Homewreckers: How Wall Street, Banks & Trump’s Inner Circle Used the 2008 Housing Crash to Get Rich

StoryOctober 15, 2019
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We speak with investigative reporter Aaron Glantz about his new book “Homewreckers,” which looks at the devastating legacy of the foreclosure crisis and how much of the so-called recovery is a result of large private equity firms buying up hundreds of thousands of foreclosed homes. “Homewreckers: 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” reveals how the 2008 housing crash decimated millions of Americans’ family wealth but enriched President Donald Trump’s inner circle, including Trump Cabinet members Steven Mnuchin and Wilbur Ross, Trump’s longtime friend and confidant Tom Barrack, and billionaire Republican donor Stephen Schwarzman. Glantz writes, “Now, ensconced in power following Trump’s election, these capitalists are creating new financial products that threaten to make the wealth transfers of the [housing] bust permanent.” Aaron Glantzis a senior reporter at Reveal from The Center for Investigative Reporting. He was a finalist for a Pulitzer Prize this year for his reporting on modern-day redlining.

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: I’m Amy Goodman, with Juan González. This is Democracy Now!

JUAN GONZÁLEZ: Well, 12 Democratic presidential hopefuls will spar this evening at Otterbein University in Westerville, Ohio, during the fourth official Democratic primary debate. As voters weigh their options, one of the pressing issues on many Americans’ minds is housing.

Independent Senator Bernie Sanders of Vermont is the latest 2020 Democratic presidential candidate to release a comprehensive “Housing for All” plan. He has advocated for rent control, called for big investments in affordable and in subsidized housing, and has also pushed for reforms in zoning laws to allow construction in more expensive neighborhoods.

Meanwhile, Massachusetts Senator Elizabeth Warren introduced the American Housing and Economic Mobility Act last year, which is the basis of her proposed affordable housing plan, calling for expanding fair housing legislation, building or rehabilitating millions of low- and middle-income housing units and reforming zoning laws.

Several other candidates, including Senators Cory Booker and Kamala Harris, have released detailed plans to tackle the housing challenges of ordinary Americans, many who are still struggling after the devastating 2008 housing market collapse.

AMY GOODMAN: Well, we spend the rest of the hour on a new book that looks at the devastating legacy of the foreclosure crisis and how much of the so-called recovery is a result of large private equity firms buying up hundreds of thousands of foreclosed homes. The book is by investigative reporter Aaron Glantz. It’s called Homewreckers: 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. In it, Aaron Glantz reveals how the 2008 housing crash decimated millions of Americans’ family wealth but enriched President Donald Trump’s inner circle, including Trump Cabinet members Steve Mnuchin and Wilbur Ross, Trump’s longtime friend and confidant Tom Barrack, and billionaire Republican donor Steve Schwarzman.

Aaron Glantz joins us now, senior reporter at Reveal from The Center for Investigative Reporting, finalist for a Pulitzer Prize this year for his reporting on modern-day redlining. His new book, Homewreckers, comes out today.

It’s great to have you with us, Aaron. What an amazing book! Just lay out what you found.

AARON GLANTZ: Well, first of all, I wanted to know. Eight million Americans lost their homes in the Great Recession. But they didn’t just disappear, right? So we live now in a society where the wealth gap between the richest one-tenth of 1% and the other 90% is bigger than it’s been in a hundred years. And so much of Americans’ wealth is in their homes, because we have very few other ways to save. So I wanted to know: What happened to these houses? Who profited off this mess? And that trail led me to a number of people who are in Donald Trump’s inner circle.

AMY GOODMAN: So talk about them, and talk about how they benefited.

