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Mnuchin, Otting, Ross
Secretary of the Treasury Steven Mnuchin (left), Comptroller of the Currency Joseph Otting (center), and Secretary of Commerce Wilbur Ross are among the architects of the 2008 housing crash who are now working to dismantle consumer protections under the Trump administration.
The 2008 housing crash wiped out the savings of millions of people and sent America’s homeownership rate crashing to its lowest level in 50 years. But a few tycoons made out like bandits — and some of them are now guiding economic policy in the Trump administration.
This shocking and underreported history is laid out by award-winning journalist Aaron Glantz of the investigative news outlet Reveal in his new book, “Homewreckers,” published Oct. 15.
In the late ‘80s and early ‘90s, I was working on Wall Street when investment banks bought residential home loans from commercial banks, bundled them into mortgage-backed securities, and sold them off. At first, regulations from the Glass-Steagall Act separated investment banks and commercial banks, and homeowners had some protection. But a variety of predators began chipping away at consumer protections until the whole industry came crashing down.
I left investment banking because I couldn’t see what value it provided. All the banks did was generate more transactions, more fees, and churn the same securities over and over. And the most frequent victims of these predatory lending practices were communities of color and working families.
Glantz, in his book, looks at how a few financiers scooped up piles of foreclosed properties at fire-sale prices, often with help from taxpayers. While many groups — including the Greenlining Institute, which I now lead — pleaded for more relief for struggling homeowners, federal agencies made sweetheart deals that turned former homeowners into renters and made some very rich people richer.
Worse, several of those who got richer on others’ misery ended up with plum jobs in the Trump administration, where they have weakened the rules set up to protect consumers and try to avoid another crash. They include Joseph Otting and Steve Mnuchin of OneWest Bank, now serving as comptroller of the currency and secretary of the Treasury, respectively, and Wilbur Ross, now secretary of Commerce.
Otting, for instance, is leading an effort to weaken the Community Reinvestment Act, the essential anti-redlining law passed in the 1970s, seeking to undermine the law’s goal of ensuring that banks invest in long-redlined communities.
Mnuchin, meanwhile, is working to dismantle the Consumer Financial Protection Bureau, the consumer watchdog put in place after the crash. As Sen. Elizabeth Warren, one of CFPB’s original architects, put it, “It comes as no surprise that Donald Trump and Steven Mnuchin — two men who were deeply involved in companies that cheated thousands of customers — would want to gut the agency that’s held cheaters accountable.”
The administration weakened protections against predatory lending — for example, by slashing the rule designed to curb the worst practices of the notoriously abusive payday lending industry, infamous for trapping borrowers in cycles of debt. A rule that would have made these lenders confirm that borrowers are able to repay their loan went out the window.
As Glantz explains, the very people who profited from the misery of the housing crash are now setting the rules of the financial system in ways guaranteed to create more victims. “Drain the swamp” has turned into “invite the thieves to update your burglar alarm.”