The Miami Herald investigative series, highlighting massive mortgage fraud and regulatory breakdown, triggered the resignation yesterday of the state’s top regulator for the financial industry, Don Saxton. (“Borrowers Betrayed: Florida’s top mortgage regulator steps down”, August 13, 2008)On his way out the door, literally, Saxon mumbled, “I have been contemplating this since long before the series came out, so this just seemed to be the perfect timing.”
It is also perfect timing for the editorial boards to connect the dots between the failure of the Florida Office of Financial Regulation and the dominant political ideology of the past decade that abjured regulation in favor of “the free market”. This may be easier to do, now that real estate advertisement revenue from the Growth Machine has dried up.
Saxon became the state’s chief financial regulator in 2003, through a new office created by the Jeb Bush administration. In his inaugural address in January 2003, Jeb perfectly articulated the triumphant anti-regulatory theme that echoes throughout the mortgage fraud crisis in which 10,000 felons were denied the right to vote but allowed employment opportunities to defraud the public.
“As the housing boom exploded in 2001, so did the number of people rushing into the mortgage industry, with loan originators leading the way. But as their numbers rose each year — 66 a day in 2005 — so did the number of former criminals. With home sales rising more than 20 percent a year in parts of Florida, mortgage companies were hiring loan originators at an unprecedented rate, state records show. ”Back then, it was such a feeding frenzy,” said David Velazquez, 37, a former loan originator in Broward who served time in prison for drug trafficking. ‘People were saying, `We need loan originators. We’ll train you.’ It was so busy. They were pulling in anyone they could.’ In all, more than 5,300 people with criminal histories rushed into Florida’s mortgage industry as loan originators since 2000. Even for people who had five or more convictions, there were no impediments to getting in.” (Miami Herald, “Thousand with criminal records work unlicensed as loan originators”)
In an earlier part of the Herald series, Saxon claimed to have offered regulatory reform proposals to a state legislator in 2005. That legislator, state representative Scott Randolph, is the only card-carrying liberal in the Florida legislature. Giving Randolph the mission to carry new regulations to the Florida legislature was like asking a tee-toteller to advocate no beer sales on Superbowl Sunday. Randolph said, “If they were trying to stir some urgency or interest, I probably wouldn’t have been the one” to talk with.
The Herald writes, “State leaders involved in mortgage industry legislation over the past five years said they favored the new proposals, but questioned why the agency took so long to press for changes.”
The state’s editorial boards must not let the assertion go unchallenged.
Saxon was doing what his boss wanted. This is what Governor Jeb Bush said in his 2003 inaugural address; “There will be no greater tribute to our maturity as a society than if we can make these buildings around us empty of workers; as silent monuments to the time when government played a larger role than it deserved or could adequately fill.”
It would be interesting to know the row where Saxon sat, in that audience.
US Senator Mel Martinez R-FLA, former HUD Secretary, told the Herald, “”I knew we had a problem. I had no idea how bad.” Of coure, not.
Saxon was presiding over an agency that was fulfilling the mandate of the Republican Reformation: “Let 100,000 Subdivisions Bloom”. According to the Herald, “The state had the seventh-highest rate of mortgage fraud in the country in 2003. It ranked 5th in 2004, 3rd in 2005 and 1st in 2006 and 2007. By last year, one out of every five fraudulent mortgage applications filed in the United States was written in Florida, according the Mortgage Asset Research Institute, a Virginia-based industry analyst. But instead of more aggressive enforcement, state regulators actually did less. In fact, the single most effective tool they had, license revocations, declined as the fraud rate soared, records show.” (Miami Herald, “State let crooked brokers keep working”)
“We never suspected that someone could have been guilty of a felony for fraud and still have a license,” said Sen. Bill Posey, R-Rockledge, who chairs the committee that oversees the Office of Financial Regulation. You don’t know whether to laugh or cry.
At any rate, let’s hope the national newspapers’ editorial boards connect the dots for the public, if the state newspapers won’t. The Miami Herald editorial board, for instance, has been notoriously reticent from any criticism of economic interests tied to real estate development. Still, it must be obvious to the Herald board; from Al Hoffman and his bankrupt WCI Communities (Hoffman was finance chair for both campaigns of Jeb Bush and George W. Bush) to the lowest scam artist committing white collar crimes under Miami’s harsh sun, Don Saxon wasn’t a leader; he was simply following the trail of the housing boom and doing the work of a loyalist: considered as all of a piece, they amount to crimes against the state.