Will Herb & Marion Sandler pay a price'
The financial problems afflicting our nation were triggered by the mortgage crisis -- too many homes for too many people unable to afford them. Simplistic, perhaps, but true.
At the heart of the problem were mortgages designed and promoted to lure people into signing on the dotted line -- while unwittingly signing away their future. The epicenter of this earthquake was in California. But the true epicenter can be located with greater precision at the headquarters of World Savings, the nation's second-largest savings and loan, founded and led by Herb and Marion Sandler.
The type of mortgage sold by the bucketful were known as Option ARMs. They carried low "teaser" interest rates that had the potential to adjust up, which they disastrously did.
At the same time, housing values collapsed. Borrowers found themselves underwater. They were saddled with unaffordable mortgages and could not be bailed out by higher home values.
One additional feature of these mortgages pioneered by the Sandlers was called "Pick-A-Pay." This allowed borrowers to choose to pay unusually low monthly payments with their obligations being pushed back and made part of the principal of the loan. This was financially perilous, especially when the housing crash came.
Late last year, the U.S. attorney in San Francisco announced dual inquiries into whether World Savings engaged in predatory lending practices or misled investors about its financial well-being.
Major media have begun to scrutinize the Sandlers' role. Time magazine has listed them among the 25 people most responsible for our crisis. Last Sunday, CBS' "60 Minutes" featured a segment on World Savings. The "Pick-A-Pay" methodology was the focus. A whistleblower, Paul Bishop, was the star. He had warned the top management at World Savings that loans were being aggressively promoted and made to people with little or no regard for their ability to afford them. The term "Enron" was waved about like a red flag but to no avail.
The Sandlers were offered a chance to appear on the show but declined. Instead, they sent a letter disavowing responsibility for the problems and stood by their assertion that proper controls were in place and practiced and that the fault lies in the collapse of the housing sector.
Were the Sandlers responsible• For years, the financial press lionized them for their obsessive, hands-on approach toward leading and managing World Savings. They owned upward of 10 percent of the company. Relatives also owned shares. They were honored for their business acumen. As they should be, a cynic might remark, because they sold their company to Wachovia Bank at the peak of the housing bubble and right before the problems with "Pick-A-Pay" surfaced.
They strolled away with more than $2 billion dollars.
But the sale to Wachovia was a disaster -- for Wachovia, sinking it and sending Wachovia into the arms of Wells Fargo.
The jury is still out on the wisdom of the Wells Fargo purchase. The company now has on its own balance sheet those toxic assets, which go from one acquirer to another like the ultimate hot potato.
Will the Sandlers suffer more than just obloquy in the press• Will the U.S. attorney be successful• Will abused borrowers be able to bring successful class actions?
The answer might well be found in Washington.
The Sandlers are sugar daddies to the Democratic Party. The couple and their children have given more than $350,000 to party committees, candidates and liberal political action committees. They gave money to help fund the Obama transition team before he assumed office.
They, along with their political and ideological ally George Soros, are among the top five funders in America of 527 groups that promote a liberal agenda.
In 2004, for example, the Sandlers gave more than $13 million to such groups. Of course, they gave to Barack Obama's presidential campaign.
More significantly, these same people played major roles in the founding and funding of the Center for American Progress (CAP), which has become a very influential player in Washington. While headlines a few months ago noted the role of George Soros at the center, the Sandlers were ignored. Their foundation gave $50 million to help establish the center in 2004. Marion Sandler sat on the small board of directors.
The center now is providing people to man key positions in the Obama administration. John Podesta -- the head of CAP -- led the transition team.
Will levers be pulled to help the Sandlers avoid further scrutiny• Will Attorney General Eric Holder, not immune in the past to allowing political factors influence his decision-making, send a message to the U.S. attorney in San Francisco to focus on other issues than the Sanders?
One more question: Why has House Speaker Nancy Pelosi, D-Calif., not looked in her own backyard for the people partly responsible for our nation's problems?
Ed Lasky is news editor of the American Thinker (americanthinker.com). He last wrote about the Sandlers for the Trib in October.
Show commenting policy