Monday, October 29, 2007
Environmental Justice on Wall Street: Subprime Mitigation?
Will E. Stanley O'Neal now be made the face of the collapse of the housing market? Will he become Subprime Stanley? It looks like the fix is in. His picture started appearing more and more as it looked like Merrill Lynch might be having some trouble. His picture and articles did not appear nearly as much when he was having great success at Merrill Lynch. Most Americans probably did not even know that one of Wall Street's largest firms was run by an African American. They know now. Now that he is gone.
Fannie and Freddie and the Fed wanted to create more home ownership for marginal buyers. Home ownership was sold big time to people who could not afford the mortgages. Now many of those chickens are coming home to roost. Was it a good strategy to try to get low and moderate income people to get the title of 'homeowner?' Idealistically yes. Realistically no. Now the buyers are hurt. The lenders are hurt. Washington Mutual is hurt. Countrywide is not far behind. Fannie and Freddie could be next. But when many say low and moderate income, minorities come to mind for many. And now an African American Wall Street CEO who dabbled in subprime is taking a fall for restating earnings ($7.9 billion write-down for 3rd quarter) and trying to shop an 11th hour deal with Wachovia Bank. Our verdict: No harm no foul. Capitalism tried to expand its base and lost. Many participated and many will lose. Just do not make O'Neal the face of the Subprime mess.
Update: Charles Prince, chairman of Citigroup, was fired a week after O'Neal for a third quarter $6.5 billion write-down, did not receive a fraction of the headlines, ink or television coverage that O'Neal did.