Jerry Brown joins the Countrywide pile on

And the housing bust hits a new low: The legacy of REO Speedwagon power ballads is invoked

Published June 26, 2008 2:15PM (EDT)

And the award for most strained metaphor to emerge from the housing bust goes to.... the Manteca Bulletin!

It's REO Speedwagon, Manteca-real estate style.

REOs -- or foreclosed real estate owned by banks -- are rocking the Manteca housing market just like the Midwestern band of the same name did the power ballad rock scene of the 1970s.

I don't know which is worse, the idea that America's housing crisis, bad as it is, has reached anywhere near the awful depths of the power ballad rock scene of the 1970s, or the horror I just experienced of having the song "Keep On Loving' You" run through my head over and over again, as I read the legal complaint filed on Wednesday by California State Attorney General Jerry Brown against Countrywide, alleging "deceptive advertising and unfair competition."

And I'm gonna keep on lovin' you
Cause it's the only thing I wanna do
I don't wanna sleep
I just wanna keep on lovin' you

Say what you want about the unseemly spectacle of California piling on to kick Countrywide after Illinois already got the party started with its lawsuit against America's biggest lender, the text of the complaint still makes for an entertaining summary of how the housing mess blew up. And it reinforces a point that How the World Works has long stressed: The incentives for creating all those loans that homeowners would never be able to pay back came from the third parties who were gobbling up shares in the securitized pools of such loans in the secondary market. Countrywide's business wasn't really making loans so that Americans could buy homes. It was making loans that it could then repackage and sell to investors hungry for the high premiums that came with risky loans. The worse the loans were, the more profits there were to be made.

From the complaint:

Defendants' deceptive scheme had one primary goal -- to supply the secondary market with as many loans as possible, ideally loans that would earn the highest premiums. Over a period of several years, Defendants constantly expanded Countrywide's share of the consumer market for mortgage loans through a wide variety of deceptive practices, undertaken with the direction, authorization, and ratification of defendants Sambol and Mozilo, in order to maximize its profits from the sale of those loan to the secondary market...

In addition, Countrywide directly and indirectly motivated its branch managers, loan officers and brokers to market the loans that would earn the highest premiums on the secondary market without regard to borrower ability to repay.

Countrywide certainly deserves some of the blame for pushing loans on people they knew wouldn't be able to repay them. But what about the investment banks that gobbled up the repackaged loans? Come on, Jerry, Countrywide's small fry. The Big Apple is where the action's at.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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