Carol Platt Liebau: John Edwards' Mortgage Meltdown

Friday, August 17, 2007

John Edwards' Mortgage Meltdown

A new report asserts that presidential contender John Edwards has investment ties to subprime lenders -- and that's not all. These are the same entities who are foreclosing on the victims of Katrina.

Two Americas, indeed.


Blogger Carol Platt Liebau said...

Coyote here.

Some Americas are more equal than others.

10:24 AM  
Blogger Chepe Noyon said...

You left out one crucial detail: when Mr. Edwards learned of the foreclosures, he decided to terminate his investment in the company. The quote from the source you cite:

"The report also said he would divest any Fortress funds in his portfolio that are invested in subprime lenders that filed the foreclosures."

What surprises me is that this source is only a few paragraphs long. How this sentence could have escaped your notice bewilders me.

10:32 AM  
Blogger Carol Platt Liebau said...

Coyote here.

What was relevant to Carol's was not that Edwards got out, but that he was in in the first place.

I don't want to engender a string of "show me the evidence" comments, but I find it hard to believe that Edwards had $16 million invested in a hedge fund without knowing what the fund's investment focus was.

Anyone remember the Claude Rains character in Casablanca who declares himself, "shocked, shocked" to find that gambling has been going on at Rick's Cafe, only to pocket his winnings a moment later?

10:39 AM  
Blogger Chepe Noyon said...

No, I won't ask for evidence, but your assumption that an investor knows the activities in the companies in which the fund has an interest is asking way, way too much. Remember, Mr. Edwards did not invest in the company directly -- he invested in a fund that invested in many companies, one of which was the one in question.

I own shares in a number of funds and I know only a few of the companies in which the funds are invested, and I certainly don't know all the activities of all those companies.

Is there ANYBODY here who:

1. owns shares in any kind of investment fund;
2. knows all the companies in which that fund has investments; and
3. can certify that not one of those companies is engaged in some kind of distasteful behavior?

11:42 AM  
Blogger Carol Platt Liebau said...

Coyote here.

If Edwards invested as a limited partner in the hedge fund, then he knew, or should have known the investment focus.

If he invested in a fund of funds, then he probably knew only the general allocation strategy of the fund of funds. Moreover, he probably has an asset manager overlooking the portfolio and so would focus solely on the annual risk adjusted return. In that case, you are correct. (That wasn't as painful as I thought it would be.)

Of course, until the subprime market hit the skids, investing in sub-prime mortgages simply made home ownership more available for the poor, kind of like buying fair-trade coffee. So, maybe he should claim he knew he was investing in sub-prime after all.

1:45 PM  
Blogger Chepe Noyon said...

Actually, I don't think that there's any shame in investing in sub-prime mortgages (although I do think it's rather foolish). And in fact, you expect that any investment in mortgages implies foreclosure on some borrowers. The nasty problem here was the foreclosure of mortgages to victims of Katrina. I very much doubt that the prospectus anywhere said "We shall be foreclosing on victims of Katrina".

4:38 PM  
Blogger Earth to Carol said...

If Edwards doesn't know what he was investing $16 million in, he doesn't deserve to be President. If he knew, he is a hypocrite. I suspect the later because he has very close tied to Fortress. He worked for them and they are his biggest contributor.

5:01 PM  
Blogger Duke-Stir said...

This is all pales in comparison to Cheney's and Duh-bya's collusion with big oil and Halliburton. Can you imagine either of those two issuing any kind of mea culpa regarding their dealings with either industry?

When Cheney offers the kind of transparency and forthrightness (the energy policy meetings with the oil execs, for example) and subsequent divestment that the Edwards campaign has just engaged in, there might be occasion for a "tsk tsk" from the right.

10:36 AM  
Blogger Carol Platt Liebau said...

Coyote here.

Below is an edited comment from FRANKLY SPEAKING.

I would ask FRANKLY SPEAKING to note the edits. I usually allow commenters greater leeway when responding to those who post than to those who comment, but name-calling and stereotyping won't get published while I am editing this blog.

FRANKLY SPEAKING writes: "Dear Carol, I read you[r] [edit] opinion about John Edwards from a link on Searchlight Crusade. Your prejudice comes through strongly. If you had read the story, [edit] you would have seen that Edwards responded immediately. [Edit] [Y]ou jump to the conclusion that because one of his investments, which followed company and industry procedure, performed a business action you don’t like, you believe you can place blame upon Mr. Edwards. I suppose you are ready to expose every investment you have ever made and take responsibility for every action those companies have ever made. [A]re [you] [edit] ready to post all your investments on your blog[?] [Edit]

12:36 PM  

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