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RECOVERED HISTORY: SUBPRIME ROOTS
RICHARD BRENNEMAN, BERKELEY DAILY PLANET - When 60 Minutes tackled the
FBI investigation of the mortgage implosion Sunday night, producers
looked to Stockton [CA]: "Ground zero for the current financial crisis
and a microcosm of everything that went wrong.". . .
"A few years ago, it was one of the hottest real estate markets in the
country; today it is the foreclosure capital of America."
A few years before that, Stockton had given birth to a hometown S&L that
rocketed into the deregulated stratosphere of the early Reagan years to
become the nation's largest, and the darling of Wall Street.
State Savings And Loan transformed itself into American Savings, the
linchpin of Financial Corporation of America, with its vast network of
mortgage funds bankrolled by double-digit uninsured jumbo CDs.
The eventual collapse of American Savings is still the largest ever bank
failure in the country's history. . .
The collapse was completely predictable . . . I know this as an absolute
fact, because I did predict it, and I got exiled to the night cops' beat
at the Sacramento Bee because I refused [to stop] trying to write about
it. . . And night cops is the rookie's beat, the same one I took when I
hired on at the Las Vegas Review-Journal at age 19. . .
One of the peculiarities of the case I discovered was a lawsuit filed by
the fellow from Santa Rosa who had previously brokered the bank's
trailer loan concession. Alleging he was wrongly deprived of the loan
business, the Santa Rosan laid out the details of the scam in the court
records I found in Stockton. . .
By the time I had devoured the trailer case papers, I was tumbling to
other schemes, the biggest and most disastrous of which involved
mortgages. The bank was lending vast sums for office buildings, shopping
centers and subdivisions, but often not quite enough to get things
finished-often in the range of 90 percent of final costs. But
developers, being the world's eternal optimists, presumed that once
they'd consumed their 90 percent, the bank would cough up the rest.
When the bank refused to loan the rest, the projects drifted into
foreclosure-in the case of one subdivision I toured, minus all but
carpets and lawns-and the bank then peddled off the loans for between a
quarter and fifty cents on the dollar.
When I ran the paper trails on the buyers, I found partnerships
controlled by partnerships, sometimes as many as five or more levels
deep, until I wound up in the telephonic presence of a couple of old
fellows who had ties to the old Al Capone Outfit and who had made a
fortune during World War II buying up property seized when many of
California's Japanese-Americans were sent to concentration camps. . .
But I was told, in writing, that the Bee didn't consider my stories
worth the effort. . .
American Savings was the biggest of the banks that fell to a variety of
forces, but all of it involved mortgage foreclosures and the reckless
pursuit of anything that could pay the high rates promised on those
jumbo certificates of deposit. The ensuing oversupply of downtown office
buildings led to foreclosures and bankruptcies, while subdivisions stood
empty and shopping malls filled only with echoes. . .
I was one of several reporters working on the S&L crisis at the time,
and all of us were sidelined in one way or another. I found out why
later, when a Sacramento banker took me to lunch to explain why he'd
told the paper to either kill the story or lose his advertising-which
was substantial. That's when I realized what "not worthwhile" meant.
So when I watched the opening of the 60 Minutes segment and learned that
Stockton was the center of yet another mortgage catastrophe I wasn't all
that surprised.
http://www.berkeleydailyplanet.com/article.cfm?issue-02-01-08&storyID-29071
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RECOVERED HISTORY: SUBPRIME ROOTS
RICHARD BRENNEMAN, BERKELEY DAILY PLANET - When 60 Minutes tackled the
FBI investigation of the mortgage implosion Sunday night, producers
looked to Stockton [CA]: "Ground zero for the current financial crisis
and a microcosm of everything that went wrong.". . .
"A few years ago, it was one of the hottest real estate markets in the
country; today it is the foreclosure capital of America."
A few years before that, Stockton had given birth to a hometown S&L that
rocketed into the deregulated stratosphere of the early Reagan years to
become the nation's largest, and the darling of Wall Street.
State Savings And Loan transformed itself into American Savings, the
linchpin of Financial Corporation of America, with its vast network of
mortgage funds bankrolled by double-digit uninsured jumbo CDs.
The eventual collapse of American Savings is still the largest ever bank
failure in the country's history. . .
The collapse was completely predictable . . . I know this as an absolute
fact, because I did predict it, and I got exiled to the night cops' beat
at the Sacramento Bee because I refused [to stop] trying to write about
it. . . And night cops is the rookie's beat, the same one I took when I
hired on at the Las Vegas Review-Journal at age 19. . .
One of the peculiarities of the case I discovered was a lawsuit filed by
the fellow from Santa Rosa who had previously brokered the bank's
trailer loan concession. Alleging he was wrongly deprived of the loan
business, the Santa Rosan laid out the details of the scam in the court
records I found in Stockton. . .
By the time I had devoured the trailer case papers, I was tumbling to
other schemes, the biggest and most disastrous of which involved
mortgages. The bank was lending vast sums for office buildings, shopping
centers and subdivisions, but often not quite enough to get things
finished-often in the range of 90 percent of final costs. But
developers, being the world's eternal optimists, presumed that once
they'd consumed their 90 percent, the bank would cough up the rest.
When the bank refused to loan the rest, the projects drifted into
foreclosure-in the case of one subdivision I toured, minus all but
carpets and lawns-and the bank then peddled off the loans for between a
quarter and fifty cents on the dollar.
When I ran the paper trails on the buyers, I found partnerships
controlled by partnerships, sometimes as many as five or more levels
deep, until I wound up in the telephonic presence of a couple of old
fellows who had ties to the old Al Capone Outfit and who had made a
fortune during World War II buying up property seized when many of
California's Japanese-Americans were sent to concentration camps. . .
But I was told, in writing, that the Bee didn't consider my stories
worth the effort. . .
American Savings was the biggest of the banks that fell to a variety of
forces, but all of it involved mortgage foreclosures and the reckless
pursuit of anything that could pay the high rates promised on those
jumbo certificates of deposit. The ensuing oversupply of downtown office
buildings led to foreclosures and bankruptcies, while subdivisions stood
empty and shopping malls filled only with echoes. . .
I was one of several reporters working on the S&L crisis at the time,
and all of us were sidelined in one way or another. I found out why
later, when a Sacramento banker took me to lunch to explain why he'd
told the paper to either kill the story or lose his advertising-which
was substantial. That's when I realized what "not worthwhile" meant.
So when I watched the opening of the 60 Minutes segment and learned that
Stockton was the center of yet another mortgage catastrophe I wasn't all
that surprised.
http://www.berkeleydailyplanet.com/article.cfm?issue-02-01-08&storyID-29071
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