With Subprime Hot Air in DC, Cold-Blooded Citigroup Buys Ameriquest

Byline: Matthew R. Lee of Inner City Press: News Analysis

            As President George W. Bush and Federal Reserve chairman Ben Bernanke Friday wrung their hands in Washington about the subprime mortgage meltdown, New York-based Citigroup announced it was buying a chunk of admitted predatory lender Ameriquest. Citigroup is a meta-predator, taking advantage of the foreclosure boom to scoop up one of the most abusive lenders at a temporarily reduced price. The head of Citigroup's "global securitized markets" unit, Jeffrey Perlowitz, said the takeover "allows Citigroup to secure valuable and scalable platforms in a market undergoing significant change." Some thought predatory lending was a market being discredited and shrinking. To Citigroup, it's just change that can be scaled up.

            The founder of Ameriquest, Roland Arnall, who has made billions from predatory lending, was nominated by President Bush as Ambassador to the Netherlands. While a few U.S. Senators delayed his confirmation until Ameriquest finalized a settlement with state attorneys general, now Arnall will profit again, selling the remainder of the company to Citigroup. The losers in the deal are the borrowers from whom Citigroup will even more ruthlessly squeeze payments on loans that were misleading and abusive from the start, and future borrowers whom Citigroup will target with the ex-Ameriquest "scalable platform."

Chuck Prince smiles, "scalable," swallowing subprime

            Citigroup's own existing platform has made it the only lender to have twice settled predatory lending charges with Federal agencies, for $240 million with the Federal Trade Commission, and another $70 million in 2004 with the Federal Reserve. Since then Citigroup's high-cost lending has gotten even more racial disparate.

            2006 was the third year in which the data distinguishes which loans are higher cost, over the federally-defined rate spread of three percent over the yield on Treasury securities of comparable duration on first lien loans, five percent on subordinate liens. Citigroup in 2006, in its headquarters Metropolitan Statistical Area of New York City, confined African Americans to higher-cost loans above this rate spread 4.41 times more frequently than whites, according to Fair Finance Watch. Citi's disparity to Latinos was 2.38. Meanwhile Citigroup is now buying a unit of Ameriquest, 91.65% of whose loans in 2006 were subprime.

            Citigroup loves subprime, and has no scruples in this field. Its corporate DNA goes back to a Baltimore-based predatory lender called Commercial Credit, which Sandy Weill and Charles "Chuck" Prince took over in the 1980s. After their company, by then called Travelers, acquired Citicorp in 1998, the next big deal was to scale up subprime lending, by taking over Associates First Capital Corporation, which was being sued for fraud all over the country.

            Now Citigroup buys Ameriquest, another well-known predatory. Citigroup's subprime regrets, if they exist, include losing out on Household International, which settled predatory lending charges for $486 million, to HSBC in 2002.  Now Citigroup is back in the game, and big deal. Borrowers, be afraid, be very afraid. Even the downturn, Citigroup just re-loads for the next hunting season...

            At Citigroup's annual shareholders' meeting on April 17, 2007, Chuck Prince stood alone on the stage of Carnegie Hall, as Sandy Weill used to do, and took questions. Inner City Press asked about Citigroup's 2006 lending record -- confining African Americans in New York to higher cost loans 4.4 times more frequently than whites -- and about Citigroup's then just announced proposal for "propping up and taking an option in Argent," an affiliate of Ameriquest.

            "Good question," Prince began. Argent "is a company that has restructured itself. This is a company that has settled with regulators." He said it is a situation of "good bank, bad bank" and claimed that Citigroup is only thinking of buying the good part.

            But it was Ameriquest that announced reforms, none of which have been implemented at Argent. Prince cut in. "We're not going to buy anything unless it's cleaned up." So in the turbulent five months since, have Ameriquest and Argent really been cleaned up? Or have prices hit bottom, leading Citigroup to pounce?  Prince said, "we've had reputation issues in the distant past, we're not going down that road." And now, while other wring their hands to come off as concerned, Citigroup is rushing headlong with Ameriquest further down the road of predatory lending.

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For more follow-the-money coverage, click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army.Click here for an earlier Reuters AlertNet piece by this correspondent about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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