Perry’s gamble on mortgage giants cost Texas tens of millions
Just when Gov. Rick Perry had to deal with one negative story, another one comes right his way.
According to the Associated Press, in 2004 the Texas executive invited several big mortgage companies into his state to help increase jobs, but they all went out of business in four short years due to risky practices better known as sub-prime lending.
Sub-prime lending has often been blamed for helping launch the financial crisis of 2008, which still drags on the economy today. Many Americans who accepted sub-prime loans have since lost their homes to foreclosure. The debts driven by these loans were largely repackaged into what’s called “derivatives,” then resold on the stock market as a bundled package designed to create wealth where there is only debt.
The AP’s reveals that Perry downplayed any fears of a mortgage crisis ahead of the economic collapse, ultimately forcing Texas taxpayers to shell out $35 million to subsidize Washington Mutual and Countrywide Financial Corp. The state would later investigate Countrywide as to whether they encouraged homeowners to borrow more than what they could afford. Texas also offered up to $7.46 million for homeowners who were duped by the lender’s schemes.
Records show that Perry ultimately accepted tens of thousands in campaign contributions from both companies.
Risky leading increased in Texas immediately after the deals. In 2004, just one percent of Washington Mutual loans in the state were given to homeowners with less-than-prefect credit. The figure rose to 25 percent the following year. Countrywide also produced a dramatic increase in risky leading, going from 14 percent in 2004 to 33 percent in 2005.
This however wasn’t the first time Perry involved himself in dubious dealings. In August, the Huffington Post reported that Perry wanted to help Wall Street bankers gamble on how long retired teachers would live by trying to convince retirees to let the state take out life insurance policies on them, in a scheme better known as “dead peasants insurance.