Wall Street's Soiled Hands

The capital unscrupulously pumped from poor neighborhoods by way of predatory loans whizzes along a high-speed financial pipeline to Wall Street to be used for investment. "It's about creating debt that can be turned into bonds that can be sold to customers on Wall Street," explains Irv Ackelsberg, an attorney with Community Legal Services in Philadelphia who has been defending clients against foreclosure and working to restructure onerous loans for twenty-five years.

Household-name companies like Lehman Brothers, Prudential and First Union are involved in managing the process of bundling loans--including subprime and predatory--into mortgage-backed securities. They often provide the initial cash to make the loans, find banks to act as trustees, pull together the layers of financial and insurance institutions, and create the "special vehicles"--shades of Enron--that shield investors from risk.

Four securities-rating agencies--Moody's, Standard & Poor's, Duff & Phelps and Fitch--provide bond ratings for all of Wall Street; before assigning the acceptable rating that will draw investors, they assess the risk firewalls constructed by the securitizing company. It becomes a complex matrix of financial operations designed to generate capital and minimize risk for Wall Street with the unwitting help of borrowers. "This whole business is about providing triple-A bonds to funds that you or I would invest in," says Ackelsberg. "The poor are being used to produce this debt--what you have is a glorified money-laundering scheme."

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