BOOK REVIEW | “Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream” by Aaron Glantz
What’s your favorite token in Monopoly: the Scottie dog, the battleship, the top hat or the racecar? Often the humble iron stays in the box.
Regardless of which token a player chooses, the strategy of Monopoly is simple: Seize all the property possible. With a few lucky rolls of the dice, monopolies are acquired and houses, then hotels can be built, and the owner can charge higher and higher rents. In the end, the board is studded with the red plastic personal hotels of the player who had the luckiest rolls. The losers are sucked dry as they slowly fork over all their property and cash.
Monopoly was originally called The Landlord and was conceived in 1903 by a leftist, progressive feminist named Elizabeth Magie. Magie’s passion and aim was to create a game that would illustrate the dangers of concentrated wealth. In one set of rules, all were rewarded for the creation of shared wealth; in another, the goal was for one player to create a monopoly and leave the others penniless.
Of the two sets of rules, the monopolist strategy was the one that eventually swept the imagination and fired the competitive, acquisitive spirit of the public. After 100 years, Monopoly is still one of the most popular board games of all time.
In late 2008, a vast game of monopoly began to play out in real life in the streets and neighborhoods of America, but these were real properties that belonged to real families – millions of them. And the homes weren’t green plastic; they were made of wood and stone with maple trees in the backyard, and they represented a lifetime of earned wealth for many.
It’s been 10 years since the housing crisis was supposedly resolved by the Obama administration’s mega-billion-dollar taxpayer bailout handed to banks “too big to fail.” What happened to the hundreds of thousands of foreclosed homes? Who is living there? Did the estimated $498 billion of taxpayer dollars given to Goldman Sachs and Morgan Stanley actually help families stay in their homes? Did the bailout money “trickle down” to the average working American as it was intended?
The answers to these questions are disturbing, increasingly relevant, and part of a new book by Peabody-award-winning journalist Aaron Glantz. The book is “Homewreckers: How a Gang of Wall Street Kingpins, Hedge Fund Magnates, Crooked Banks and Vulture Capitalists Suckered Millions Out of Their Homes and Demolished the American Dream.”
The short answer to what happened, according to Glantz, is that an elite group of millionaires pocketed the colossal bailout and became super billionaires. In the process, they ruined the American dream for an astounding number of working people – 8 million lost their homes in the decade following the 2008 crash – and they are now running the country.
Today, these businessmen –yes, all men, Glantz notes – are sprinkled throughout the inner power circle of the Trump administration where they are working to further deregulate and destabilize the banking and housing industry and undo safeguards from the Obama administration, including some that have been in place since the Great Depression, in an effort to make the massive transfer of wealth of the 2008 housing bailout permanent. Today, the wealth gap between the richest one-tenth of 1% and the other 90% is wider than it’s been in a hundred years. According to Glantz, the decisions made in 2008 that favored creating a new crop of billionaires over helping families stay in their homes are largely to blame.
Glantz is an investigative journalist whose reporting has kicked off over a dozen congressional hearings as well as criminal investigations by the FBI and the Federal Trade Commission. He has written about such subjects as treatment of returning war veterans, the opioid crisis and modern-day redlining. Redlining refers to the practice of refusing bank loans and financial services based on Zip codes, overwhelmingly affecting black neighborhoods.
In “Homewreckers,” Glantz unravels the tangled web of bankers, hedge fund partners, private equity firms and Wall Street players and describes how their financial bonanzas were directly related to decreased homeownership nationwide, reduced wealth for low- and middle-income Americans, and the destruction of long-standing communities.
In early 2016, Glantz began investigating the trail of created wealth following the foreclosure crisis, before anyone knew who the next president would be. He watched in amazement as the same men who grew obscenely rich as a direct result of the crisis became part of newly elected Donald Trump’s inner circle. They include Steve Mnuchin, secretary of the treasury; Wilbur Ross, secretary of commerce; and U.S. Comptroller of the Currency Joseph Otting. Glantz calls these men “homewreckers.”
How could this happen?
Homeownership has long been a keystone of the American dream. Glantz notes that there are five things Americans spend money on: food, clothing, transportation, health care and housing. Of these, buying a home is the only way to save money and create wealth that can be handed down. Without home ownership, most families have a negative net worth.
Prior to 2008, there was a lot of freewheeling lending going on, and people who wanted their piece of the dream were susceptible to offers of easy loans. The housing market kept rising with seemingly no end in sight, and homeowner hopefuls were encouraged by banks to buy homes far beyond their means. At the peak of the housing bubble, over 40% of loans were considered risky, or subprime.
