A Shocking New Look at the 2008 Housing Crisis

CHRISTIANE AMANPOUR: Aaron Glantz’s work has sparked over a dozen congressional hearings and criminal probes. His latest book home, “Homewreckers,” takes a shocking new look at America’s 2008 housing crisis, a tale of greed and corruption. Glantz pulls back the curtain on a group of Wall Street magnates who he says took advantage of a rigged system. And he told our Hari Sreenivasan these home-wreckers include key members of President Trump’s inner circle.

(BEGIN VIDEOTAPE)

HARI SREENIVASAN: Your book is titled “Homewreckers.” Who is a home-wrecker?

AARON GLANTZ, AUTHOR, “HOMEWRECKERS”: Steve Mnuchin, the president’s treasury secretary, Wilbur Ross, the commerce secretary, Tom Barrack, the president’s close friend who planned his inauguration, Steve Schwarzman, the chairman of Blackstone, Jamie Dimon, the head of J.P. Morgan Chase, the biggest bank in America. These are the people that I describe as home-wreckers.

SREENIVASAN: Why are they home-wreckers? Why are they not just investors in the real estate market?

GLANTZ: They are home-wreckers because they are the people who swooped in after the housing bust, when eight million Americans lost their homes, and profited tremendously, taking the wealth of those families and putting it in their pocket.

SREENIVASAN: Look, capitalism says this is — this offers the market liquidity, when there are buyers that are coming in for distressed properties. They’re the ones taking the risk. What’s so distinct about what these guys did?

GLANTZ: When I went about writing this book, my initial thought was that, when you had eight million Americans lose their homes in the Great Recession, that there would be some families who are winners and other families who were losers. So I bought a foreclosure in 2009. I used these historically low prices that happened at the bottom of the housing bust to live the American dream for my family. And now here I am, 10 years later, raising my children in a stable environment, building wealth for my family. God willing, I will be able to retire at the end of the day. And we live in a country right now where this is the exception, not the rule, where the richest Americans own as much as 90 percent of the rest of America. And this is because we don’t own things like we used to; 80 percent of most Americans’ monthly paychecks go to essentials, things like food, transportation, clothing, health insurance, and shelter. Now, four of those five things just disappear as soon as you spend that money. Your gas is burned up. Your clothing wears out. Your food is eaten. Only housing can either go to build wealth for your family over time, or it can go to build wealth for your landlord. And what we saw in this decade after the housing bust was that the homeownership rate in America declined every single year from 2008 to 2016, even when the economy was supposedly getting better. And the reason that that happened was that we had a rigged system. And the home-wreckers are the people who benefited from that rigged system. And they are the ones who took our wealth.

SREENIVASAN: Showing this rigged system, you end up kind of diving in through the eyes of one specific woman, Sandy Jolly. Her parents lost their homes through a reverse mortgage that they may not have understood. And their daughter fought this for eight years. She starts digging in to who got their home. You get this paper trail. What do you find? Tell us the story.

GLANTZ: This is a woman who, as you mentioned, her parents had owned their house outside of Thousand Oaks, California — outside of Los Angeles in Thousand Oaks, California, for 30 years. They had bought it for less than $90,000 back in the 1980s. He worked for the water department. She worked for a company that printed payroll checks. He was a World War II veteran, and they used the G.I. Bill to buy their first home. This is the American dream that we’re supposed to have. But when they got old, there was a reverse mortgage salesmen in the housing bubble who showed up at their door with a sales pitch that said, so, you ask, what’s the catch? None. There is no catch. But, of course, the catch was that, while this family got a relatively small amount of money from this bank, the bank then added interest and fees month after month. And instead of the debt getting smaller over time, their debt actually got bigger. And this is how they ended up being foreclosed on when they died. And so, when I started to talk to Sandy, she was all upset about this reverse mortgage and this foreclosure, but when I began to investigate, I found that this was a woman whose 1,500-square-foot home in the suburbs outside of Los Angeles had become a pawn in a real estate then involved many of the president’s closest friends and advisers. So, the bank that foreclosed on her was run by Steve Mnuchin, who is now Trump’s treasury secretary. He foreclosed on over 100,000 families, including 23,000 seniors. And we — because of this rigged system, we subsidized that to the tune of over a billion dollars.

SREENIVASAN: How?

GLANTZ: This bank that Steve Mnuchin owned was bought in 2009, at the depths of the Great Recession. And it was a failed bank. The previous bank was called IndyMac. After Steve Mnuchin bought it, he rebranded it OneWest. And the way this happened was — maybe you remember — IndyMac was one of the worst banks in America, headquartered in Pasadena, California. It made the reverse mortgages, like I was mentioning. It also was a big maker of these so-called ninja loans, no income, no job, no assets, no problem. The interest-only loan, which was a loan that you would get on your house, but like a high interest credit card, the balance would get bigger, instead of smaller every month, if you just made the minimum payment.

SREENIVASAN: So, very risky loans.

