-pointing or sloganeering. And the great–and I don’t want to cheapen the importance of your book, which is really thorough, thoroughly researched journalism. It’s not, you know, ideologically biased. I don’t want to–you know, [Laughs] I have more energy in this, maybe, in a certain way. I do think these people are scoundrels, but I don’t want that to intrude on our appreciating this book. It’s an incredibly serious, solid, well-documented–
AG: Bob, there’s no–there’s no evidence that any of these Obama people, like, cashed in themselves from this.
RS: Well, let’s talk about that. Lawrence Summers, for instance, before he even became–here was Lawrence Summers, who was treasury secretary, assured the Congress that collateralized debt obligations and credit default swaps were sound instruments–despite what Brooksley Born said–and there was no reason to regulate it, because if you regulate it, you’ll spook the market. And these people on the market know what they are doing. And they are the ones who will be damaged. I don’t want to go into that whole history. But Lawrence Summers also got six and a half million dollars working for the D. E. Shaw hedge fund. These people go back and forth.
And when he became an economic adviser to Obama, when Obama was running, Obama–then he made a decision not to have public campaign financing, something we’ve all overlooked. And he decided he could get money from the good people on Wall Street. Robert Rubin, who had engineered the whole meltdown, he was back on Wall Street now working at Chase–not Chase, I’m sorry, at Citibank. Let’s talk about–
AG: No, let’s talk for a second, Bob, about you’re exactly right in what you’re saying. There’s nothing wrong, untrue about what you’re saying. Let’s think about Hillary in 2016 ,because you’re bringing up how the people on Wall Street supported Obama; guess who else they supported? Hillary. Guess who they thought was threatening to them? Trump. Right? Trump was erratic. But there was this small group of Wall Street money men who didn’t put their money on Hillary, who put their money on Trump instead. And they’re the people like Steve Mnuchin, who goes from taking a billion dollars in government subsidies while he forecloses on 100,000 people, to being the treasury secretary, right. Wilbur Ross, who did the same thing that Mnuchin did but in a bank in Florida, becoming the Commerce Secretary.
Tom Barrack, Donald Trump’s best friend, who used the crisis to assemble a rental empire of 30,000 homes, plans his inaugural, has the President’s ear; the President’s on his speed dial. Same thing with Steve Schwarzman, the chairman of Blackstone, who buys up 80,000 homes, right, and are now creating these new kinds of mortgage-backed securities, collateralized debt obligations, all that junk that you were talking about, but on rental properties, right? So these guys, they knew that they could get farther with Trump than they could ever have gotten with Obama. So they were able to benefit during the Obama years. But when it came time to place their bed in 2016, they could have bet on Hillary like most of Wall Street. But they said, you know what, we’re going to do one better than this. We’re going to put our money on Trump. And then what you have is not just Wall Street in the White House, you have the vulture capitalists of Wall Street in the White House. And that is what is new and different under Trump than the Obama period.
RS: Yeah, I think there’s no question what you just said is right. I said Trump is the pus in the wound. But he didn’t open that wound, and that started with Bill Clinton. And, to make it bipartisan, Phil Gramm, who was the republican leader. And you’re right, Ronald Reagan first opened this door of deregulation, but they couldn’t get the stuff through Congress until they had a bipartisan grouping.
AG: And you know what, you know, what Steve Mnuchin will say again and again is: I didn’t make any of these terrible loans. Yeah, I might have foreclosed on 100,000 people; I was just trying to clean up this mess, right? And Sheila Bair, who was the head of the FDIC at the time, who gave Mnuchin this deal where he got the bank for basically nothing, and then got government subsidies to foreclose on people, and then was able to keep the money when he flipped the bank to his upstairs neighbor on Park Avenue, John Thain, for $3.4 billion, right? Like, she’s like, I didn’t create this mess, I just showed up at the scene of the mess, right? So, all these bad loans were primarily being made.
