Edwards Found To Have Strong Ties To Lenders Foreclosing on Katrina Victims

After several other stories raising questions of hypocrisy, The Wall Street Journal finds a contradiction between Edwards political speech on foreclosures and his ties to lenders. The present several quotes from Edwards on foreclosure:

“While Washington turns a blind eye, irresponsible lenders are pulling a fast one on hard-working homeowners,” Mr. Edwards said a few days later. … It’s time to put an end to the shameful lending practices that are compromising our strength as a nation.”
April 4, 2007, in Davenport, Iowa

“I said, ‘This is not okay that this is happening.’ I don’t know how many cases there are . . . but the right thing is to go back and fix this.”
May 11, 2007, to the Washington Post, explaining his reaction when he found out that Green Tree had foreclosed on Katrina victims

“In Cleveland this morning, I saw something that would absolutely break your heart. … In a one-block radius, 38 homes have been foreclosed. … What I saw first-hand this morning in Cleveland is a perfect example of why we have got to have a national predatory lending law.”
July 17, 2007, in Pittsburgh, on his Road to One America tour

The story begins with a review of Edwards’ ties to lenders foreclosing on Katrina victims.

As a presidential candidate, Democrat John Edwards has regularly attacked subprime lenders, particularly those that have filed foreclosure suits against victims of Hurricane Katrina. But as an investor, Mr. Edwards has ties to lenders foreclosing on Katrina victims.

The Wall Street Journal has identified 34 New Orleans homes whose owners have faced foreclosure suits from subprime-lending units of Fortress Investment Group LLC. Mr. Edwards has about $16 million invested in Fortress funds, according to a campaign aide who confirmed a more general Federal Election Commission report. Mr. Edwards worked for Fortress, a publicly held private-equity fund, from late 2005 through 2006…

On the campaign trail, Mr. Edwards has particularly attacked lenders behind foreclosures in storm-slammed Louisiana. In April, he visited the devastated Lower Ninth Ward neighborhood to voice one of his main antipoverty planks: a proposal to rein in subprime-mortgage companies whose “shameful lending practices,” he said, threaten millions of working-class homeowners. “While Washington turns a blind eye, irresponsible lenders are pulling a fast one on hard-working homeowners,” Mr. Edwards said a few days later.

At the time in late 2005 when Mr. Edwards went to work for Fortress, it already had a stake in one subprime lender that subsequently foreclosed on some Katrina victims, Green Tree Servicing LLC. While he was there, Fortress acquired a second, Nationstar Mortgage LLC. Fortress paid Mr. Edwards $479,512 in 2006 for part-time work, a Federal Election Commission report in May showed.

After leaving the firm, he kept about half of his net worth in Fortress funds. And Fortress employees have collectively made up the largest class of political contributors to Mr. Edwards. Workers there put up more than $150,000 toward his presidential run in the first six months of the year.

This isn’t the first time Mr. Edwards has been confronted with the possibility that Fortress-directed companies might be foreclosing on New Orleans homeowners. In May, the Washington Post said that shortly after Katrina hit, Green Tree sent a letter to a 67-year-old storm victim, admonishing her to get current on her mortgage or face losing her house. At the time, most mortgage companies doing business in the city had agreed to a house-payment holiday for storm victims.

“This is not okay that this is happening,” the Post quoted Mr. Edwards as saying. He added that he planned to speak to the lender about its practices.

Yesterday, Mr. Edwards said he did later speak to Fortress about Green Tree and was told the matter had been taken care of. At the time, Mr. Edwards said yesterday, he didn’t know how many foreclosures Green Tree might have filed in New Orleans. The Post didn’t ask him about Nationstar’s activities in New Orleans, and he said yesterday that he was unaware that that lender was also pursuing.

The Wall Street Journal also reported further on Edwards’ reactions, including a promise to remedy the situation, possibly at his own personal expense:

Asked about the matter, Mr. Edwards yesterday pledged that he would personally provide financial assistance to New Orleanians who are facing foreclosure by Fortress-affiliated businesses or have lost their homes already. “I intend to help these people,” the former North Carolina senator said.

He also promised to cleanse his portfolio of any investments that may be profiting from their losses. “I am going to divest” from any Fortress funds that have a stake in the subprime lenders that filed the foreclosures, he said in a telephone interview. “I will not have my family’s money invested in these firms.”

Mr. Edwards didn’t give details on how or when he was going to proceed, either to alter his holdings or to aid borrowers. He said he plans to begin making amends to New Orleans homeowners first by contacting them and “seeing where they are in the process.” He said his help may come from his own cash or in collaboration with a charity that specializes in repairing homes. The foreclosures, Mr. Edwards said, “run counter to what I’m about.”yesterday that he was unaware that that lender was also pursuing…

The candidate has said he had no involvement in Fortress units’ subprime lending when he worked for the private-equity firm and wasn’t aware of it at the time. He has said his job at Fortress was to provide information about what he saw happening economically in the U.S. and overseas. He has also said he was there “primarily to learn” about finance.