AARON GLANTZ: Well, we start with the crash itself and the failure of the banks. When all of these bad loans came due and there was massive foreclosures, we, the taxpayers, the government, subsidized those foreclosures. And there were a lot of people who lost money during that time, but there were also people who bet on these failed banks and received government support to foreclose. And that included, as you mentioned, Steve Mnuchin, who’s now our treasury secretary. He and his group of other investors, including George Soros, John Paulson, Michael Dell, the founder of Dell Computer, came in and bought IndyMac Bank, which was this failed Pasadena, California, bank, and then proceeded to foreclose on over 100,000 families, including 23,000 seniors. Now, under the deal that he made with the government to acquire this bank, which the government owned because it failed, he and his investors paid the government nothing. And then, although he invested some of his own money in the bank, we then paid him to subsidize his foreclosures. And documents that I obtained under the Freedom of Information Act show that we paid his group more than a billion dollars. And Wilbur Ross, the commerce secretary, had a similar deal at BankUnited, which was another failed bank in Florida.

JUAN GONZÁLEZ: And, of course, IndyMac, as you show in your book, was really the first major bank to collapse, and then a whole bunch — a series of others happened in 2008. And it was basically based on a lot of either fraudulent or predatory lending. If you could talk about that, as well?

AARON GLANTZ: There were a lot of predatory loans going around in the housing bubble. And at this point, we all know that. What I wanted to know was when there were families who got these so-called NINJA loans — right? — no income, no job, no assets, no problem — or these loans that had these teaser rates and then reset at a higher level, and you were told, “Oh, you can just refinance,” or the main character in my book, Sandy Jolley, whose family owned their home outside of Los Angeles for more than 30 years, until they got a reverse mortgage that sapped their equity — and all of these families lost their homes to foreclosure. What I wanted to know was what happened after. Right? We’ve been stuck in this country on this trauma of 2007, 2008, 2009. But now here we are in 2019. Ten years have passed. The unemployment rate is low. The president tells us everything is great. But people don’t feel like everything is great. So, you know, we have jobs, but what happened to our wealth? They took it. That’s what happened.

JUAN GONZÁLEZ: And also, the disproportionate impact that this loss of equity in all these homes had, especially on the African-American and Latino communities, which were even more dependent on home equity for what little wealth they had or net wealth they had.

AARON GLANTZ: What we see is that banks, like Steve Mnuchin’s bank, concentrated their foreclosures in communities of color. And then, when they started making loans again when the economy improved, they didn’t make loans to those communities. So they wiped out the wealth of these communities with foreclosure, but then, over a five-year period, Steve Mnuchin’s bank made three loans to help African Americans buy homes and 11 loans — this is national bank — helped three African Americans and 11 Latinos buy homes over five years.

And now Steve Mnuchin, as the treasury secretary, is in charge of regulating every American bank. And so, he and Donald Trump picked one of his deputies at OneWest Bank, Joseph Otting, for this position called comptroller of the currency, which basically is America’s top bank cop, who’s in charge of enforcing laws, like the Community Reinvestment Act, that are meant to stop redlining. So, this bank, which didn’t make any loans — hardly any — to communities of color is now in charge — you know, this leadership, under President Trump — of making sure that these anti-redlining laws are followed.

JUAN GONZÁLEZ: And it seems to me it’s not just the Trump administration, because it was under the Obama administration there was supposed to be some efforts to help homeowners stay in their homes. And, in fact, Julián Castro, now a presidential candidate, was at HUD supposedly in charge of the efforts to assist homeowners, and that’s come under heavy criticism, what the Obama administration did to help these homeowners.

AARON GLANTZ: This book, you know, some people say it’s an anti-Trump book, because it has Donald Trump on the cover holding wads of cash, with Steve Mnuchin riding on a wrecking ball and, you know, Wilbur Ross pulling money out of a house. But all of this activity happened, as you mentioned, when Barack Obama was the president. The homeownership rate in America, this is what got me started on this book. I started working on this book — it’s an investigative book; it took years to write. I started working on it in 2016, when I didn’t know who the new president was going to be. But I noticed that the homeownership rate in this country, instead of going up during the economic recovery, it kept going down. It went down in 2012. It went down in 2013, '14, ’15 and ’16. Until 2016, it bottomed out at its lowest rate in over 50 years. And so that's when I started asking the question, “Who profited?” Under Obama.

AMY GOODMAN: Tell us more about Tom Barrack and Steve Schwarzman, and their relationship with Trump and what they did.

