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How Edwards fights poverty and predatory lenders

Posted by Richard on May 12, 2007

John Edwards' campaign is once again all about deploring the "two Americas" (AKA, exploiting envy, inciting class warfare, and bashing the rich). So, it's been mildly amusing to read about his 28,000-square-foot house, $400 haircuts, and generally ostentatious lifestyle. It got even funnier when he explained that he worked for Fortress Investment Group, a $30-billion hedge fund catering to billionaires, to learn more about poverty.

But here's what dialed the irony, chutzpah, and hypocrisy meters up to about 11: In early April, Edwards declared war on those evil lenders who specialize in "subprime loans and predatory mortgages" (emphasis added): 

As part of his ongoing effort to expand and strengthen the middle class, Senator John Edwards today released an aggressive plan to end the harmful lending practices that have put millions of families at risk of losing their homes. At a town hall in Davenport, Iowa, Edwards called for strong national legislation to regulate mortgage abuses and prohibit predatory mortgages. He also proposed immediate steps, including bankruptcy reforms and the creation of a Home Rescue Fund, to provide relief for families who are struggling to keep their homes.

"This is about the future of the middle class," said Edwards. "While Washington turns a blind eye, irresponsible lenders are pulling a fast one on hard-working homeowners. Using deceptive practices, hidden fees, and abusive terms, they have already taken billions of dollars from hard-working homeowners, destroying their nest eggs in the process. For too many families, homeownership has become a risky gamble when it should be the foundation of economic security. It's time to put an end to the shameful lending practices that are compromising our strength as a nation." 

Well, it turns out that his former employer, Fortress, is one of those "irresponsible lenders," and greatly expanded its role in the subprime market while he was there advising them: 

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.

Of course he was. 

Fortress, whose hedge funds are incorporated in the Cayman Islands to get the kind of tax breaks Edwards routinely rails against, is a not-insignificant player in funding his campaign:

Fortress announced Edwards's hiring as an adviser in a brief statement in October 2005. Neither Edwards — who ended his consulting deal when he launched his presidential campaign in December — nor the firm will say how much he earned or what he did.

But his ties to Fortress were suggested by the first round of campaign finance reports released last week. They showed that Edwards raised $167,460 in donations from Fortress employees for his 2008 presidential campaign, his largest source of support from a single company.

Edwards, who was described as a "senior adviser" at Fortress, now insists that he had no idea Fortress was gobbling up subprime mortgages and lenders, and that he really didn't spend much time at the Fortress offices. I can think of two possibilities:

  1. This was a sham job designed to give Fortress a big name on its letterhead and Edwards a valuable "private sector experience" entry on his resume.
  2. Edwards is lying. 

Explanation 1 represents a fairly common practice in certain circles and is thus likely to be true. But given the fact that he's a trial lawyer who got rich by channeling dead fetuses to gullible jurors, I'm leaning toward number 2.

The real irony, from my perspective, is that if he weren't so committed to his anti-capitalist demagoguery, Edwards could justifiably say that, while he regrets certain excesses, on the whole he's proud of what he and Fortress have done for middle and lower income Americans, especially minorities.

New financing tools and easier credit have generally been a big success. Homeownership is at record levels. Sure, foreclosures are up and some lenders clearly went too far with the "creative" financing, but the vast majority of subprime borrowers are not losing their homes — they're making their payments, building equity, and proud to be part of the property-owning class.

But there's simply no pleasing the left. Twenty years ago, liberals complained that it was too difficult for minorities and working-class people to qualify for a mortgage. Now, they're complaining that it's too easy.

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