In the interview yesterday, Mr. Edwards said that when he first joined Fortress, “I made clear that I didn’t want to have anything I was investing in to be antilabor or involved in predatory lending practices.” But he added that he didn’t fully understand the firm’s complex operations, saying: “They’re diverse. They’re very diverse.”

Stories such as this which raise questions of hypocrisy regarding Edwards’ positions on poverty are especially damaging in light of the manner in which Edwards used his Poverty Center as a means to campaign while avoiding FEC regulations. It is good that he intends to help those who suffered, but this is an easy political gesture to make after being discovered.

Edwards’ defense to today’s criticism comes down to pleading ignorance. In other words, he was at Fortress “primarily to learn” but has no idea of what the company does. This is far more meaningful than the recent report that Republicans such as Mitt Romney and Sam Brownback having stocks in companies which have some involvement in stem cell research, especially considering the holier than thou attitude of the Edwards campaign. Even if we were to accept his explanation based upon ignorance, it only provides further evidence that Edwards is not qualified to be President. As Bob Shrum wrote, Edwards is “a Clinton who hadn’t read the books.”

Not surprisingly, conservative bloggers have been very critical of Edwards over this report. Ed Morrissey writes:

Bear in mind that this is not a case of a blind-trust investment choice, like the silly meme regarding Mitt Romney and stem-cell research. It’s not even about a personal investment choice supposedly made in ignorance. John Edwards worked for the owner of a subprime lender during 2005 and 2006, when Hurricane Katrina hit and the company initiated foreclosures on the victims. In fact, he made almost a half-million dollars advising Fortress while it purchased a second subprime lender during that period.

Nor did he cut all ties to Fortress after he stopped consulting for them. He invested half of his net worth in Fortress, according to the WSJ. Fortress employees have contributed $150,000 to his presidential campaign in the first two quarters of this year.

Edwards has conducted a “poverty tour” as part of his campaign this year, emphasizing his Two Americas theme. One of the stops was in Cleveland, where he walked a neighborhood particularly affected by foreclosures. He told reporters, “This is not complicated, this is wrong,” as he walked the streets, but the WSJ did some checking afterwards– and four of the foreclosures came from Fortress Investment lenders.

Apparently it’s more complicated than Edwards knows.

Remember this the next time Edwards attacks “shameful lending practices”. His own firm, the one who used his consulting to operate and acquire companies like Nationstar, conducts those same practices. Will Edwards return the $150,000 in contributions to Fortress managers who run these lenders? Will he return to that Cleveland neighborhood and apologize for his hypocritical posturing on their streets?

And will Edwards finally get seen for what he is — an ambulance chaser, a poseur, and a fraud?

Many liberal writers will try to write off Ed’s comments, as well as the reports in The Wall Street Journal as a right wing attack. This is a right wing attack of the most dangerous sort–an honest and valid attack. So far we are only seeing the tip of the iceberg regarding what will come up should Edwards manage to get the nomination. Unlike in the case of Kerry and Gore, the right wing will not need to fabricate charges to Swift Boat the Democratic candidate. As Edwards campaigns on his new populist agenda, he is also loosing the support of independents. I’ve previously written that any Democrat, even Edwards, can probably get elected in 2008. That may or may not still be true, but nominating John Edwards would sure give the Republicans a fighting shot at winning.

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8 Comments

  1. 1
    skeptica says:

    Excellent post. And isn’t it interesting how this story has been mostly ignored by major Democratic websites? I’m afraid it shows a clear pattern on Edwards’s part and an effort by the left blogosphere to give him a pass because of the policies he’s suddenly started championing. The more I see him, the more I think of him as the southern Romney. (Then again, whenever I see him in those tight jeans he likes to wear in Iowa, I think of Bush in the flight suit on that “Mission Accomplished” pr stunt.)

  2. 2
    Ron Chusid says:

    Skeptica,

    He certainly has a lot in common with Romeny considering how he totally reinvented himself for the 2008 run based upon the positions which would help with regards to his strategy of concentrating on Iowa and the internet. If Iowa wasn’t a key event, and if the internet wasn’t what it now is, I wonder if he would have a totally different platform.

    It is discouraging that so many in the liberal blogosphere do give him a pass because he says what they want to hear. They don’t understand how he’s increasingly seen as just a slimy politician after personal power who will say anything for votes by most of the country. His polling numbers among independents in the early primary states drop the more they see of him. (It is interesting that those outside of the states where he is campaigning see him as more conservative, and he gets more support from independets, probably because of thinking of him from 2004. Once they actually see him, perceptions change and Edwards loses support among independents.)

  3. 3
    dk2 says:

    Regardless of your smear at Edwards – he is doing what he can to divest himself from any source of funds harmful to katrina victums and predetory lending practices. So, give him credit for doing the right thing, are any of the others even trying?

