Broke, USA
Page 38
There are any number of good sources on Sandy Weill, including a terrific and memorable profile written by Roger Lowenstein that appeared in the Times’s Sunday magazine in August 2000—just weeks before the Associates purchase. Monica Langley, the author of Tearing Down the Walls, a lively and informative account of Weill’s rise to the top, was the source for two anecdotes in this chapter: the displeasure expressed by Weill’s personal assistant, Alison Falls, when she learned her boss, post–American Express, was thinking of getting into the consumer finance business, and the reaction of James Calvano, the former president of Avis, who also expressed his incredulity. Weill, it turns out, was one of the few subprime lenders who declined to speak with me. Also of note: Mike Hudson’s piece appearing in Southern Poverty, in the summer of 2003, “Banking on Misery: Citigroup, Wall Street, and the Fleecing of the South,” winner of the prestigious Polk Award. And Lawrence Richter Quinn’s 1998 article for Mortgage Banking documenting the purchase of subprime lenders by brand-name banks.
Nine
In a 2007 interview with Jonathan D. Epstein of the Buffalo News, John Hewitt spoke at length about getting into the refund anticipation loan business. He described the working poor as “low hanging fruit,” and described himself as a mathematician so good “I was the best I ever met.” The homegrown Virginian-Pilot did a diligent job covering Jackson Hewitt and served as the source for Keith Alessi’s quote about needing to “find ways of attacking entire metropolitan areas.” Details about Jackson Hewitt’s tax loan business—the costs associated with a RAL and its revenue figures in 1997—were culled from a well-done feature by Jerry Knight at the Washington Post. Also helpful was a Jackson Hewitt feature written by Len Strazewski for Franchise Times.
The Dayton Daily News profile of Fesum Ogbazion and his company, Instant Tax Service, was written by Jim Bohman. Geert DeLombaerde profiled Ogbazion in 2001 in the Business Courier of Cincinnati shorly after he sold his first business. And for the brief section about Andrew Kahr and the birth of the subprime credit card, I’m indebted to my former colleague Joe Nocera for his wonderful book, A Piece of the Action: How the Middle Class Joined the Money Class.
Ten
The Ohio Department of Commerce generously provided me with a town-by-town, store-by-store listing of every payday enterprise in the state that included the date each was granted a license and each one’s location.
Eleven
Again, the Atlanta Journal-Constitution proved an invaluable resource. Especially impressive was the work of Maureen Downey, a columnist and editorial writer who for my money deserves a retroactive Pulitzer for her outrage over subprime mortgage lending in the early 2000s and the lengths the lenders went to foil the state’s attempts to check their mortgage business. The Journal-Constitution was my source for historical foreclosure data in Atlanta. Glenn R. Simpson, one of the Wall Street Journal’s star investigative reporters wrote about Ameriquest and Wright Andrews at the end of 2007, and Clark Howard was the consumer reporter who declared Atlanta under siege by predatory lenders. Newsweek’s Michael Hirsh wrote a nice coda about the Georgia bill that almost was, and BusinessWeek took John D. Hawke, Jr., to task in a memorable piece written by Robert Berner and Brian Grow, published in October 2008.
Dennis Hevesi of the New York Times wrote a revealing and in-depth 2002 feature looking at predatory lending in New York City. That piece included data from the Federal Reserve showing a sevenfold jump in subprime mortgages between 1993 and 2000 and the 68 percent spike in foreclosures. John Sugg was the author of the Creative Loafing article, also appearing in 2002, that featured the Iveys of Atlanta and quoted Fort.
Twelve
The annual reports on the payday industry produced each year by Stephens, Inc. were my source for the growth of the payday lending industry through the decade. The 2005 “like bears on a trout stream” study was conducted by Steven Graves, an assistant professor of geography at California State University–Northridge, and Christopher Peterson, an assistant professor at the Levin College of Law at the University of Florida. There were several good sources on subprime credit cards, including a study by Chi Chi Wu and Rick Jurgens at the National Consumer Law Center titled “Fee-Harvesters: Low-Credit, High-Cost Cards Bleed Consumers.”