It is true during the presidency of George W. Bush, right. You have a company like IndyMac, which is the bank that Mnuchin bought, this Pasadena bank that failed in July 2008, the first big failure of the Great Recession, before even Lehman Brothers went down. You know, it went–it went out of control during the Bush years. That’s when all this profit-lending was going on, the so-called ninja loans–no income, no assets, no job, no problem, right? The reverse mortgages, many of the families in my book were set upon by these reverse mortgages where the bank gives you a little bit of money and then piles on interest in fees, and then when you die, the bank takes the house, and all the wealth that your family has built over decades is gone. They were allowed to expand under Bush because–and I didn’t realize this until my editor said, how did these reverse mortgages become so popular?
I had to do the research. There was never a bill in Congress to allow for reverse mortgages to be rampant. What they would do is they would put riders into the Iraq War funding bills that President Bush would sign that allowed these reverse mortgages to spread like wildfire. And then Obama comes in. He comes in after the collapse of Lehman Brothers, right; after the collapse of IndyMac, after the collapse of Bear Stearns. And he’s given a choice: he can either kind of like double down on these failed policies that created this mess, or he can go in a different direction. And instead, we have a doubling down on the policies that got us into this mess.
RS: Time for a break, and we’ll be back in a few minutes. So we’re talking about Homewreckers, this incredibly important book. So I think that is absolutely accurate. And so, but let me lay that choice out. And look, I want to be really clear, there’s something so blatant and ugly about what Trump did. He took these homewreckers, as you describe them, and put many of them right in the key positions. OK, maybe that’s something if Hillary had won, she wouldn’t do; it’s just a little too blatant to actually, you know–you’re sitting there, I know people had their homes lost and you know, because Colony and you know, Blackstone would, you know–these are now, Blackstone is a respectable company. I know at the school I teach, they seem to fund forums and things like that, you know; they came out smelling like roses. But the fact is–
AG: Yeah, now they’re a corporate landlord owning 80,000 homes, and every single one of those homes, they’re tracking the rent that they charge for their shareholders, right. So you know, maybe if you own a home and you rent it from a landlord and you have some problem, you go talk to the landlord; maybe you lose your job, you ask for forbearance–none of that is possible when you’re renting from a corporate landlord and they’re looking for a certain maximum return on investment for each and every one of the 80,000 houses they got.
And by the way, you look at the houses that Blackstone’s company owns now, and you see massive liens on these homes, massive amounts of debt leveraged on these homes. So this house at the center of my story, this 1500-square-foot home in Thousand Oaks, California, with three bedrooms, one bathroom, a little patch of lawn and a lemon tree out front–if you go look at the property record at the courthouse, you will see a $960 million lien recorded on this little house. Because Blackstone has bundled it together with 3,000 other homes, and they’re pulling equity out of these houses. So homeowners were faulted in the housing bubble of, like, taking on too much debt to remodel their kitchen or pay for medical expenses or something like that, and they were accused of profligate borrowing.
But now we have Blackstone doing profligate borrowing, right. And you have tenants in these homes paying more and more and more in rent, to pay off these giant bundles of debt that companies like Blackstone have taken out. And guess what? How are you ever supposed to build any wealth or own anything in this kind of situation? They have rigged the game to an extent that it has never been rigged before. And that is why we have wealth gaps that we have not seen since the Gilded Age of the 1890s.
RS: Right. But as your book points out–I don’t have the page, I think it’s as early as page 85, I’m not sure–but you have a very strong statement there. In some ways I thought, maybe he’s burying the lede, but I don’t think that’s true. But I noticed a tweet came from, I think, Detroit, saying read this book, it’s a must-read; somebody reviewed it and said it really nails Obama. And you retweeted it with some comment that they got it right.
AG: Yeah, absolutely.
