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Well the senate vote in securing financial reform legislation set to take place next week our next guest has taken on the big banks -- actually won.
Martha Coakley Massachusetts attorney general joining us now -- -- first on Fox Business interview ms.
Tell us what -- What is it that Morgan Stanley did that you said was illegal.
Well we -- that Morgan Stanley was involved both in the financing.
Of new century loans in Massachusetts providing monies of the loans could be made in the first instance which are shipping it Cortes said.
Is an unfair practice because those loans.
Where basically unsustainable they were may be -- couldn't pay them back they knew it they should have known it.
And they proceeded to do it -- -- it.
Let me just stop -- -- forgive me 12 just for those who might not know new century.
It was sort of -- the mortgage firm that Morgan Stanley was financing that's how it worked right.
New century is a large sub prime lender filed bankruptcy awhile ago but yes.
All right well my -- my question would be is -- out exactly what Fannie and Freddie were doing -- and when you're gonna sue them.
Well -- the issue is that.
In these instances.
There were many.
On no ability to repay which -- in some instances was not documented.
On this was not about -- people who are taking risks that they should have taken we understand people got loans got mortgages they shouldn't have gotten.
I'm not defending that what I'm saying however is that we had sub prime lenders like new century like countrywide.
Like Fremont in Massachusetts they came in and offered -- loans with resets after two or three years that they knew.
The people taking -- out possibly couldn't pay instead of it.
I we are again I would I would challenge you ms.
Coakley I would say.
Clearly Fannie and Freddie were making loans out to people who they should have known just as new century should've known.
Could not have afforded to pay these loans long term and that's why the taxpayer.
Is now on the hook for hundreds of billions if not trillions a bad sub prime mortgages backed by Fannie and Freddie.
Well we just gonna have to disagree on that because on it at least from where we sit and I'm an attorney general that does not oversee banks I don't regulate banks -- make that clear.
But I in many of the other attorneys general are not dealing with the aftermath in our states have abandoned properties of people about to lose their homes.
Can't find mortgages.
-- who were sold products that -- deceptive and unfair it's not just me saying this it's our supreme judicial court.
It's looked at the documentation that we provided looking at foreclosure rescue schemes looking at the pattern in practices.
-- brokers and lenders here in Massachusetts and I think across the country.
That made loans that they knew at the time they made them those borrowers could not repay.
Well and again congratulations first -- -- I die I don't want to bury the lead which is that you've got a hundred over a hundred million dollars for your state which is in desperate need of money.
From Morgan Stanley congratulations -- that's wonderful news but I I have to say when I read and I'm quoting now from -- I think -- from from your indictment of Morgan Stanley.
The lender cokes and the lender being new century the lender coaxed lower income borrowers into loans that they couldn't afford to pay.
I think it -- -- I think you Barney Frank I think a lot of income group congress people that.
Sort of coax low income people who couldn't afford loans in the loans backed by Fannie and Freddie.
Given the point was that the profit made by the sub prime lenders and as we said -- in looking at Goldman Sachs behavior and -- Wall Street.
In looking at Morgan Stanley's behavior was to not only finances loads but then to securitize them to take those loans at that stage that they knew.
Were worthless or next to worthless.
And then sell them up the chain in a way that they knew with frankly not just a question of the consumer or Massachusetts economy is -- -- National economy in terms of responsible lending cracked.
And by the way a lot of these big banks who were securitized mortgages.
Apparently had officers on the ground looking at some of these mortgages -- Reported upstairs saying hey -- some of these mortgages are badly put together they would probably will never be paid off.
It is this just the beginning.
You think a lot of lawsuits maybe even against some firms that don't officially exist -- more -- I I imagine there -- some remnants of Bear Stearns.
That could be it could be -- you could attack on a charge.
To put a lien against right.
Well we have a couple of objectives one is to dry -- get.
People in homes where they can sustain mortgages not ones that are unsustainable those that are underwater.
And that's part of what we did that our settlement with Goldman Sachs and Morgan Stanley make sure that some principal reduction.
So that the person stays in the home there's taxes on the home we don't have another foreclosure I think we all agree.
The foreclosures across the country aren't a good thing to do and the second thing is that kind of -- -- -- book on this I think that the -- -- people where they do.
Disk to file lawsuits -- getting results but what did happen in this economic meltdown what -- -- the potter parties play I'm not here to protect anybody in particular but let's find out what happened the -- -- we go forward with financial reform to try to make sure doesn't -- -- that -- -- Hey man -- that's why we thought Fannie and Freddie shouldn't be and that financial reg reform bill because they were certainly part of the -- part of the probably got another period into the mess is that.
Well -- I think that initially we're looking at those who made the loans.
On those who sold them those who took fees from the remember that the federal government guaranteed those loans and so we get argue about what role they played but they certainly weren't the core reason I believe.
White people in Massachusetts are now looking at foreclosures across the state -- still looking at people who can afford their mortgages and who we're told in this.
They I believe in deception.
Deception ways that -- a violation of our allies you know we want a level playing field that I'm not again I'm not defending speculators on -- -- -- people.
Who absolutely -- -- that they were gaming the system we're going about people who were told by these lenders.
On that don't worry you can reach me at this won't -- you're gonna be able to afford this loan.
Lenders who -- lower income borrowers into loans they couldn't afford and again I would say that's includes Fannie -- but let's move off -- that ought to the question of whether or not all of this work is is part of what the consumer.
The new financial -- consumer agencies gonna do and whether you would like to -- the -- that agency.
I think frankly that Elizabeth Warren would be a terrific head of that agency we love a lot a lot about.
I thought about the she's got a lot about the consumer prediction he's good you know -- and he regulators now on the office of the comptroller of the thrift.
They all look at the health of the institutions and it's important that somebody do that we don't want the banks to fail we don't.
But no one has focused on this consumer piece -- it and I think that.
The bill provides for exactly that look at the federal level that we at the states have been -- we should be doing we see it first.
And to watch out to make sure that there's a level playing field there's no you're responsible lending.
Forget what do you think consumers should have -- these loans or not it's just not good for the economy for our large banks and for Wall Street to be -- for those mortgages and to be securitized and I've.
I would be remiss not that's what you think the job Scott Brown's been doing so for in the US senate what do you think.
I thought I'd listen guys I'm Scott Brown yesterday we marched together in a fourth of July -- -- on he's enjoying it on he's working hard.
And you know he's dealing with what happens in Washington and trying to decide how you vote.
It's a very nice political answer but we're glad that your margin -- -- kids together Margaret ghostly.
Look at it whether it's your -- -- we don't care we we think both of you would be a great addition to the government and in that role thank you for being here appreciate it.
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