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Are we bailing out the bad lenders?

Banks are getting billions of dollars from the federal government to prop them up following the melt-down of the U.S. housing industry. The melt-down was caused in large part by poor lending practices, especially among sub-prime lenders. And who owned those sub-prime lenders? The very banks that are now getting bail-out money.

That’s the finding of a new report released by the Center for Public Integrity. And a not-insignificant number of those loans financed homes right here in Pinellas County.

Many banks that have been hit the hardest by the economic melt-down have portrayed themselves as victims of the sub-prime lending industry — companies that were too easy about lending money to people with little cash, poor credit or low incomes. But the director of the Center for Public Integrity says the banks not only knew about those questionable practices, they owned the very lending companies that behaved so irresponsibly.

“The mega-banks that funded the sub-prime industry were not victims of an unforeseen  financial collapse, as they have sometimes portrayed themselves,” said Bill Buzenberg. ”These banks were deliberate enablers that bankrolled the type of lending that’s now threatening the financial system.”

The Center looked at 7.2 million sub-prime loans made between 2005 and 2007.  It said that banks based in the U.S. and Europe poured vast amounts of capital into the sub-prime industry in pursuit of big profits. And it says that at least 21 of the 25 biggest sub-prime lenders  received their financing from banks that are now getting bailout money from the U.S. government.

The Center for Public Integrity describes itself as a non-profit organization “dedicated to producing original, responsible investigative journalism on issues of public concern.”

Tags: Add new tag, home finance, pinellas county, sub-prime

This entry was posted on Friday, May 8th, 2009 at 10:50 am and is filed under Mortgage & finance, North Pinellas County. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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