RS: Yeah, I just saw that like a couple hours ago. I don’t know if–
AG: No, it’s true. I found this very interesting. So the Detroit Free Press wrote about my book over the weekend, and that was the message that they took. You know, another person that’s getting a lot of attention because of my book is Kamala Harris, who was our attorney general in California at the time, who had a chance to prosecute people like Steve Mnuchin for their wrongful foreclosures. And when her own staff recommended, she launched these prosecutions, she buried the report, and it didn’t come out until 2017, when Mnuchin had already made all of his money, foreclosed on all those homeowners, and was up for treasury secretary. There was a lot of bipartisan failure.
RS: Well, I want to say, that particular story with Kamala Harris–because I very carefully read this book. I think this is the indispensable book to read if you want to know about the historic role of housing in American life and how it was betrayed in this–after the meltdown. This is not the book to read about how we got to the first meltdown; there are many books out there. This is the book about a failed opportunity to do the right thing. And Kamala Harris is a very good example, because until I read your book, I still had a very favorable view of Kamala Harris for one reason: that as attorney general in California, she joined with these other attorney generals, I forget in how many states–
AG: Forty-nine. Everyone but Scott Pruitt, who was the attorney general of Oklahoma.
RS: Yeah. And they said, look, there has to be some relief for homeowners in these bailouts. Your federal bailout from the Obama administration is bailing out the thieves, they’re bailing out Wall Street; they’re not helping homeowners. It didn’t go as far as I would like it, because what we should have had was a moratorium on foreclosures. Plenty of responsible people recommended that: we don’t know who owns these houses, all of this monkey business is taking place, and so forth. We should have like, what, a year, two years, sort out were these liar’s loans, were they robo-signed? What happened here? Meanwhile, let people stay in their houses. Because the worst thing you want are foreclosures; it ruins the whole neighborhood, even people who have paid for their own house and done everything faithfully, their value is going to go down if two houses or one house on the street are foreclosed. So let’s have a moratorium on foreclosures until we sort out the scandal.
What Obama did, instead of that moratorium–and the attorney generals were criticizing him–he said, let’s just go to the Wall Street people and let them buy these houses, in toto or in blocks–you described that, packages of mortgages. So we don’t have the inconvenience of dealing with individual homeowners who are underwater, we’ll let these other folks come in and do reverse mortgages and, you know, short sales and everything else–and bundle, right, a new bundling; that’s what Blackstone and Colony were able to do.
And until I read your book, I thought Kamala Harris was on the right side of this, just as I thought George Soros was a good person because of his charitable activities. And taking two names, Kamala Harris and George Soros, I can never think the same way about either of them after reading your book. Because they talk a good game, but as you single out with Kamala Harris, you know, she’s got a lot of explaining to do. She was the lead attorney general on this, from the biggest state with the biggest problem, and she dropped the ball.
AG: Yeah, I mean, you have to ask yourself, there’s some stuff about her rhetoric that has never made sense to me. California had a million foreclosures, right? She was on the front lines. She parlayed her tough talking into a big speech at the 2012 Democratic Convention, which is what made her a national star and positioned her to eventually run for president. But if you read the details of the settlement that she reached, it allowed the banks to take credit for pretty much anything. So they could take credit for helping a homeowner for something called deed in lieu of foreclosure. So basically, you give the deed to your house to the bank and walk away, and the bank can take credit under the settlement for not foreclosing on you.
Well, guess what? You still have no house, right? You could take credit for a short sale, where you allow someone to sell the house for less than its value, less than the value of the loan. A lot of people were underwater, right? Well, why not just let the homeowner stay in the house at that level, renegotiate their payments? Banks could claim credit for that as well. And with Mnuchin’s bank, you know, Kamala Harris made a big deal of standing up this mortgage fraud, Strikeforce, in the AG’s office. And they did get stood up, and they did investigate. And they investigated Steve Mnuchin, who was running a foreclosure machine at OneWest Bank in Southern California. And they concentrated 70% of their foreclosures in communities of color. They foreclosed on 100,000 people, including 23,000 seniors in California, was the biggest market for this foreclosure machine. And they were getting subsidized, remember, as they were making these foreclosures, under an agreement that they had made with the FDIC.
