Tuesday, September 11, 2012
Georgia Was a Different Ground Zero
I know most of you think of 9/11 when you hear (or read) "Ground Zero". But Georgia was ground zero in a different disaster -- the sub-prime mortgage meltdown of 2008. I hope you will be as shocked as I was when I listened to this from Frontline.
"NARRATOR: Bankers spread their investing dollars across the country, but especially in states seeing historic levels of population growth, places like Florida, Nevada, California, and here, in Georgia.
ROY BARNES, (D) Governor of Georgia, 1999-03: Well, Atlanta was one of the hottest markets in the country, the Atlanta region."
Some of you might remember Governor Roy Barnes -- the last Democratic Governor of Georgia.
"NARRATOR: Elected in 1998, Barnes is renowned for having taken on Wall Street over subprime lending, a market the Street had traditionally avoided."
You might not have known that. But it's true. Let's skip forward a little.
"NEWSCASTER: Subprime loans in Atlanta jumped by more than 500 percent during a five-year period.
ROY BARNES: What really changed the appetite for subprime mortgages was you could securitize them. And you could sell it on Wall Street. They do it in tranches, and then they wrap it up so they could be packaged together and have an overall higher yield."
As more and more people become educated about the history of the Lesser Depression, we become aware that sophisticated, educated bankers were pushing sub-prime loans on unsophisticated, uneducated citizens. In short, predatory lending.
"NEWSCASTER: It’s a phrase you’re likely to hear in the future—
NEWSCASTER: —predatory lending—
1st WOMAN: We trusted mortgage companies—
2nd WOMAN: We say that we were swindled.
3rd WOMAN: The situation have caused me to go into the state of bankruptcy.
4th WOMAN: This is what you call robbing somebody without a gun!"
Governor Barnes -- not an expert on sub-prime loans but smart enough to recognize predatory lending -- wrote legislation to curb the practice -- and the industry. I bet you can already guess the rest of this story. But it's worth hearing.
"MORTGAGE LENDER: This bill will cripple the mortgage business! It’s going to cripple real estate sales! It’s going to absolutely devastate the home market in Georgia, I can guarantee you!
FRANK ALEXANDER (Prof. of Law, Emory University): There were threats that the residents in Georgia wouldn’t be able to get mortgages anymore because investors would not buy the mortgages in Georgia. And if that were true, no bank would create a mortgage in Georgia.
NARRATOR: Despite the efforts of the mortgage lobby, Barnes and Fort got the bill passed in April 2002.
NEWSCASTER: Georgia now has the toughest predatory lending law in the nation—
NARRATOR: The mortgage lobby feared that similar legislation could pass in other markets, like California. They opposed Barnes’s reelection, they funded his challenger, and lobbied to rescind the law.
FRANK ALEXANDER: Right after the Governor Barnes’s defeat in November, one of the top legislative priorities for the new governor and the new legislature was to gut the Georgia Fair Lending Act. I think it was about two weeks into the new legislative session, and it was gutted.
NARRATOR: But for a seven-month period, predatory lending in Georgia declined. It may have been the last chance to slow the housing boom."
You caught all that, right? Big Business funded Barnes' challenger and then gutted Georgia's Fair Lending Act. Frontline was too non-partisan to mention it but I will; the people that gutted that law and the Governor that signed it were Republicans.
I urge you to go listen to this story to get the full effect. I'm not going to sugar coat it. It's a four-part series and each part is an hour long. I'm only through the second part -- and it has jaw-dropping moments greater than this one. Click here and listen to Episode One of this show this blog describes.
The transcript is here. in case you need to read it and/or send it to any of your friends.
There's one last point and I'll let you go. This show is funded by PBS. Public Broadcasting. It is paid for by people like you and me. Don't ever let anybody tell you it isn't worth it. This stuff is important. And you're not hearing it anywhere else.
Don Brown -- Chairman
The Democratic Party of Pike County
September 11, 2012