It was boom time (and bubble time) in the housing market. And loans were everywhere. There were the so-called ninja loans (no income, no jobs, no assets, no problem), loans with teaser rates that were reset at a higher level a year or two down the road (enthusiastic loan officers explained the loan could be refinanced when the house rose in value). There were reverse mortgage loans that sapped equity from seniors who had nearly paid off their houses. There were predatory loans issued to black people and other minorities who were denied conventional loans due to redlining.
Why were the banks eager to give out loans to anyone who could hold a pen? Isn’t that bad business? One would think. But as Glantz points out, the business of loaning money today is a far cry from the good old days depicted in “It’s A Wonderful Life.” In the classic movie, Jimmy Stewart’s character, George Bailey, runs The Building and Loan office and brokers loans to people of the town so they can own a modest home instead of paying the evil Mr. Potter to live in his overpriced slums. There is an unbroken line between The Building and Loan office, George and the people of the town. Their children go to school together; they live and work in a shared community.
But 75 years later, straightforward lending has been transformed into a morass of splintered credit default swaps and inscrutable Wall Street deals. In 2008, the big banks didn’t care if they gave out risky loans. Banks would collect the initial loan fees and deposits, then bundle the risky mortgages together to create a financial product called a mortgage-backed security and sell it on Wall Street. The loans were quickly moved off the bank’s books, and it was down to a game of who’s got the mortgages, who’s the greater fool? Home mortgages were like game pieces to play with, not symbols of a someone’s hopes and dreams. George Bailey would have been utterly baffled.
When the housing bubble popped and the loans came due, the banks holding the bad mortgages fell like dominoes. Enter that special breed of vulture capitalist who waits to profit off the pain of others. Mnuchin, Ross and others bought shuttered banks such as BankUnited and One-West Bank for a song, using government programs that were designed to get the banks up and running again so they could restructure loans and keep people from losing their homes. But the “Foreclosure Kings” were adept at exploiting the system. Mnuchin, for one, forced a waterfall of foreclosures and became the sole owner of over 100,000 flipped homes, which his limited liability company then rented out at fees sometimes 400% of the market value. Where there once had been 100,000 owners, there was now one absentee corporate landlord. And Mnuchin wasn’t the only one following the playbook. Over the next eight years, U.S. homeownership plunged to its lowest levels in more than 50 years.
African-American families were hit hardest of all. Mnuchin and others foreclosed on the homes of African Americans at a rate 70% higher than other homeowners, according to Glantz’s research. As a result, black homeownership is lower today than it was during the Jim Crow era. And Trump’s pick for comptroller of the currency, Otting, another of Glantz’s Foreclosure Kings, is in charge of regulations that safeguard against redlining.
What haunts Glantz most is that there were excellent alternatives to the massive bailout scheme. It just didn’t have to happen the way it did. Following the Great Depression, President Franklin D. Roosevelt created a government bank that refinanced one out of every five loans in America and saved a million homes. When foreclosure was inevitable, the government found other families to live in the empty houses and helped finance them. And FDR’s bank made a profit for taxpayers! Families, given a non-predatory loan, will pay it back. The GI Bill, while decidedly racist in application, was another example of a financially successful loan program. It financed 4 million loans and broke even.
There were also ideas on the table to turn the empty foreclosed properties into homeless shelters and low-income housing. But ultimately, it was the Foreclosure Kings who won the game and got a spot in the current administration for their efforts.
Ironically, Magie’s original Monopoly board design was stolen by a penniless and unscrupulous friend of a friend. Charles Darrow was introduced to the game one night and, after playing it several times, asked for the written rules. Even though Magie had taken out a patent, Darrow was able to change the game slightly to subvert the patent and went on to become the first millionaire game designer in history.
Magie lamented that not only did she not receive credit for inventing the game but that her work had been meant to “protest against monopolies, not praise them.” The reason behind the game, she said, “was to help educate people. If players had known what they were learning about, my work would not have been in vain.”
Mnuchin, Ross, Otting and the others are playing a Monopoly game with people’s lives, and with each win, lives are decimated. It seems the dice are loaded, and every time the billionaires roll, they win.
According to Glantz, systemic, radical change is needed. He hopes at the very least, the Democratic candidates focus on housing issues in the upcoming debates. “The inability of most Americans to buy their own home is at the heart of the wealth gap,” he wrote. “Loss of wealth is silent, quiet.”
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