    Further more, his voice on the subject, regardless of all the smearing has put more attention on lending practices then all the other candidates put together, Democratic and Republican. He is a champion for the middle to lower income families, while no one else has the courage to do so for fear of just such scrutiny.

    So, if this is all you got is some complaining about his portfolio, then, I say he must be a saint compared to the others. Keep hunting, maybe you will find something that matters.

    http://johnedwards.com/issues/

  4. 4
    Ron Chusid says:

    Dk2,

    It looks like you read the first line seeing that this is a criticism of Edwards without actually reading the post.

    “he is doing what he can to divest himself from any source of funds harmful to katrina victums”

    Read the post. This is not about his investments. It is about his actual ties to the company. I made the point that if this was simply about investments it wouldn’t be such an important issue.

    “So, give him credit for doing the right thing, are any of the others even trying?”

    None of the others have been found to have engaged in business practices which conflict so greatly with their political rhetoric.

    “He is a champion for the middle to lower income families, while no one else has the courage to do so for fear of just such scrutiny.”

    It is all political posturing. He has changed most of his positions to fit into his campaign strategy of appealing to a segment of the blogosphere and Iowa voters. As I’ve discusseed in other posts, other candidates have shown better ideas for dealing with poverty, without using the issue primarily for political gain as Edwards has.

    “So, if this is all you got is some complaining about his portfolio, then, I say he must be a saint compared to the others. Keep hunting, maybe you will find something that matters.”

    As I already said, this has absolutely nothing to do with his portfolio, so keep trying harder to defend him. You might try actually defending him against the actual charges. The other problem with your reply is that it is not necessary to keep hunting. This is just the latest in a long string about revelations about Edwards which discredit him. There’s no need to hunt. Finding information on Edwards is easy. What was hard was for a fraud like Edwards to cover his tracks. Fortunatley he didn’t do a very good job of it.

    It doesn’t work to display one type of conduct as a businesman and then, after amassing a fortune, argue the opposite. Promising to remedy the situation is less impressive the second time he is caught and repeats the same claims. Creating a Poverty Center is less virtuous once you find that it was basically a scam to campaign while avoiding FEC regulations and to keep campaign aides on the payroll.

    It doesn’t matter what ideology a candidate is expressing and what party he is in. There are con men who go into politics expressing a wide variety of beliefs for personal benefit. They should be opposed regardless of party, as opposed to excusing their conduct because you like some of their rhetoric.

  5. 5
    dk2 says:

    MY post stands – your blatant rhetoric is just that, garbage talk, defend him – I don’t need to. There is nothing to defend – if all you have on him is some personal finance numbers with a hedge fund, then the guy is clean as a whistle.

    When will you check out the funds of all the others, Rebpublican and Democratic.

    Your whole verbage can be taken apart:

    You say:
    “It doesn’t work to display one type of conduct as a businesman and then, after amassing a fortune,”

    I say – he obtained his wealth – amassing a fortune, working hard, and before ever investing (businessman).

    Speaking of con men in politics, Edwards isn’t one of them, look to the republicans if you want that, I think the White house would be a good place to start.

  6. 6
    Ron Chusid says:

    DK2,

    You are still missing the entire point of the post. This isn’t about his hedge funds either. This is about yet another scandal. I know there are too many scandals with Edwards to keep them all straight. This latest one makes Edwards appear far worse as it involves his actual conduct as a businessman and not just the investments in his portfolio.
    Your misrepresentation of my “whole verbage” isn’t valid as you still do not even understand what the acccusations are.

    Sure there are lots of con men among the Republicans. That doesn’t mean that every Democrat is also clean. We cannot give a pass to a Democrat who shows behavior we would condemn if it came from a Republican.

    Quite often a Republican comes here to defend Bush from some attack by launching an attack on Clinton or other Democrats. I generally include in the response that, even if their attacks were true, they still would not justify what Bush has done. The same is true about the charges against Edwards. I doubt that there is as flagrant an example of hypocrisy between the pre-campaign actions and campaign actions of a candidate as this shows with Edwards. If such examples can be found, it could demonstrate problems with the other candidate, but would still not provide any defense for Edwards’ actions here.

  7. 7
    Ryan says:

    Such interesting conversation. I find the post, once again, fair and well-reasoned, with the exception of the part about “any Democratic can probably get elected in 2008.” Don’t get lulled into that false sense of security.

    I already know who’s going to win, and sorry Democrats, you’re not going to like it. 🙂

  8. 8
    Ron Chusid says:

    Ryan,

    You are right that if Democrats do become complacent they can easily loose. However after eight years of Bush I don’t think that will happen. It certainly isn’t ineveitable that they will win but the Democrats have a tremendous advantage going into 2008.

    As for knowing who will win, I assume you believe it is one of the Repubicans. At this point the Republican race is harder to call than any race in recent history.

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