Deval Patrick, Foreclosure Mogul
When Deval Patrick’s daughter was growing up in the 1980s, her kindergarten teacher gave her an assignment: Go home and describe the four seasons to your mom and dad. So she did: “First you drive up and the doorman takes your car.” For the daughter of a Boston power lawyer, the Four Seasons Hotel seemed as sensible a homework topic as the basics on winter, spring, summer and fall.
Patrick loves this joke. He has been telling it to audiences since at least 2007. It’s in his memoir, it pops up in radio interviews, and this fall he deployed it to charm a crowd at a Washington think tank. The key to the story isn’t his easy smile but who he is. Coming from Mitt Romney, the same narrative would be a crass celebration of inherited wealth. But from a black man who can remember his mother cashing welfare checks on the South Side of Chicago, it’s inspirational stuff ― a symbol, as Patrick says, of what makes America an exceptional country.
Which makes Patrick, a Democrat, an extremely effective messenger for a fundamentally conservative idea. “What I feel we often describe as income inequality is a shorthand for economic mobility,” he told that think tank crowd. “The ability to move from where you are to where you want to be ― that is the source of continuing anxiety, notwithstanding what the statistics say about the strength of the economy.”
This isn’t true, of course. Economic mobility and income inequality aren’t interchangeable concepts, and people don’t really get them mixed up. In 2012, Romney’s soon-to-be running mate, Rep. Paul Ryan (R-Wis.), made the difference between the two ideas a key distinction between the Republican ticket and the vision of President Barack Obama.
“We have to make a decision in this country,” Ryan told a right-wing radio host. Republicans wanted to “celebrate the right to rise” by “protecting equal opportunities,” while Democrats, Ryan said, “saw the government’s role” as “equalizing the outcome of our lives.”
But as the Democratic Party prepares for the 2020 primaries, Patrick’s message is receiving a powerful signal boost from none other than Obama himself. The two men have more in common than a Chicago connection. Both attended prep school on scholarships, and both earned Harvard Law degrees before beginning careers as civil rights attorneys. During his 2008 presidential run, Obama even cribbed some rhetoric on the stump from speeches Patrick gave during his 2006 gubernatorial race. Today much of the 44th president’s inner circle is promoting Patrick at elite gatherings. And while Patrick hasn’t made anything official, his friends launched a political action committee in August, allowing his team to start courting donors ahead of 2020.
Patrick has plenty of political assets ― an understated sense of humor and the experience of two terms as governor of Massachusetts among them. But the support from Obama is the chief reason Patrick is being mentioned as a top 2020 contender in the Democratic Party. And it might be best if Democrats didn’t go hunting for other reasons. Told from a different angle, Patrick’s biography isn’t an uplifting rags-to-riches story but an ugly tale of corruption among the American power elite. Patrick didn’t just make a lot of money; he made a lot of money helping a Republican billionaire rip off the black middle class.
In 2005, President George W. Bush nominated Republican Party megadonor Roland Arnall to serve as ambassador to the Netherlands. Arnall, his wife and the companies they controlled were the biggest contributors to Bush over the previous three years, spending over $1 million on his second inauguration alone. Ambassadorships are frequently dispensed to big donors, but Arnall had no diplomatic experience. Even his business was a domestic affair. The appointment looked bad enough that a few senators, including a newcomer from Illinois named Barack Obama, cried foul.
But Arnall got some support from an unlikely source. Patrick and Arnall got to know each other in 1996, when Patrick helmed the civil rights division at the Department of Justice. Arnall was running Long Beach Mortgage Co., which the DOJ was investigating for racial discrimination in the subprime lending market. The DOJ and Long Beach eventually reached a $4 million settlement. The idea was to send a message to subprime lenders about some of their shadier practices without crimping the flow of credit into the still-developing sector. “We recognize that lenders understand the industry in ways we don’t,” Patrick said at the time. “That is why there is so much flexibility in the decree.”
When Arnall came up for the ambassadorship, Patrick wrote to the Senate Foreign Relations Committee to heap praise on Arnall. The billionaire was “a good man,” Patrick wrote, and Arnall’s Ameriquest was “a good company.” Arnall had “really stepped forward” after the settlement in the 1990s. “He used the experience to make a better company” and would make a “fine ambassador.”
It wasn’t true. After signing Patrick’s slap-on-the-wrist settlement, Arnall developed his mortgage operation into Ameriquest, which became the world’s largest subprime lender during the housing bubble. It was notorious ― “the worst bottom-feeder of them all,” in the words of New York Times business columnist Joe Nocera, who later wrote a book with Bethany McLean documenting the company’s horrors and its relationship with Patrick.
