Democratic presidential candidate John Edwards said he didn’t know his former employer, hedge fund Fortress Investment Group, was actively involved in the subprime mortgage market. Fortress, which owns large stakes in Green Tree Servicing and Nationstar Mortgage (formerly Centex Home Equity) are both subprime market players. Green Tree services subprime mortgages and Nationstar originates subprime mortgages.
Fortress bought $4 billion in subprime loans from embattled Fremont General Corp. who was issued a cease and desist order from the FDIC for its subprime lending practices.
The story, which runs in the Washington Post, shows the contradictions between Edwards employer and Edwards’ stance on important campaign issues which include predatory lending and tax breaks for corporations and wealthy individuals.
While it would be easy to take Edwards to the woodshed on this one, I think it is important to look at his role in the company and also his level of knowledge about the specific holdings of the fund before really giving it to him. I think it could be very plausible that he was not aware of the specific holdings of the fund at the beginning; though I find it rather implausible that he was not aware of a large $500+ million acquisition of Nationstar and the HUGE purchase of subprime loans from Fremont General.
I am sure this will become a much bigger deal as candidates leverage the housing crisis to pimp promote their campaign agenda.
Disclosure: My company formerly originated loans for both Nationstar and Fremont General.
Last 3 posts by Morgan
- Subprime Bananas - June 28th, 2009
- Roubini: No confidence in government exit strategy - June 24th, 2009
- Goldman bonuses largest in firm's 140-year history - June 21st, 2009
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