The BusinessWeek article about what the magazine dubbed the “medical debt revolution” ran on its cover in November 2007 and was written by Brian Grow and Robert Berner. At the American Banker, Jeff Horwitz’s research into World Savings, the Sandlers, and option ARMs proved invaluable. Victoria McGrane wrote the Politico profile of the Center for Responsible Lending that declared the organization the main intellectual engine driving the Democratic response to the housing crisis, and a BusinessWeek writer named Eamon Javers wrote both the “pit bull of public relations” profile of Eric Dezenhall and the piece examining the stealth sponsorship of commentators such as Tom Lehman of Indiana Wesleyan University. An article by Jenny Anderson at the Times as well as Alpha magazine—and of course Gregory Zuckerman’s writings about John Paulson in the Wall Street Journal and his book, The Greatest Trade Ever—were the sources for John Paulson’s extraordinary success.
Thirteen
Dayna Baird, the chief lobbyist for large lenders like Household and CitiFinancial, was quoted as praising the Ohio legislature’s 2002 bill in a Dayton Daily News article written by Laura A. Bischoff. The article covering the Predatory Lending Study Committee’s visit to Dayton was written by the Daily News’s Ken McCall. The lengthy profile of Faith that the Cleveland Plain Dealer ran when naming him its 2003 “Ohioan of the Year” was written by Bill Sloat. In that piece I found the quote from Barb Poppe, Faith’s wife, about her husband’s intensity and ability to get into “the zone.” I found the Joy Padgett quote in the August 2007 volume of Stateline Midwest, a newsletter published by the Council of State Governments.
I spoke with Martha Clay and Rachel Robinson, the attorney who rescued the Clays before they lost their home to foreclosure. The Columbus Dispatch’s Geoff Dutton and Doug Haddix also wrote a terrific profile of the Clays while the state legislature was debating a hard-hitting predatory lending bill. Reporter Bobby Warren told Peggy Daugherty’s story in the Wooster Daily-Record, and a report written by the attorney general’s office, along with interviews with attendees, served as the foundation for my write-up of the hearings into payday lending sponsored by the attorney general around the state. Aaron Marshall is the Cleveland Plain Dealer reporter who broke the story about Otto Beatty, the husband of Joyce Beatty, the House minority leader, and his ties to a payday lender. Data on registered lobbyists and their affiliations are listed at the website maintained by the Joint Legislative Ethics Committee and the Office of the Legislative Inspector General. Particularly useful in my depiction of the legislative fight over payday was Jim Siegel’s coverage of the wrangling, which appeared in the Columbus Dispatch and the political blog he maintains, and Laura A. Bischoff’s coverage of state politics in the Dayton Daily News.
Fourteen
Matt Fellowes, founder and CEO of a new company called Hello Wallet, is a former scholar at the Brookings Institution who studied the high cost of being poor; it was Fellowes who calculated how much the typical cash checking customer pays in fees over a year. The estimated size of the unbanked in the United States comes from the FDIC, via Fellowes.
Sixteen
The country was collectively $19.5 billion in credit card debt in 1975 compared to $587 billion in 1998, according to the Federal Reserve. Elizabeth Warren told the story of her meeting with bank executives in the 2006 documentary Maxed Out, James Scurlock’s entertaining investigation of debt in America.
At the Dayton Daily News, Lynn Hulsey and Ken McCall wrote a fine series of articles about the area’s foreclosure problem. An article by the Los Angeles Times’s E. Scott Reckard was the source of the revelation that Roland Arnall and his wife gave $12 million to Republicans between 2004 and March 2008, and it was Reckard and Mike Hudson, in the terrific piece they wro
te exposing Ameriquest’s business practices, who checked on the volume of customer complaints to the Federal Trade Commission between 2000 and 2004—and discovered that Option One didn’t even make the top three.
Connie Bruck wrote a great piece, published in 2009, about Angelo Mozilo and Countrywide for the New Yorker. That built on a series of prize-worthy articles about Countrywide written the previous year by my former colleague Gretchen Morgenson at the Times. For rankings of the top subprime lenders, I relied on data provided by Inside B&C Lending. Glen Pizzolorusso was featured in an award-winning radio broadcast called “The Giant Pool of Money” by Alex Blumberg and Adam Davidson, broadcast on This American Life. (A longer version of the interview appeared in GQ.)