AARON GLANTZ: So, Tom Barrack is Donald Trump’s oldest friend, closest friend, introduced Ivanka at the Republican National Convention, planned the inauguration for Donald Trump. Steve Schwarzman, another old Trump friend, according to media reports, still has the president on speed dial.

Now, we’ve been talking about the foreclosures. Who bought those foreclosures? We have seen a massive transfer of wealth, as I mentioned, not from one group of families who got foreclosed to another group of families who were able to buy homes, but we now have 3 million homes in this country that are owned by LLC, LP and LLP shell companies. And some of the largest buyers of these homes were these private equity funds run by Tom Barrack and Steve Schwarzman.

So, there’s now a company called Invitation Homes, which was founded by Blackstone, Steve Schwarzman’s company, owns 80,000 homes across more than a dozen states. And it’s a publicly traded company now. They have their IPO. So you can track — they track very clearly their rent increases, the relatively small amount of money they spend on maintenance. And also, importantly, because these people are leverage buyout kings, they have been taking these homes and bundling them into this new type of mortgage-backed security, taking on a ton of debt. So, for example, I mentioned earlier Sandy Jolley, this longtime homeowner in Los Angeles area whose family owned their home for more than 30 years before they were foreclosed on by Steve Mnuchin’s bank. Now that home is part of a $960 million mortgage-backed security, bundled with thousands of other homes. So, if you go and look at the property record, you don’t see like a $20,000 home equity line of credit to remodel the kitchen. You see a $960 million lien on the house taken out by a private equity firm.

AMY GOODMAN: We’re going to break and then come back to this discussion. Aaron Glantz is our guest. He was a Pulitzer Prize finalist last year. His new book, out today, Homewreckers: 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. Stay with us.

[break]

AMY GOODMAN: “The Capitalist Blues” by Leyla McCalla. This is Democracy Now! I’m Amy Goodman, with Juan González. Our guest, Aaron Glantz, senior reporter at Reveal from The Center for Investigative Reporting. His new book, Homewreckers: 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. I’m Amy Goodman, with Juan González.

JUAN GONZÁLEZ: Aaron, talk to us about John Paulson, another billionaire hedge fund and equity guy, another big supporter and adviser of Donald Trump, and his role in all of this.

AARON GLANTZ: Well, you know, Steve Mnuchin — we’ve been talking about Steve Mnuchin, the treasury secretary now. He bought this bank IndyMac. But he was just the head of a group that bought this bank. So, Paulson —

JUAN GONZÁLEZ: He didn’t have the real money. He had some money, but not the big money.

AARON GLANTZ: Yeah, I mean, he lives in a 6,000-square-foot apartment on Park Avenue and has another house in Bel Air and another one in Scotland, but that’s not the real money, right? I mean, Paulson had made billions of dollars in the run-up to the housing bust. He was one of these hedge fund guys who saw that we were in a bubble, bet against the American dream and made a ton of money. And then, then he’s like, “OK, now there’s a crash. How am I going to make money on the way up again?”

And so, his staff studied the S&L bailout. All of these guys — all these guys looked at the savings and loan crisis of the late '80s, which was another time where the government intervened and bailed out the rich at the expense of the rest of us, and they used it as a playbook. And so, one of the things they noticed was that some of the richest deals, the best deals for the hedge fund guys to come out of the S&L crisis came at the very beginning. And that's why they bet on IndyMac. But what’s interesting is, Mnuchin, another reason he had to put together this group is if any of these hedge funds had put in more than a certain amount of money into the bank in terms of their share of ownership, they would be regulated as bank holding companies, and the government would be able to go in and look at their books. So they all just stayed just a little bit below that threshold to make sure that they would avoid scrutiny.

AMY GOODMAN: So, the debate is tonight, Aaron Glantz. The housing policies of the different Democratic presidential candidates?

