Inner City Press Report - January 24, 2006

Ameriquest: What Does $325 Million Buy? Carte Blanche to Gouge Consumers

Jan. 24 – Parts of the largest subprime mortgage lending conglomerate in the United States, ACC Capital Holdings Corporation, yesterday announced a $325 million predatory lending settlement with the attorneys general and regulators in 49 states. While many states’ attorneys general heaped praise on the settling company, there are reasons for consumers to be unsettled, critics say.

Chief among these reasons is the exclusion of ACC’s largest subprime unit, Argent Mortgage, from any of the reforms in the settlement, despite the fact that Argent makes more of ACC’s high-cost loans than its affiliates Ameriquest, Town & Country or Bedford/AMC. As in the attorneys general’s larger 2002 settlement with HSBC’s Household International unit, the distinction seems to be between retail loans and those made through mortgage brokers.  But with so many of the abuses in the subprime lending industry being in the broker channel, settlements which leave unaddressed these problems can hardly be said to reform and improve the industry.

Even this limited settlement raises questions about the due diligence performed by the investment banks which have helped package Ameriquest’s loans and sell them as mortgage-backed securities, including the three largest banks in the United States: Citigroup, JP Morgan Chase and Bank of America. Each of these three banks has securitized Ameriquest loans, while claiming to screen out predatory loans. With today’s settlements, these banks previous defenses of their practices must be inquired into, critics say.

But who will do the inquiring? Today’s business press largely missed or ignored the loopholes in the settlement.  The national edition of the New York Times of January 24 did not even cover the $325 million settlement.  Elsewhere, ACC Capital Holdings or “Ameriquest” was widely described as the largest subprime lender in the United States, without mentioning that what makes it the largest is Argent Mortgage, which is not covered by the terms of the settlement. Even ABC News Nightline, which used stock footage of the U.S. embassy in Amsterdam, did not mention the exclusion of ACC's largest subsidiary, Argent, from the settlement. The Los Angeles Times reported that “advocacy and community groups… praised the conditions imposed on Ameriquest” – without mentioning Argent.

The LA Times also predicts smooth sailing for the nomination of ACC’s founder Roland Arnall to become U.S. ambassador to the Netherlands: "Sen. Sarbanes has indicated that if Mr. Arnall would settle this matter with the attorneys general, he would not object to or seek to block moving forward on this nomination," Jesse Jacobs, a spokesman for Sarbanes, said… "Because a settlement was reached, Sen. Obama will not seek to block Mr. Arnall's nomination," said Tommy Vietor, a spokesman for Sen. Barack Obama.  But not only does the settlement not cover or reform ACC’s largest subprime unit, Argent – the settlement is also not final, until it is reviewed by a court. 

Ironically, some of the same members of Congress who are questioning the bypassing of courts and over-concentration of power in the executive branch are in this case conveniently ignoring judicial oversight of this tentative settlement. As noted, Arnall is a billionaire who makes both federal and state political campaign contributions, funded at least in part by ACC’s high-cost loans. So what does $325 million buy? Beyond a coveted ambassadorship, carte blanche to keep gouging consumers, at least through Argent Mortgage.

ACC has also impacted state legislative processes. For example in Nevada, legislators were given free tickets to Rolling Stones concerts by  former Nevada Attorney General Frankie Sue Del Papa -- now a lobbyist / lawyer for Ameriquest and Argent. It's a story that can symbolize and sum up the current era -- and it remains a developing story.

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