Massachusetts Democratic Gov. Deval Patrick, President Barack Obama’s friend and campaign co-chair, told The Daily Caller that he’s proud of the work he did for Ameriquest as it pumped up the nation’s mortgage bubble.
“I served on the board of the holding company for that company, and it was work that I was asked to do with some of their fair-lending issues, and I’m proud of that work,” said Patrick, who was appointed Feb. 22 by Obama as one of his 2012 campaign’s co-chairs.
Patrick served on the five-member board of Ameriquest’s holding company, ACC Capital Holdings, from 2004 to 2006. This was when the mortgage bubble rapidly inflated under pressure from President George W. Bush, 1990s regulations, numerous Democratic-affiliated housing groups, as well as executives in Fannie Mae and Wall Street companies.
Ameriquest was a leading cause of the bubble, in part, because it began the practice of selling mortgages to people that were deemed by other mortgage companies to be a bad credit risk. For example, the company pioneered the practice of selling mortgages to people without asking for documentation of their income, greatly raising the chance that each loan would go into foreclosure.
In turn, Ameriquest sold the flawed mortgages, dubbed no-doc subprime mortgages, to Fannie Mae and Wall Street, and profited from the processing fees.
The subsequent foreclosure of many risky mortgages dragged down Wall Street and the national economy. Since then, the street unemployment rate has remained well above 10 percent, and the nation’s formal debt has risen by $5 trillion. The median wealth of African-American households fell by 53 percent, according to a 2011 Pew study.
Obama tapped his long-time friend for the campaign job, despite Obama’s routine criticism of mortgage company executives. (RELATED: Obama campaign co-chair tied to subprime mortgage crisis)
“There is something wrong when board of directors or senior managers don’t understand the implications of the risks assumed by their own institutions,” Obama said in a March 2008 speech in New York. “As the subprime crisis unfolded, tough questions about new and complex financial instruments were not asked… the public interest was not protected,” Obama said.
“The American people must be able to trust that their government is looking out for all of us, not just those who donate to political campaigns,” Obama added at the speech, delivered at the Cooper Union building in New York.
Patrick acknowledged the harmful economic impact of those unverified mortgages, but insisted that other companies also issued mortgages without verifying the likelihood of repayment.
“I don’t think anyone is proud of that part of the housing crisis, which was caused by those so-called liar loans,” he said, adding that “a certain number of them were done by a number companies.”
The mortgage bubble helped wreck the national economy and did much damage to Massachusetts.
Unemployment grew from roughly 150,000 in early 2008 to 300,000 in late 2009. It remains above 220,000, even though many people have left the labor force. The labor force is now only 16,000 larger than it was in Nov. 2008, despite the state’s population growth of roughly 120,000.
Patrick defended his tenure as governor.
“I am very very proud of the work we’re doing the commonwealth to get people back to work,” he said.
As the mortgage bubble burst, Patrick also helped persuade Citigroup’s chief executive to bail out Ameriquest.
That decision proved disastrous for Citigroup’s shareholders — such as pension funds — who lost a trillion dollars in company value between 2008 and 2010. (READ MORE: Obama campaign co-chair tied to subprime mortgage crisis)
Citigroup’s stock prices have not recovered.
Patrick on Friday also declined to resign from Obama’s campaign. Instead, he said he was “very proud of the work that his president is doing… and looking forward to working beside him.”
Obama describes Patrick as his friend.
“Deval and I go a ways back… Deval supported me when I ran for the United States Senate in Illinois at a time when none of you could pronounce my name,” he said a Oct. 2009 fundraiser for Patrick.
“But I’m here today because I want to remind you [that] you’ve got a governor who represents a better kind of politics… He doesn’t like talking about himself and his accomplishments,” Obama said.
“He’s asked for nothing but the opportunity to serve for you, to serve the people of Boston and Pittsfield and Worcester and Plymouth; to serve all the people of Massachusetts,” Obama said.