GLANTZ: Very, very risky. And they would tell people, don’t worry, you can always refinance, real estate will go up forever. And, of course, that was a lie. And so, when real estate started to soften, the bank collapsed. And the government took it over. And the government was so desperate to get this bank off the government’s books that we made a deal with Steve Mnuchin, who had got this group of investors together that also included John Paulson, George Soros, Michael Dell, the founder of Dell Computer. And this group together came in, and they paid the government nothing for this disaster of a bank.

SREENIVASAN: How can you pay nothing for a bank? Do you mean that it was that they made the profits back up, or how?

GLANTZ: I mean, that the government owned this bank, and then they basically gave it Steve Mnuchin and his group for nothing. It was like a junk car, right? They didn’t want it anymore. They said, here, you take it. But then, more than that, Steve Mnuchin agreed to invest some money in the bank. But then we agreed to cover his losses up to 90 percent in many cases.

SREENIVASAN: So, if you make money, it’s your money. If you lose money, we got your back.

GLANTZ: Exactly. And so we agreed to cover his losses, to a great degree, on foreclosures, and not only the cost of the loan, but also appraisal fees, inspection costs, lawyers’ fees, all these costs that you incur, if you’re a bank in a foreclosure, that actually provide an incentive that you not foreclose. We said, we got your back. We will take care of that for you.

SREENIVASAN: So, explain, for example, what happened to her house? How did it bounce around between these different characters you’re talking about?

GLANTZ: So, what happened was, after it was foreclosed on by Steve Mnuchin’s bank, this 1,500-square-foot home outside of L.A., it goes on the auction block. And who should show up and buy it but a company called Colfin AI-5 California LLC.

SREENIVASAN: Who is that?

GLANTZ: Turns out that this LLC, this shell company, is one of many LLCs controlled by an investment fund founded by Tom Barrack, who is one of Donald Trump’s closest friends. And he was sending people out to courthouses all around the country at the bottom of the housing bust on a gigantic buying spree, buying up properties with cash, ends up buying up 30,000 homes across the country, from California to Florida. So, Sandy ends up paying more than $40,000 in rent to live in this house to Tom Barrack’s company over a period of just 18 months.

SREENIVASAN: So, you mentioned a couple of names, George Soros.

GLANTZ: Yes.

SREENIVASAN: He’s famously known as kind of a backer of liberal causes. Is this about specific political persuasion? Is this just about money? Because this was also happening during the Obama administration.

GLANTZ: This is a story that takes place during the Obama years. And it was during the Obama years that we made these sweetheart deals with people like Steve Mnuchin, paying him as his bank foreclosed on over 100,000 people. Wilbur Ross, who’s now the commerce secretary, he made a similar deal, acquiring BankUnited in Florida, and we subsidized his group, also more than a billion dollars, as he foreclosed on tons of homes. When Tom Barrack was getting started, the government itself ended up owning hundreds of thousands of homes and was trying to decide what to do with them. It put out, under Obama, an open call for proposals. And lots of people came for with very good ideas, like allow cities to take these over and turn them into affordable housing, use them to fight segregation, get the government involved in selling them off one at a time to families, so that they can build wealth, so we have maybe a transfer of wealth from one family to another, but not to these giant corporate landlords. The Obama administration didn’t do any of those things. Instead, what it did was, it bundled these homes, 1,000 at a time, and sold them off at deep discounts to private equity firms. And so the very first purchase of homes through one of these government auctions is made by Tom Barrack’s company. He buys a controlling interest in about 1,000 homes across Las Vegas, Los Angeles, and Phoenix for pennies on the dollar. And when I asked former officials at the federal Housing Finance Agency, why did you do this, and they said, well, Barrack had the highest bid. And I said, yes, he had the best bit of some who could buy 1,000 homes at once. What about people who wanted to buy these homes one at a time?

SREENIVASAN: Is there a racial or class component to this? I mean, are all houses treated equally?

GLANTZ: The racial component here is very strong. During the housing bubble, families of color were disproportionately targeted for predatory loans, the high interest loans, the loans with balloon payments. And then, when the housing bubble burst, they were most afflicted with foreclosures. So, Steve Mnuchin’s bank in California, nearly 70 percent of the foreclosures of his bank were in communities of color. Then you look at where the bank did its lending. Over five years, where Steve Mnuchin and Joseph Otting, who’s now Trump’s chief bank regulator, were running this bank, it helped just three African-American families buy homes and just 11 Latino families.

SREENIVASAN: Compared to how many loans were they making?

GLANTZ: They were making hundreds of loans.

SREENIVASAN: What’s been the response to the book from, say, Steve Mnuchin?