And so Kamala Harris’s mortgage fraud, Strikeforce wrote a memo to her. They said, Steve Mnuchin is cutting corners, his bank is breaking the law, we want to prosecute him. And by the way, if we are successful, we will not only stop the foreclosure machine, we will also stop all of these government subsidies that are going to him. Because those government subsidies are conditional on him following the law. And rather than doing what her attorneys recommended, which was prosecuting Mnuchin, she instead buried the report, and it was buried for years. And it only came out in 2017, when it was far too late to do anything.
RS: Well, think of that. We, again, we try to put a cast on this. So homewreckers–are they just a bunch of thieves that happened to be very rich and powerful and effective on Wall Street? Or were they mainstream Wall Street people? Which I think in your book, you see a lot of mainstream players–people, you know, people who were at Goldman Sachs, people who were at the big banks. Jamie Dimon, for instance, somebody who was treated very favorably by Barack Obama, and treated with respect. And Jamie Dimon is right in the middle of your book.
AG: Absolutely. Absolutely. The big banks–and especially JP Morgan Chase–I write about Chase–
RS: Which is his bank.
AG: Which is his bank, which is the biggest bank in America, and which became the biggest bank in America as a result of the financial crisis. Because we, the government helped him acquire Bear Stearns and helped him acquire Washington Mutual, and felled them into JPMorgan Chase. So we subsidized his acquisitions of these other institutions and helped him become the biggest banker In America. And what did he do? He retreated from home mortgage lending. He pulled out of the FHA home lending program, which helps working-class people buy homes.
And at the same time, he pioneered these new debt bundles, these new mortgage-backed securities, to help the homewreckers like Tom Barrack, like Steve Schwarzman, as they acquired these empires of rental homes. I mean, people think that hedge fund guys and private equity guys, they are rich, and that’s how they’re able to buy all these homes. Well, they are rich, but they don’t spend their own money. They borrow it, just like you and I do when we want to buy a house, except for they want a billion dollars at a time, or $500 million at a time. So what you have–
RS: And they don’t pay the 18% that American Express is now charging cardholders–they get it at a discount rate.
AG: They pay very little, and they can refinance basically whenever they want, right. And by the way, when Colony went and it had its first mortgage-backed security, $514 million, 3,000 homes–so basically, they went out and they bought these homes for, quote unquote, “cash,” and then they turned around, and then they got a huge loan that paid off all their investors. And then they could put the rest of it in their pocket or go out and buy more property. And meantime, all the tenants in these homes were paying back that note, right? So that’s a note from Chase. Chase could have easily given that same $514 million to 3,000 families who were trying to buy homes, right? That was a choice that the bankers made.
And when you go to try to get a loan from Chase, there is a mountain of paperwork you have to fill out. For example, you have to get your house appraised, right? Somebody comes to your door, they go into the house, they look at the foundation, they look at the windows, they look at the roof, and they write an appraisal for the lender. So the lender knows that if they make a loan on this house, the house is strong. When these private landlords, these big-time landlords like Colony and Blackstone get one of these massive loans, they don’t have any appraiser go into the house. They have something called the drive-by appraisal, where a realtor takes a photo of the house and then they have a quote unquote “broker price opinion.” And then based on this broker price opinion, they underwrite a huge amount of debt. So big banks like Chase, Jamie Dimon’s bank, are making it so much easier for credit to flow to corporate landlords than to individual families. And that’s why the wealth gap in this country has gotten so big.
RS: This is a good way in which to end this. Just to say something is bipartisan–yes, you have lesser-evil quotients, but it’s so depressing that we’re always left with arguing about the lesser evil. It seems to me a more serious way to leave this with readers is to think about if you’re on an evil track, where money controls everything, and money gets more concentrated and more cynical in its application, where the political process gets more and more corrupted by this concentration of power, the zigzagging, it still takes you down that same horrible road. And what I came away from this book thinking–and it’s interesting, I want to give you credit for trying to be, at the end, to be optimistic.
