Michael W. Hudson
Editors' Note: CounterPunch readers who’ve enjoyed economist Michael Hudson’s incisive writings may have noticed that there’s a new book about the global financial disaster, The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America -- and Spawned a Global Crisis, written by Michael W. Hudson. They’re not the same person. The book’s author, Michael W. Hudson, is a reporter at the nonprofit Center for Public Integrity. In fact, the two are so often mistaken for each other – same name, similar subject matter – that they recently wrote a piece together to help dispel the confusion and share their ideas about how people help themselves to other people’s money. In this excerpt adapted from The Monster, Michael W. Hudson writes about the nation’s largest subprime lending empire through the fortunes of its owner and one of its customers.
By the spring of 1998, Gary Ozenne had been living in his house on Crestview Street in Corona, California, for twenty-two years. Corona was a bedroom suburb in Riverside County, just east of the Orange County line. Ozenne and his wife had picked out the lot in a subdivision called Summerfield and watched as Standard Pacific, an Orange County–based homebuilder that was now expanding into California's Inland Empire, had put up their home. They'd picked the middle-priced model of the three ranch homes available. It cost them $41,000. The four-bedroom stucco house had a fireplace and a big backyard. The couple and their seven-year-old son, Scott, moved into the house in 1976, the bicentennial year. This, Ozenne decided, "was our piece of America," the place where they would live for the rest of their lives.
In 1991, though, he had taken a risk that put his dream in jeopardy. After twenty years in the computer business, he quit his job as a sales rep at Microsoft. He started his own company, Residential Fire Sprinklers, which installed and serviced fire-suppression systems for homes and businesses. The company had done well for a while, but eventually it faltered. Ozenne fell behind on his mortgage, and his lender began threatening to foreclose. He cashed in his Microsoft 401(k) and filed for personal bankruptcy, hoping for a second chance.
Things started to look up when he learned that the government had ordered the recall of eight million defective sprinkler heads. He would be okay, he thought, if he could refinance his adjustable-rate mortgage into a fixed-rate loan, and get a little cash out of his home equity to get his business moving again so he could take advantage of the recall. The hitch was that, with his late payments and his bankruptcy filing, his credit record was terrible. Bank after bank turned him down.
Then he remembered a postcard he had received in the mail from Ameriquest Mortgage. The card told him he was "more than a credit score." Ozenne called Ameriquest and talked on the phone with a salesman who told Ozenne that if he would withdraw his bankruptcy petition, the lender could give him a good deal on a loan. Ameriquest sent him a Good Faith Estimate that described his loan as a thirty-year mortgage with no prepayment penalty and a fixed interest rate of 10.5 percent. The rate was more than 3 percentage points higher than the going rate for fixed-rate mortgages at the time—but not bad considering his credit history. The deal seemed to be the solution to Ozenne's problems.
Nothing about the new mortgage, though, turned out the way he expected, Ozenne later claimed. The loan closing took place in April 1998, at a coffee shop on Main Street in Corona. Ameriquest sent a representative bearing Ozenne's loan documents. As he read through the paperwork, Ozenne saw that what the lender was offering was nothing like what he had been promised. The loan carried an adjustable rate that started at 14.5 percent. It could never go down, but it could climb to as high as 20.5 percent. The thousands he had been told he'd receive as cash out had disappeared, and the contract included a “prepayment” clause that would force him to pay a big penalty if he tried to refinance.
Ozenne tried to object to the bait and switch, but the Ameriquest functionary said he couldn't answer any questions. He was just a courier. If Ozenne signed the papers, the courier suggested, he'd have time to fix any discrepancies before the loan became official. Under federal law, he had a three-day "right of rescission." He could change his mind about the loan within three business days.
Ozenne had been backed into a corner. The lender's assurances had persuaded him to abandon other strategies for saving his house, prompting him to quit looking for other loans and to withdraw his bankruptcy petition. So he signed. Then he began calling the Ameriquest manager who had 
negotiated the deal with him over the phone. For nearly three days, he said, the manager didn't call back. Ozenne finally left a message saying if he didn't hear back from the manager, he was going to cancel the deal. A couple of hours before the three-day period was up, the manager faxed him a letter urging him to stick with the deal. If he made his payments on time, the manager said, he could refinance into a better loan in twelve months. Ozenne decided he had no choice. He let the deal go through.
negotiated the deal with him over the phone. For nearly three days, he said, the manager didn't call back. Ozenne finally left a message saying if he didn't hear back from the manager, he was going to cancel the deal. A couple of hours before the three-day period was up, the manager faxed him a letter urging him to stick with the deal. If he made his payments on time, the manager said, he could refinance into a better loan in twelve months. Ozenne decided he had no choice. He let the deal go through. Soon after Ozenne tied his fortunes to Ameriquest, the lender handed off his mortgage to one of its allies. A document was filed in the county courthouse verifying that the mortgage on the house at 861 West Crestview Street in Corona, California, had been assigned, "for value received," to "Lehman Capital, a division of Lehman Brothers Holdings Inc., 3 World Financial Center, New York, New York 10285." Gary Ozenne's loan had become part of the global mortgage machine.