Epilogue
Sheryl Harris, a columnist for the Cleveland Plain Dealer, wrote at length about the ways payday lenders tried to repackage the payday loan so it remains legal under Ohio law, despite a legislative fight and a ballot initiative, as did Bob Driehaus in the New York Times. Larry Hauser, the payday entrepreneur who has his employees call customers every thirty days, explained his policy in an interview with the Wall Street Journal’s Easha Anand, and I found Alan Greenspan’s 2000 statement to the National Community Reinvestment Coalition in Shortchanged, a book published in 2005 and written by Howard Karger, a social policy professor at the University of Houston. An article by the Times’s Stephen Labaton in mid-October 2009 was the source for the claim that the financial services industry had spent $220 million lobbying against Obama’s proposed financial oversight board. Also at the Times, Peter Goodman and Sewell Chan kept close tabs on the federal government’s efforts to help homeowners facing foreclosures and Eric Dash kept tally of Citigroup’s post-crash job losses and selloffs. The data about the lucrative world of student loans was gleaned from a terrific article by Kathy Kristof appearing in Forbes in 2009 and called “The Great College Hoax.”
Searchable Terms
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Aaron’s, 26, 178, 289, 291, 330–31
AARP, 17, 113, 210, 241, 245
ACE Cash Express, 23, 26, 255, 293
Ackelsberg, Irv, 140
Acker, Suzanne Gravette, 275
ACORN, 17
Acton Marketing, 270
Advance America, 31, 120–22, 124–26, 161, 193–94, 224–26, 228, 255, 256, 287, 291, 293, 310, 313–14
Advance Financial, 224, 268–69
Advanta, 176
Aetna Life & Casualty, 148
African Americans, 86, 90, 256, 307–8
average net worth of, 96
bank branch closings and, 200–201
as targets for subprime loans, 30, 40, 43, 44, 46, 50, 56, 111, 132, 133, 201, 214, 308–9
AIG, 305
Alabama, 48–49, 166
Albertson, Robert, 151
Aldinger, William, 5, 6, 11, 17, 18–19
Alessi, Keith, 180
Allio, Tom, 251–53
Altobelli, Stephen, 33
American Banker, 151, 176, 208, 223, 224
American Express, 4, 28, 145, 146, 148, 264
American Financial Services Association, 142
American General Finance, 305
American Stock Exchange (AMEX), 25
Ameriquest Mortgage, 29, 51, 58, 207–8, 212, 214, 215, 296–99, 303, 305, 322, 324, 325, 327
Amscot Financial, 266–68, 313
Andrews, Edmund, 29
Andrews, Wright, Jr., 207–8
annual percentage rate (APR), 10, 11, 28, 123–24, 125, 185, 220, 228, 284
Appalachian Mountain Days, 135
appraisal inflation, 247, 248, 301
arbitration, mandatory, 155, 165
Arizona, 273
Ark, The, 243
Arkansas, 124, 223
Arnall, Roland, 296, 297
Arnold & Porter, 217
Associated Press, 122–23
Associates First Capital, 57, 106, 110, 175, 222, 297
Citigroup’s acquisition of, 143–67
Eakes’s phone call to, 108–9
government investigations of, 150
predatory practices of, 104–5, 107–8, 112
Self-Help’s settlement with, 114
size of, 109, 110
Atlanta, GA, 47, 49, 50, 201, 202–3, 205, 248
Atlanta Journal-Constitution, 39, 46, 49–50, 58, 211
Atlanta Legal Aid Society, 36, 37, 38, 39, 42–43, 45, 48, 58–59, 211
auto title loans, 27, 53, 64, 204, 268, 273, 315, 330
Ayala, Gary, 150
