Blame the Politicians, Act II

One consequence of our broken political system -- which is run more by lobbyists than voters -- is that state laws once floated in several states to protect buyers from predatory lenders were either watered down or scuttled completely after the donation checks cleared.

Writing in today's Wall Street Journal, Glenn Simpson's Page One story provides a detailed overview of what happened to potential laws in numerous states including California.

Ameriquest Mortgage Co., until recently one of the nation's largest subprime lenders, was at the center of those battles. Working with a husband-and-wife team of Washington lobbyists, it handed out more than $20 million in political donations and played a big role in persuading legislators in New Jersey and Georgia to relax tough new laws. Those victories, in turn, helped blunt efforts by other states to crack down on reckless lending, critics of the industry contend...

So politicians ignored the best interests of their constituents for money? Say it ain't so!

..Executives at Ameriquest, based in Orange, Calif., acknowledge that the company lobbied heavily against state lending restrictions, but say that other subprime lenders did so as well. In fact, a host of subprime lenders and banking trade groups, including Citigroup Inc., Wells Fargo & Co., Countrywide Financial Corp. and the Mortgage Bankers Association, spent heavily on lobbying and political giving.

I remember the "but they did it too!" excuse while growing up, but my mother never bought it. Too bad she wasn't elected to office!

According to Wright Andrews, a lobbyist who gave millions to various politicians to help fight mortgage-related bills, he's not to blame either:

"Personally, I think and have long felt the Fed should have done more early on," he says. "But I don't think anybody realized the level of problems that were going to come out in the last year or two. If you had said to me the industry was going to melt down, I would have said you were absolutely insane."

That's right, Mr. Andrews. Blame the Fed -- everyone else is!