Major Banks Receiving Federal Aid Backed Subprime Lenders, Report Says

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http://www.washingtonpost.com/wp-dyn/content/article/2009/05/06/AR2009050603365.html?hpid=topnews

Many of the banks receiving billions of dollars in federal aid owned or bankrolled subprime lenders that directly contributed to the unraveling of the global economy, according to a new report.

While many portrayed themselves as unwitting victims of the subprime mortgage meltdown, the banks also enabled that kind of lending because it was lucrative, according to the Center for Public Integrity, a nonprofit investigative reporting group funded largely by charitable foundations. The group analyzed federal data on 7.2 million mortgages made from 2005 through 2007, a period that covers the peak and collapse of subprime lending.

The report oversimplifies the problem and ignores the complexities of the market, said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents some of the nation's largest lenders. "To say we are victims is understating, and to say we are enablers is overstating," he said.

Banks that received federal bailout money financed at least 21 of the top 25 subprime lenders, the investigation found. They owned these lenders, extended credit to them, or bought their loans and then sold them as securities.

Wells Fargo, J.P. Morgan Chase, Citigroup, Regions Financial Corp., GMAC, Capital One and the insurance company American International Group all owned subprime lenders, according to the center's tally. AIG still owns one of those lenders, American General Finance. Ten of the top 25 subprime lenders have paid to settle claims related to abusive lending, and 20 of them have closed, stopped lending or sold themselves.