AG: I am optimistic! That’s what I was going to say, is that after all of this, I see so much hope. I do. I saw so many good people coming forward with good ideas at every step of the process over the last 10 years. And those ideas are still there. You know, we’re having an election right now. I see Elizabeth Warren, Bernie Sanders, Pete Buttigieg, many of the democratic candidates, with really good, ambitious housing plans. Right? And I feel like, you know, a lot of the ideas that I have in the book, I see a possibility that some of them could take hold over the next period of time. And so yeah, I feel like the fact that we don’t need to reinvent the wheel here, the wheel already exists, that there are things we can do that will make this better–I find it very empowering.
RS: Well, I think the book is empowering in that it leaves us smarter and more realistic about what the problem is. And that is empowering, and that’s what great journalism is all about. And this is a book of great journalism. However, as sort of this critic here, let me just say you didn’t mention Joe Biden. And Joe Biden, when he’s campaigning totally on his connection with Barack Obama, totally. So most likely at this moment, we’ll end up with Joe Biden versus Trump. And yes, for most people listening to this, that’ll be no contest, lesser evil, all that. But when I read your book, I thought, wait a minute, wait a minute–what is Joe Biden’s position on, really, the serious responsibility for the Barack Obama administration in failing an opportunity to do the right thing and actually abetting the wrong thing?
AG: Yeah, I know we have to wrap it up, Bob, but you’re right. I mean, I just mentioned the other democratic presidential candidates. I could have mentioned Julian Castro as well, or Cory Booker. Many of them have really strong housing plans that I would love to see them debate in the next democratic debate. The one who does not, conspicuously so, who’s been very silent on all the things that we’ve been discussing, is Joe Biden. He has never talked about his role in the problems that we’re talking about. And he has also not offered a positive vision of how he would attack these issues if he was elected president. So I would love to hear him called on the carpet by some of his rivals, or journalists who have more access to him than I do, and hear that debated.
RS: Well, that’s good, nonpartisan–I mean, that’s really what we’re talking about. We’re trying to talk about good journalism. You know, I think, by the way, in that review that I thought was–it was intended as a favorable review of your book in the New York Times. But maybe once in a while the New York Times might mention that they editorialize in favor of the reversal of Glass-Steagall, and in favor of the deregulation of banking. And that that paper itself–and as also the L.A. Times, the Wall Street Journal, and other mainstream media–had a very spotty record in covering the buildup of the housing record. And you know, that’s why you have to read a book like Homewreckers to understand just how pervasive.
And I left out, because I’m more interested in policy, I left out the human dimension, the compelling thing about this book. And I know some individuals who suffered at the hands of these, lost their homes and so forth. I’m sure a lot of people listening to this know it. There’s another third, or to half of this book that is about the human dimension, the human cost. I have not treated it with the respect that it deserves, but as a reader, I found it compelling.
And that’s why I’ve taken this extra time to deal with this book. Because we’re not talking just about, oh, some historical matter, or facts and figures. We’re talking about tens of millions of people having their dreams destroyed and driven to desperation by their inability to function as whole people in this society because the main thing that contained their earnings, their worth, their family values, family–was taken, ripped away from them, in really what is a great swindle scheme.
So that’s it for this edition of “Scheer Intelligence.” The book by Aaron Glantz is called Homewreckers. Read it one way or another. And our thanks to Reveal, which I guess is where you work, here at the Center for Investigative Reporting, for not only supporting your research–which is nonpartisan; this is a non-partisan operation–but also has made the studios available. Thanks to our engineers at KCRW for putting this on, and our producer Joshua Scheer for producing “Scheer Intelligence.” See you next week with another edition.Wait, before you go…
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