Background
On February 28, 2008, legislation aimed at easing the subprime mortgage crisis stalled in the U.S. Senate after Republicans, led by Minority Leader Mitch McConnell (R-KY) and backed by the banking industry, prevented debate on the bill from moving forward. Subprime lenders have been in the spotlight for over a year due to concerns about skyrocketing default and foreclosure rates - linked to predatory lending practices - that have helped bring the economy to the brink of a recession.
Lenders extended subprime loans to nearly 35 percent of all Kentucky refinance borrowers in 2005[i] [0], all while McConnell has seen his contributions from commercial banks and the mortgage brokerage industries for his current race more than triple compared to the cash he collected for his re-election in 2002. Since then, those industries have given $373,550 to McConnell's campaign fund and leadership PAC. Over all, since 1989, he has received $681,905 from those industries.[ii] [0]
Meanwhile, his colleagues in the Kentucky state legislature passed predatory lending legislation in 2003 and have introduced additional bills in each subsequent legislative session.
Predatory Lending in Kentucky
Predatory loans, often involving "deception or fraud and aggressive sales tactics, which take advantage of a borrower's lack of understanding of basic rights and terms of the mortgage" are most often extended with greater frequency "in locations with low income and minority households."[iii] [0]
In Kentucky, lenders extended subprime loans to nearly 35 percent of all refinance borrowers in 2005.[iv] [0] Concealed fees, balloon payments, and skyrocketing interests rates coupled with a stagnant economy have led to a record number of mortgage delinquency rates and defaults. In the third quarter of 2007, there was one foreclosure filing for every 809 households.[v] [0]
The six-county Lexington metro area had 212 new foreclosures filed in the three months ending Sept. 30, 2007, the highest quarterly total in at least three years. It is double the 106 foreclosures filed in the third quarter of 2006 and nearly 12 times the 18 foreclosures filed in the same period of 2005, which was before the national wave of foreclosures began.[vi] [0]
Adding to the subprime lending misery in Kentucky and around the country, a softening housing market has grown even weaker due to a sudden tightening of credit. The Federal Deposit Insurance Corporation (FDIC) has called for a Congressional crack down on so called predatory loans.[vii] [0] And the problem is widely expected to grow worse as Adjustable Rate Mortgages (ARMs) - one of the subprime lenders' favorite financial products - reset to higher interest rates this year and next.
Contributions from Lending Industry
Senate Minority Leader McConnell and his leadership PAC, the Bluegrass Committee, have received more than $680,000 from commercial banks and mortgage brokers since 1989. Since 2003 alone, he has collected $373,550, more than triple the amount he collected for his 2002 election - $123,200. And that's with several months to go until the November election. Donors include Banc One Corporation, Chase Manhattan, Citicorp, and Wells Fargo - all lenders that offer subprime loans.[viii] [0]
In fact, two of Senator McConnell's lifetime, top 20 donors according to the Center for Responsive Politics are lenders that have been caught up in the subprime scandal: Citigroup ($54,050 lifetime donor) and JP Morgan Chase & Co. ($60,375 lifetime donor)[ix] [0].
McConnell has also received $10,500 from the principal owner of Inez National Bank, Robert M. Duncan - better known as Mike Duncan, chairman of the Republican National Committee.[x] [0]
Commercial banking and mortgage broker industry contributions to Sen. Mitch McConnell (R-KY)* | |
| Election ** | Contributions |
| 1996 | $102,155 |
| 2002 | $123,200 |
| 2008 | $373,550 |
*includes contributions from individuals ($200+) and PACs to campaign committee and leadership PAC, the Bluegrass Committee.
**totals include contributions over six-year period leading up to election. 2008 contributions downloaded February 2008.
About Us
Campaign Money Watch is a project of the nonpartisan Public Campaign Action Fund. The organization works to hold candidates who are against reform accountable for where they get their political donations.
Campaign finance figures are based on Campaign Money Watch analysis of data obtained from the Center for Responsive Politics [0], a non-partisan organization that tracks and codes campaign finance data by industry. Data includes individual contributions ($200+) and from Political Action Committees (PACs) to campaign committees and leadership PACs. Data for the 2008 cycle were downloaded in February 2008.
[i] [0] 2006 Corporation for Enterprise Development (www.cfed.org [1]) calculation, published in 2007-2008
Assets and Opportunity Scorecard, based on Mortgage Bankers Association, National Delinquency Survey, Second Quarter 2006, p.5.
[ii] [1] Public Campaign Action Fund analysis of campaign finance data provided by the Center for Responsive Politics. Includes contributions from individuals ($200+) and Political Action Committee (PAC) contributions to McConnell's campaign committee and leadership PAC.
[iii] [1] HUD/Treasury report, 2000: "Curbing Predatory Home Mortgage Lending"
[iv] [1] Consumer Federation of America report, 2006: "Subprime Locations: Patterns of Geographic Disparity in Subprime Lending."
[v] [1] RealtyTrac: US Foreclosure Market Report - 2007.
[vi] [1] The Lexington Herald-Leader, November 15, 2007
[vii] [1] New York Times (Reuters): March 27, 2007. http://www.nytimes.com/reuters/business/business-usa-subprime.html [2]
[viii] [2] Public Campaign Action Fund analysis of campaign finance data provided by the Center for Responsive Politics.
[ix] [2] www.opensecrets.org/politicians/allcontrib.asp/CID=N0003389 [3]
[x] [3] Public Campaign Action Fund analysis of campaign finance data provided by the Center for Responsive Politics.