US and foreign banks were not unwitting victims of circumstance but deliberately culpable in the financial meltdown that engulfed the United States last year, a campaign group said Wednesday.

The Center for Public Integrity named 25 “subprime” mortgage companies whose risky lending was blamed for the US property market collapse and the subsequent global economic crisis.

Many of the lenders were either controlled by US and European banks, or could not have indulged in their high-risk lending spree without the connivance of banks, the investigative journalism group said in a new study.

“The mega-banks that funded the subprime industry were not victims of an unforeseen financial collapse, as they have sometimes portrayed themselves,” the center’s executive director Bill Buzenberg said.

“These banks were deliberate enablers that bankrolled the type of lending that’s now threatening the financial system,” he said.

The study was released as the US House of Representatives was set Wednesday to vote on a Senate-approved bill that would set up a 9/11-style inquiry into the root causes of the financial crisis.

The center said it analyzed US government data on nearly 7.2 million “high-interest” or subprime loans made from 2005 to 2007, when the real estate bubble was at its peak.

It said the “Subprime 25″ accounted for nearly one trillion US dollars or about 72 percent of industry-reported loans extended to risky borrowers who would not normally have qualified for a mortgage.

At least 21 of the 25 were financed by banks that received US government bailout money, and 11 of them have made hefty payments to settle prosecution claims of widespread lending abuses, it said.

Four of them have received bailout funds, including collapsed insurer American International Group and banking behemoth Citigroup. Other banks named included Britain’s HSBC and Barclays Bank.

Top of the list with at least 97.2 billion US dollars in subprime loans was Countrywide Financial, which was bought by Bank of America last year to avert bankruptcy for the giant mortgage company.

Second with 80.6 billion US dollars in loans was Ameriquest Mortgage, now part of the Citigroup family. Third with 75.9 billion was New Century Financial Corp, which went bust in 2007 and now faces a federal investigation.

“The center found that US and European investment banks invested enormous sums in subprime lending due to unceasing demand for high-yield, high-risk bonds backed by home mortgages,” the study said.

“The banks made huge profits while their executives collected handsome bonuses until the bottom fell out of the real estate market.”

The list of lenders (via Business Week) is:

1. Countrywide Financial

At least $97.2 billion

2. Ameriquest Mortgage/ACC Capital Holdings

At least $80.6 billion

3. New Century Financial

At least $75.9 billion

4. First Franklin/National City/Merrill Lynch

At least $68 billion

5. Long Beach Mortgage/Washington Mutual

At least $65.2 billion

6. Option One Mortgage/H&R Block

At least $64.7 billion

7. Fremont Investment & Loan/Fremont General

At least $61.7 billion

8. Wells Fargo Financial/Wells Fargo

At least $51.8 billion

9. HSBC Finance/HSBC Holdings

At least $50.3 billion*

10. WMC Mortgage/General Electric

At least $49.6 billion

11. BNC Mortgage/Lehman Brothers

At least $47.6 billion*

12. Chase Home Finance/JPMorgan Chase

At least $30 billion

13. Accredited Home Lenders/Lone Star Funds V

At least $29.0 billion

14. IndyMac Bancorp

At least $26.4 billion

15. CitiFinancial/Citigroup

At least $26.3 billion

16. EquiFirst/Regions Financial/Barclays Bank

At least $24.4 billion

17. Encore Credit/ECC Capital/Bear Stearns

At least $22.3 billion

18. American General Finance/American International Group (AIG)

At least $21.8 billion*

19. Wachovia

At least $17.6 billion

20. GMAC/Cerberus Capital Management

At least $17.2 billion*

21. NovaStar Financial

At least $16 billion

22. American Home Mortgage Investment

At least $15.3 billion

23. GreenPoint Mortgage Funding/Capital One Financial

At least $13.1 billion

24. ResMAE Mortgage/Citadel Investment Group

At least $13 billion

25. Aegis Mortgage/Cerberus Capital Management

At least $11.5 billion

*Totals include subsidiaries

Source:
rawstory.com
By Raw Story