John Edwards and the Mortgage Blowout

Dear sweet John Edwards, the people's candidate, has been exposed as up to his eyeballs in hedge fund money and sponsorship by Fortress Investment Group. Now Fortress is at the short end of the sub-prime mortgage blowout. Not only that, but the sub-prime scam promised poor people new homes in the booming economy, and is leaving them only foreclosure and bankruptcy.

Fortress Investment Group, the $35 billion hedge fund that employed John Edwards from October 2005 until December 2006 -- and which provided the largest bundled contributions to his Presidential campaign in 1st Quarter 2007 -- blew up in Edwards face today, with the page one news that Fortress is and has been a major player in every aspect of the predatory subprime mortgage market which is now evicting poor people from their homes in sites of economic devastation like New Orleans. Edwards had sought to make ``fighting poverty'' the signature issue of his campaign.

Subprime loans are a predatory ``product'' foisted on people with poor credit, which charge higher rates, often carry fees, and large rate increases which are hidden from the buyer. With the blowout of the housing bubble, home foreclosures rose to 1.2 million for 2006, mainly through defaults by subprime lenders.

Today's Washington Post (5/11) exposes Fortress's connections to every phase of subprime looting. When Fortress hired Edwards, it owned a major stake in Green Tree Serving LLC. Green Tree made subprime loans to mobile home owners during the 1990s, then had switched to the collection side of the business when Fortress bought a major stake in it in 2003. In 2005, Green Tree represented 4% of Fortress' Holdings.

In July 2006, Fortress bought Centex Home Equity, one of the top 25 subprime lenders. In December 2006, Centex, which is now called Nationstar Mortgage, bought the loan-making division of Champion Mortgage, bringing another subprime lender into Fortress.

In March 2007, Newcastle Investment Corp., a real estate investment trust managed by Fortress, moved into the subprime market by buying a $1.7 billion loan portfolio. In March 2007, Fortress also bought $4 billion in subprime loans from Fremont General Corp. Thus, while Edwards the candidate made speeches about fighting predatory lending, his former employer and largest contribution base was participating in every phase of the predatory subprime market.

John Edwards is not alone among the so-called top-tier Democratic Presidential candidates in taking huge contributions from hedge funds. The hedge funds, and the banks and private equity companies they run, are the second largest source of contributions to Hillary Clinton and Barack Obama. Both Clinton and Obama have also accepted contributions from Fortress.

It used to be said, ``caveat emptor''--let the buyer beware. Today, it may be said, let the bought beware, by refusing hedge fund money.