Edwards Firm Involved In Predatory Lending

From his fans at the Washington Post:

Edwards Says He Didn’t Know About Subprime Push

By Alec MacGillis and John Solomon
Friday, May 11, 2007; A06

The hedge fund that employed John Edwards markedly expanded its subprime lending business while he worked there, becoming a major player in the high-risk mortgage sector Edwards has pilloried in his presidential campaign.

Edwards said yesterday that he was unaware of the push by the firm, Fortress Investment Group, into subprime lending and that he wishes he had asked more questions before taking the job. The former senator from North Carolina said he had asked Fortress officials whether it was involved in predatory lending practices before taking the job in 2005 and was assured it was not.

Subprime loans are aimed at buyers with poor credit histories and charge higher rates because of the risks. Some loans carry fees and large rate increases that are hidden from a home buyer.

Largely as a result of the rise in subprime lending and the cooling housing market, home foreclosure filings rose to 1.2 million in 2006, an increase of 42 percent. At the same time, the drop in value of subprime lenders has presented a buying opportunity for investors such as Fortress.

Fortress hired Edwards as an adviser in October 2005, nearly a year after his losing campaign as Democratic vice presidential candidate. At the time, it owned a major stake in Green Tree Servicing LLC, which rose to prominence in the 1990s selling subprime loans to mobile-home owners and now services subprime loans originated by others…

Fortress’s growing role in the subprime lending market provides a second contrast between the firm’s business practices and the positions Edwards has taken as the presidential candidate who has made poverty a major campaign theme. The Washington Post reported last month that Fortress’s partners and its foreign investors benefited from the kind of offshore tax breaks Edwards has criticized as a candidate.

Last month, Edwards announced a plan to fight predatory lending. He said that an increase in subprime loans and predatory mortgages was resulting in a surge of foreclosures that risked “devastating communities,” and that “shameful lending practices . . . are compromising our strength as a nation.”

Edwards said his role at a company with a growing stake in the subprime industry should not be seen as undermining his commitment to helping the poor. He noted that since the 2004 election, he has founded a poverty think tank, started a charity for poor college students and assisted campaigns to raise the minimum wage…

Subprime loans have been particularly prevalent in New Orleans, which Edwards has made a focal point of his campaign. He formally announced his bid in a Katrina-ravaged neighborhood there and returned for a visit last week.

The New Orleans Times-Picayune reported in December 2005 on the problem of subprime loan foreclosures after Katrina, citing as an example Green Tree’s effort to hold a 67-year-old hurricane victim in default on her subprime loan for a home two months after it was flooded out. Green Tree general counsel Brian Corey said that case was not representative of the company’s practices in New Orleans.

Edwards said he asked Fortress this week to find Katrina victims foreclosed on by Green Tree and to help them. “I said, ‘This is not okay that this is happening,’ ” he said. “I don’t know how many cases there are . . . but the right thing is to go back and fix this.”

Disclosure forms to be released on Tuesday will show how much Edwards was paid for his work at Fortress, which lasted until December 2006, when he stepped down to run for president. He has received $167,460 in campaign contributions from Fortress employees and their families, his largest sum from a single company.

Edwards, a highly successful trial lawyer before entering politics, said yesterday he went to work for Fortress to learn more about capital markets. He acknowledged the job provided a financial benefit at a time when his only other salary was $40,000 from the poverty center…

In hindsight, Edwards said, he does not regret taking the job. “I guess it’s my belief that I did learn something about capital markets that’s valuable,” he said. “I think it’s very important for a president to understand how markets operate.”

What do we expect? Mr. Edwards doesn’t know anything about high finance.

He only knows about “birthin’ babies.”

But if he didn’t know anything about what was going on, why did this firm pay him?

Last month, Edwards announced a plan to fight predatory lending. He said that an increase in subprime loans and predatory mortgages was resulting in a surge of foreclosures that risked “devastating communities,” and that “shameful lending practices . . . are compromising our strength as a nation.”

What chutzpah.

And do note that the Washington Post only brings up the story to present Edwards’s “defense.”

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