AARON GLANTZ: Well, first of all, I would love to hear them talk about it in tonight’s debate. I mean, the moderators have totally abdicated on asking about issues of economic equity. So, as you mentioned earlier, Elizabeth Warren has a plan. Bernie Sanders has a plan. Pete Buttigieg has a plan. Kamala Harris has a plan. I’m not sure if I’ve heard one from Vice President Biden. But I would like to see them engage, you know, on these issues. You know, Kamala Harris says she wants to put $100 billion towards promoting African-American homeownership. The black homeownership rate in this country is below the level that it was at when segregation and discrimination was legal. I’d like to hear her talk to Elizabeth Warren, who has a plan to give massive down payment assistance and rectify redlining. Juan was talking about Bernie Sanders’ plan on rent control and affordable housing. I mean, this is something where the Democratic candidates should engage, in the same way they’ve been engaging on healthcare, and present their conflicting visions and debate.

You know, as I mentioned at the outset, the richest 0.1 of 1% of the American people have the same amount of wealth as the other 90%. And that is because, in America, 80% of most middle-class families’ wealth goes to only five things: food, housing, shelter, transportation, healthcare. All those other things, besides housing, just disappear as soon as you spend your money. Housing is the only way that most Americans have to save. The average American family has $4,000 in the bank. So, either you put your money in equity in your house, or you pay it to your landlord, and if it’s a private equity firm, it goes on the bond market, or you have a little bit for yourself. And I’d like to see the candidates engage on this question.

JUAN GONZÁLEZ: And in terms of — your book also does talk about some of the regulators who attempted to do the best they could to deal with the bank failures. Sheila Bair, of course, is highlighted in your book. Talk about the regulatory climate right now, in terms of being able to protect homeowners, and the lending industry, in general.

AARON GLANTZ: Well, I think, actually, when I looked at the history of America, the thing that jumped out to me was, in this financial crisis, how many people came, throughout the whole process, with really great ideas that were summarily ignored, you know, under President Obama. I write about Alan Blinder, who was a former member of the Federal Reserve Board, who, in 2008, went with a number of other prominent economists, including members of the conservative [American] Enterprise Institute, and said, “Hey, you know, what we need is a government-run bank, like President Roosevelt had during the Great Depression,” which the Home Owners’ Loan Corporation helped more than a million Americans keep their homes. It refinanced one out of every five mortgages in urban America. It invented the long-term fixed rate mortgage. And, guess what, it made money for the taxpayers, because the American people paid their loans back. After World War II, we had the GI Bill. It helped 4 million Americans buy homes. It basically broke even, because the GIs paid their loans back.

Instead, what we had over the past decade is this massive government giveaway to private equity and a few people who are now close friends of the president and in his administration. The really scary thing is that, under President Trump, these people are running the country. And so, they are, bit by bit, taking away the few scraps and reforms that Obama put in place, defanging the Consumer Financial Protection Bureau, weakening the Dodd-Frank Act, which regulated the banks. We’re seeing, as I mentioned earlier, a ballooning number of this new kind of mortgage-backed security, a $960 million lien on a single house in South Los Angeles. So, this is where we’re at. You know, the people who looted us during the Obama years are now running the country. And that’s why the book is called Homewreckers.

AMY GOODMAN: We’ve got just 30 seconds. What shocked you most?

AARON GLANTZ: I think the thing that shocked me most was how many of these good ideas were proposed and how much they were ignored over more than 10 years, and that there really is no reason that we have to be in the situation we are now.

AMY GOODMAN: Well, I want to thank you so much, Aaron, for being with us. We’re going to do Part 2, and we’ll put it online at democracynow.org. Aaron Glantz, senior reporter at Reveal from The Center for Investigative Reporting. His new book, Homewreckers: 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.

That does it for our show. Happy Birthday, Juan González! Happy Birthday!

JUAN GONZÁLEZ: Thank you, Amy. We’re getting old, aren’t we, Amy? Getting older than we thought.

AMY GOODMAN: Well, we also have someone else to say Happy Birthday to. Happy Birthday to Miguel Nogueira, our engineer! And congratulations to our producer Tami Woronoff and her husband Dave Rowley on the birth of their son, Quentin Akira Woronoff-Rowley. Welcome to the world, Q!

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