GLANTZ: Steve Mnuchin — well, first of all, I tried to interview him before publication. I reached out a number of times. I even sent a certified letter to four of his homes. He didn’t respond. But after the book came out, I did get an e-mail from him. He quibbled. He said that I was inaccurate when I said that he had acquired this bank for nothing off of the government, and he said that he and his other investors put $1.6 billion in the bank. And I told him that I have reported that in the book, that they invested money in this bank, but that did not take away from the truth that they had paid the government nothing. And it was very important to me to point out that we, the U.S. federal government, took a huge financial hit, and even subsidized his foreclosures. And yet he remitted none of his financial gain back to make up for that. And, in fact, at the end of the day, he sells this bank, OneWest Bank, to one of his neighborhood — neighbors in a Park Avenue apartment that he lives in for $3.4 billion. So he and his investors cleared a tremendous amount of money. And we, the government, got nothing in return. So I said all that back to him when he wrote to me. And I also said that he’s still welcome to talk to me. And I remain available. I work for Reveal. We have a weekly radio show that goes out to 500 stations. I said, we would clear the whole show for him. And he wrote back to me again, and he restated his concerns with what I had written. I offered him again the opportunity to come on and state his perspective for our large audience and be featured in the update of the book. And then he disappeared.

SREENIVASAN: Redlining has come back in the news recently, particularly for some comments that Michael Bloomberg made during a discussion that he was having.

(BEGIN VIDEO CLIP)

MICHAEL BLOOMBERG, PRESIDENTIAL CANDIDATE: Redlining, if you remember, was the term where banks whole hold neighborhoods and said, people in these neighborhoods are poor, they’re not going to be able to pay off their mortgages, tell them — your salesmen, don’t go into those areas. And then Congress got involved, as — local elected officials as well, and said, oh, that’s not fair. These people should be able to get credit. And once you started pushing in that direction, banks started making more and more loans where the credit of the person buying the house wasn’t as good as you would like.

(END VIDEO CLIP)

SREENIVASAN: Essentially saying that this group of investors shouldn’t have been lent to in the first place, and that helped create the housing crisis.

GLANTZ: It was incredibly disturbing to see a candidate for president of the United States blame the end of redlining for the housing crisis. I mean, redlining was a practice that goes back to the New Deal. During the New Deal, Franklin Roosevelt invented the long-term fixed-rate mortgage that we enjoy today. The Home Owners Loan Corporation refinanced more than a million loans, nearly one out of every five mortgages in urban America, and it made a profit for the taxpayers. It shows a shining example of what we could have done during the housing bust of 2008 that would have made a very different result than we had. Now, the main problem with the Home Owners Loan Corporation was redlining. All of that wonderful government finance was only available to white people. And government real estate agents went out to neighborhoods all over America. They drew lines on maps. They shaded neighborhoods with large numbers of people of color red. They used specifically racialized language, saying that neighborhoods were hazardous to lend in because they were — quote, unquote — infiltrated by Negroes or threatened with Negro encroachment. The word melting pot was used as a pejorative, because you wouldn’t want people of different races living side by side, according to the government at that time. And now here comes Michael Bloomberg, all these years later, saying that the end of this practice, which happened, by the way, in 1968, with the Fair Housing Act, was responsible for the Great Recession. It’s laughable. I mean, what we did have during the boom was, we had predatory lending by banks targeting people of color, which resulted in them being dispossessed when the housing market busted. Loan officers at Wells Fargo testified in court that they were making — quote, unquote — “ghetto loans to mud people” during the housing bubble. And Wells Fargo paid a large federal settlement over that. I mean, that is the kind of activity that led to the housing bust, not the end of redlining.

SREENIVASAN: What is the impact that these people that you have called home-wreckers, you put on the cover of the book, have now that they are swept up into the administration? Because the names that you’re talking about are not the ones that are churning in and out of the administration. These are relatively stable names that have been there in their Cabinet positions or positions for quite some time.

GLANTZ: Yes, these guys are not going anywhere. I mean, it’s pretty remarkable, when you think about the level of churn in the Trump administration. How many Department of Homeland Security secretaries has he been through, State Department chiefs, chiefs of staff? It seems like, every day, we wake up, there’s another body turned over in the Trump administration. And yet the people that you and I are talking about today, Steve Mnuchin, Wilbur Ross, Joseph Otting, they’re all still there, quietly working away. We could talk about the tax bill that was passed, the Trump tax bill, which was generally helpful to rich people, but especially helpful to real estate developers who own properties through LLCs. If you make money, and it’s paid to you through an LLC, then you get, because of this Trump tax bill, a 20 percent deduction right off the top. The Opportunity Zone tax credit, which was the main way that the Trump tax bill was supposed to help poor communities, if you live in a house and you want to fix your roof, you can’t get a tax benefit for that. But if you’re a big-time condo developer that wants to buy 10 houses, knock them all down, and build a new development, you can get a huge capital gains tax cut if you do it in a poor community. So, every step of the way, these guys, these home-wreckers, now that they’re in power, are there — they’re very focused on their goals. They’re not caught up in the day-to-day of impeachment or the rest of the Trump hysteria. They’re focused on profit and making money.

SREENIVASAN: Aaron Glantz, thanks so much.

GLANTZ: Thank you, Hari.