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Subprime Non-Bank Lenders Ask
Obama and Geithner for Bailout, in Guise of Stimulus
Byline: Matthew R. Lee of Inner
City Press on Wall Street: News Analysis
NEW YORK, February
10 -- The abuse of the
subprime-triggered U.S. bailout fund has reached a new high, or low,
with a
trade association for non-bank subprime lenders asking to be eligible
for
Troubled Assets Relief Program funds. In a February 5
letter to Barack Obama, copied
to Timothy Geithner and Larry Summers, the American Financial
Services
Association argues that while "to date, the majority of the federal
government's financial relief programs have been directed toward
assisting
depository institutions... a campaign to get credit into the hands of
consumers
must also encompass finance companies." Inner City Press first obtained
the letter from SNL Interactive.
AFSA's
board of directors includes, as incoming chair, a representative
from the
financial company World Acceptance. This South Carolina-based company
has been described
as "below-subprime" by SmartMoney, for example, and as making
"small, expensive loans to paycheck-to-paycheck types, mostly in
Southern states." Now this type of company is in line to get bailout
funds, in the guise of stimulating the economy.
AFSA's
letter to Obama goes on to say that "many finance companies rely
on bank
lines of credit to fund loans to consumers. For this reason, we ask the
administration to ensure that, if these banks accept TARP money, they
keep
these lines of credit open and fluid."
Even prior
to the predatory-lending triggered meltdown, consumer groups like
Bronx-based Fair
Finance Watch documented to the Federal Reserve that, for example, Bank
of
America, JPMorgan Chase, Citigroup and Wells Fargo were financing and
enabling payday lending firms. Inner City Press sued
the Federal Reserve under the Freedom of Information Act to gain access
to the
list of finance companies lent to by Wachovia, since failed and bought
by Wells
Fargo.
Now
the
argument is made that banks' should be required to lend to subprime
finance
companies as a condition of their bailout funds.
Geithner raises glass, Bernanke and Summers
smile, AFSA's TARP not yet shown
These
novel arguments are merely an extension of currently accepted abuses.
CIT, a
finance company with a subprime component, was allowed to become a bank
holding
company with no public notice or comment, in order to receive bailout
funds.
Ocwen, a subprime mortgage servicers, has applied to the Federal
Reserve to buy
a small Texas bank, in order to gain access to bailout funds.
But, AFSA's
argument seems to be, why even go through these contortions? Why not
openly
funnel bailout funds to the very subprime lenders which triggered the
crisis? And perhaps Obama, Summers and
Geithner will
do it.
Inner City Press on Geithner (video stream) click here
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