* * *
The boy from the village in France lived well in his later years. Roland Arnall became a billionaire three times over by styling himself and his company, Ameriquest, as advocates for home ownership. As his wealth grew, so did his own collection of homes. In 2002, he and his second wife, Dawn, spent more than $30 million on a ten-acre compound tucked between Sunset Boulevard and the Los Angeles Country Club in the Holmby Hills section of Los Angeles, not far from the Playboy Mansion. The estate included three houses that once were homes to the Hollywood elite. The largest was a forty-room, 12,000-square-foot mansion. Twentieth Century–Fox founder Joseph M. Schenck owned it in the 1950s.
Schenck had allowed a young starlet-in-waiting, Marilyn Monroe, to live in his guest cottage. Tony Curtis owned the place in the early 1960s before giving way to Sonny and Cher, who owned it in the late '60s and '70s as their careers blossomed and their marriage disintegrated. Another house on the property was known as the Pink Palace. In the 1930s it had been home to song crooner Rudy Vallee, one of America's first pop stars. After Jayne Mansfield and her bodybuilder husband bought the place in the late '50s, she had the house and any other available surface painted soft pink and installed a heart-shaped bathtub and a fountain that burbled with pink champagne. The house eventually passed to singer Engelbert Humperdinck, who kept it until real-estate operatives packaged it into the deal that transferred the ten acres of Hollywood history to the Arnalls.
Months after the big purchase, motorists on Sunset Boulevard noticed that the Pink Palace had disappeared. The Arnalls had bulldozed the Hollywood landmark into "pink rubble," as the New York Post put it.
Little more than a year later, the Arnalls added to their holdings by shelling out $46 million to buy Aspen's Mandalay Ranch from Hollywood kingpin Peter Guber, the producer of Flashdance and Batman. At the time, it was the biggest home purchase ever in Colorado's Glitter Gulch, and one of the biggest in American history. The 650-acre spread was on a back road between Snowmass and Buttermilk ski areas. It included a 15,000-square-foot mansion and a 3,500-square-foot guesthouse with caretaker's quarters and two cabins. The deal signaled the beginning of an unprecedented boom in Aspen's high-end real-estate market. After the Arnalls bought Mandalay Ranch, "the market went nuts," one real-estate agent told the Wall Street Journal.
The Arnalls' homes became stopping-off points for the rich and powerful. Attendees at the couple's holiday soiree at the Holmby Hills estate in December 2004 included a who's who of California's top Democrats and Republicans. Among them were Gray Davis and his wife, Sharon, as well as the couple that had replaced them in the governor's mansion, Arnold Schwarzenegger and Maria Shriver. They also included California's attorney general, Bill Lockyer, a Democrat who, before his office joined the multistate investigation of Ameriquest, enjoyed $250,000 in campaign support from Arnall and his companies.
* * *
Gary Ozenne lived in less rarefied circumstances during the great mortgage boom. For one stretch of several months, his home was Room 301 at the Arizona Motel in Corona, California.
As mortgage disasters for millions because a crisis for an entire nation, Ozenne began to see himself as one of the early casualties, a guinea pig in the social experiment – “this gathering storm of loan securitization” – that Wall Street and the subprime industry had unleashed on America. He had made mistakes in his life and in his finances, and he had been in dire circumstances before he took out the loan from Ameriquest. But the company’s bait-and-switch tactics and nosebleed interest rates had ensured that he wouldn't be able to recover.
Roland Arnall's company had dumped the loan before Ozenne could challenge the way the lender had treated him. The mortgage had passed from Ameriquest to Lehman Brothers to Chase Manhattan, which in turn relied on yet another company, Ocwen, to act as the loan's servicer. Ocwen collected Ozenne's payments and, after he couldn't keep up, foreclosed on the home where he'd lived half his life.
He had to drive fifty miles to find a lawyer to file suit for him against Ameriquest and Chase. A judge threw out his lawsuit. He appealed. In arguing the case in the higher court, Ameriquest was represented by Roland Arnall's nephew and right-hand man, Adam Bass, who doubled as an attorney at Buchalter Nemer, a top corporate law firm that defended the company against borrowers' claims. The Fourth District California Court of Appeals upheld the judge's ruling against Ozenne on technical grounds. It said he hadn't raised his claims about Ameriquest's deceits soon enough and had failed to note them in the later bankruptcy petitions he'd filed to try and save his home.
Unable to keep paying his attorney, he became his own lawyer as he petitioned various judges, pleading for a day in court in which he would be allowed to lay out his claims against the big financial firms. On Presidents' Day 2003, Riverside County sheriff's deputies evicted him from his home. Over the next few years, he lived in at least seven different rented rooms in five different cities. His house on Crestview sat unoccupied. "I picked up the trash from my front lawn of my vacant home today," he wrote in a first-person, stream-of-consciousness pleading he filed in Riverside County Superior Court. "The lawn is over ten inches long." His "liquid assets" dwindled below $100. To make ends meet, he began spending his collection of Sacagawea $1 coins.
He could have given up. But he fought on. "No one is above the law," he wrote in another court document. "Bankers and their agents, like everyone else, are accountable to the law; our system demands it."
Weary of bouncing from place to place, Ozenne settled into a one-room apartment at the back of his nephew's home in Corona. His older brother, Dennis, had lived there until his death. Gary felt alone, a sixty-year-old man sleeping in his dead brother's room, fighting a legal battle he had little chance of winning. How could he keep going? "I listen to Winston Churchill's speeches," he said. "I drink too much. And I don't want these people to get away with this." Some nights he dreamed about the case. His unconscious mind churned over the words he'd written, trying to rephrase his story in a way that would persuade a judge to see simple justice and return his home to him.
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