Recent actions by General Motors regarding subprime lending reveal how much Warren — and the Obama administration — are willing to pull strings to pick winners and losers.
The Investors Business Daily recently noted in a story that “while the administration has targeted subprime mortgage lending, it seems to have turned a blind eye to auto subprime loans.”
The IBD story was referring to GM, which received a $50 billion bailout. In 2008, GM vowed not to engage in subprime lending. However, as IBD noted, GM got back into making risky, subprime loans in order to increase its bottom line, which, of course, conveniently helps the Obama administration.
GM CEO Dan Akerson wants GM to become investment grade sometime in the next ten months, which he thinks will give the company’s stock price a much-needed boost. The stock price has plummeted to record lows in recent weeks from the November IPO.
But GM’s subprime lending makes Obama’s and Warren’s rhetoric on the subject hypocritical.
In January of 2012, Obama spoke about about how his administration would reign in predatory lending.
“If we’d had the Consumer Financial Protection Bureau ten years ago, the Easons and families like them across the country could have turned to this resource for help,” Obama said, referring to a family that had faced foreclosure. “But going forward, the Bureau will be a watchdog for anyone who owns a mortgage, uses a credit card, or applies for a loan. And that’s good news for families like the Easons.”
Obama said the CFPB was needed and would become “the single, consumer-focused regulating authority, consolidating the existing authorities scattered throughout the Federal government under one roof” and its oversight would include ” the large banks and credit unions that had historically been regulated by the Federal government, as well as independent and privately owned ‘non-bank financial institutions’ that had never been regulated before.”
In Kansas, in December of 2011, Obama said, “We all know the story by now: Mortgages sold to people who couldn’t afford them, or even sometimes understand them.
Obama said “banks and investors” were “allowed to keep packaging the risk and selling it off” and these “huge bets” — and bonuses — that were “made with other people’s money on the line” combined with “the breathtaking greed of a few with irresponsibility” across the system — “plunged our economy and the world into a crisis from which we’re still fighting to recover.” Obama said such practices “claimed the jobs and the homes and the basic security of millions of people — innocent, hardworking Americans who had met their responsibilities but were still left holding the bag.”
“Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all,” Obama said. “It was wrong.”
And yet, the CFPB is doing absolutely nothing — publicly or behind the scenes — to help consumer fight GM Financial’s predatory lending.
Under the Equal Credit Opportunity Act (ECOA), a creditor may not discriminate against a lender because of race, color, religion, national origin, sex, marital status, or age (as long as you are old enough to enter into a contract). And in a CFPB notice, the agency said they would combat unfair practices and “look not only at mortgage lending, but also at other types of credit including student loans, loans for cars, and credit cards.”
Warren has frequently criticized GE — even in campaign advertisements — but has said nothing about GM, which had a negative 1.5% tax rate due to many of the benefits it received from the government.
Obama and Warren are silent about GM’s predatory lending practices because the auto bailout is the crown jewel of Obama’s reelection campaign.
Obama, who is running against a slumping economy, needs GM to “succeed,” and so he is going out of his way to allow GM to make loans to people with little or no income in a recession.
In essence, the Obama administration and Warren are endorsing the very practice of predatory lending they pretend to hate, so long as the companies benefited by these lending practices help them politically.