Bailey, Jeff, 5–6, 7, 11
Baird, Dayna, 240
Baker, Leslie “Bud,” Jr., 101, 102
Bald Headed Bistro, 61, 63
Baldwin, James, 24
Baltimore, MD, 323
Bank of America, 25, 27, 34, 135–36, 145, 200–201, 202, 214, 225, 322
Bank of Boston, 42
Bank of New England, 46
Bank One, 135–36, 172, 173–74
bankruptcy, 19, 44, 77, 232, 294, 306–7
Bankruptcy Abuse Prevention and Consumer Protection Act, 306
banks, 4, 24, 153–54
anti-predatory lending laws opposed by, 141
fees charged by, 22, 28, 62, 223, 272, 318–19, 321
financial crisis of 2008 and, 22, 23–24
payday lenders financed by, 27
subprime lending by, 28, 40–41, 56–57, 58, 153, 202, 247, 303
see also specific banks
Barnes, Roy, 44–45, 50, 54, 55, 199–200, 203–7, 209, 210–11, 223, 296, 326
Barry, Marion, 220
Batchelder, Bill, 253–54, 277, 316
Bear Stearns, 199, 297
Beatty, Joyce, 256–57
Beck, David, 88, 325–26
Beneficial Finance, 6–7, 51, 146, 172, 178
Bennett, Annie Ruth, 47–48
Bennett, Frank, 47–48
Bernanke, Ben, 87, 318
Bernstein, Jodie, 162–63
Best Buy, 26
Better Business Bureau, 329
bill consolidation, 52
Binzer, Ken, 306–7
Blaine, Jim, 228, 315
Blasdel, Chuck, 240–41, 259
Blazek, Bob, 6
Blockbuster, 119
Bloomberg News, 27
Blum, Lanier, 105–8
Bojangles, 118
Bomchill, Mark, 297–98
Borror, Douglas G., 246
Boston, MA, 46–47
Boston Globe, 45–46, 47, 48, 49, 54
Bradshaw, Terry, 110, 153
BREAD, 255–56
Brennan, Kevin, 310
Brennan, William J., 36–40, 42–44, 45–46, 47, 50, 55, 56, 57–59, 111–13, 137, 152, 153, 155, 201, 202, 205, 207, 210, 211, 214, 216, 248, 304, 326
Bridges, Ron, 241, 245, 247, 249–50
“Brokered Dreams,” 245–47
Brookings Institution, 272
Brown, Karen, 45
Brownfield, Matthew, 16
Browning, Chris, 188–98, 257, 277, 313
Brown Realty Associates, 39–40, 42
Bruck, Connie, 303
Bryant, Raymond, 50
Buffett, Warren, 163, 320
Bush, George H. W., 97
Bush, George W., 85, 91, 296, 306
Business/North Carolina, 97
BusinessWeek, 55, 122, 147, 219, 222, 232
Byers, Kevin, 299, 301–2
Byrd, Dora, 133, 139
Calhoun, Mike, 50, 94, 99, 102, 105, 110, 113, 114, 115, 166, 210, 221–22, 235, 299, 300–301, 318
California, 139, 183, 277
Capital One, 28, 176
Capital Research Center, 233–34
Carter, Jimmy, 85
Carver, H. Allen, 97
cash advance business, see payday lending industry
Cash America, 25�
��26, 227, 259, 291, 332
Cashland, 194, 291, 292, 293, 307
CashPass, 271
Caskey, John, 231–32
Cavuto, Neil, 324, 326
Cendant Corporation, 180
Center for Community Self-Help, 86–88, 92–103, 104, 105, 107–8, 160, 208, 229, 233–34, 328
Brennan as ally of, 111–12, 113
default rate at, 234
fix-it loans of, 105–6, 107
growth of, 100–101
mortgage securitization created by, 102–3, 325–26
in payday lending fight, 159, 187, 223, 226–29
in predatory lending fight, 109–15, 166, 323
salary caps at, 99, 233–34
Center for Responsible Lending, 50, 51, 63, 87–88, 96, 100, 109–10, 167, 236, 252, 286, 300, 318, 324
attacks on, 232–38, 282–83
criticisms of, 325–26
donors to, 235–38
media and, 227–28
in payday lending fight, 222–23, 224, 226–32
purview of, 222–23
reports by, 230–31, 232, 289–90, 309
size of, 221–22
in subprime mortgage fight, 222, 229–30
Washington offices of, 218–19, 221
Champion Mortgage, 40
Chase Home Financial, 303