Ameriquest’s business model used high-pressure sales techniques to push homeowners with existing mortgages into new loans with sky-high interest rates. If the family couldn’t pay, investors who bought the loans would acquire the house through foreclosure. When home prices were soaring during the housing bubble, it was a tremendously profitable strategy, turning Arnall into a billionaire.
But Ameriquest was a financial time bomb targeting middle-class families, particularly families of color. There is no nationwide database on Ameriquest’s lending that sorts by race, but we can get a look at the company’s general operations by looking at individual cities. In Milwaukee “nearly all” Ameriquest loans issued from 2003 to 2005 were refinancings, according to data from the University of Wisconsin, and half of them were made to households making less than $50,000 a year, with more than a third going to inner-city neighborhoods covered by the federal government’s Community Development Block Grant Program. In Detroit the company was responsible for over 2,500 foreclosures, 70 percent of them on homes that were blighted or abandoned by 2015, according to The Detroit News. A 2010 study by researchers at Ohio State University found that Ameriquest disproportionately targeted black neighborhoods in Minneapolis.
And Patrick was making $360,000 a year working for Ameriquest. He joined the company’s board in 2004, lending his credibility as a former civil rights attorney to both the company’s operations and the public image of its founder. Two months after Patrick vouched for Arnall to the Senate, Ameriquest agreed to pay $325 million to settle predatory lending allegations in 49 states and the District of Columbia.
When the mortgage business began to implode, Patrick left Ameriquest to run for governor of Massachusetts. Though his corporate background generated plenty of controversy in the primary ― he pointedly refused to release his tax returns during the campaign ― he entered office in 2007 as Ameriquest was collapsing. Patrick called Citigroup executive Robert Rubin to plead for funding to rescue the dying firm, using the weight of the governorship to quite literally call in a favor for a Republican billionaire.
In a statement provided to HuffPost, Patrick spokesman Alex Goldstein described the former governor’s Ameriquest tenure as a victory for progressive change.
“Governor Patrick believes that real change cannot always be achieved from the outside, and sometimes requires us to bring our judgement and conscience inside to have an impact,” Alex Goldstein wrote. “In 2004, he agreed to serve on the board of ACC Capital Holdings as the Board’s internal liaison to Ameriquest management, helping to reach settlements with states seeking compensation for those harmed by Ameriquest’s predatory lending practices. Governor Patrick served in this role as he has throughout his career ― without leaving his conscience at the door.”
If so, Patrick’s tenure at Ameriquest raises serious questions about his role at other scandal-plagued corporations. He did some work on the mortgage settlement, and the details that have come to light ― particularly in a book by former Wall Street Journal reporter Michael Hudson ― implicate Patrick in the company’s attempt to wine and dine its way out of liability.
Arnall introduced Patrick to a group of state attorneys general at a dinner he had arranged hoping to bring down the temperature of negotiations that would eventually end in the $325 million settlement. The pricey evening became an immediate government ethics debacle for the prosecutors ― a transparent effort by Arnall and Patrick to buy off their adversaries with a night on the town. Public servants are generally barred from accepting gifts from corporations they are investigating for fraud. But Ameriquest insisted on taking care of the check, resulting in months of negotiations over how prosecutors would pay their tabs. Several ended up sending the company personal checks.
In corporate America, Patrick was not so much a reformer as he was a public relations figure.
Patrick’s personal line on government ethics issues has always been aggressive. His decision to work at a company he had investigated for racially discriminatory lending was, even by Washington standards, an audacious turn through the revolving door. But the Ameriquest episode wasn’t the first time he ran that particular routine.
Under Patrick’s leadership in 1997, the DOJ signed a $176 million settlement with Texaco for racial discrimination against its employees. A year after a court approved the deal, he left the DOJ for a job as Texaco’s top in-house attorney.
Four years later, he left Texaco for Coca-Cola, which was trying to clean up its image after signing a $192 million racial discrimination settlement ― the largest in history. The pattern was clear: Patrick was the guy you hired if your company needed to look serious about fixing high-profile racism.
He arrived at Coca-Cola as outrage was building over its practices in Colombia, where its bottling plants hired paramilitary forces to intimidate and murder employees in an effort to thwart union activity. By 2003, international labor unions were calling for a boycott of the company. Patrick’s legacy with Coke is complex. He defended Coca-Cola against a lawsuit filed by labor unions over the violence, and when courts dismissed the case, he praised the result as “the right legal outcome.” But in 2004 he pressed for an independent investigation of the death squad allegations as a check against Coca-Cola’s own investigation. When the company’s executives recoiled at the idea, he resigned.
But he wasn’t done taking Coke’s money. He accepted $2.1 million in consulting work with Coke the year after he stepped down.
Prominent civil rights leaders, including the Rev. Jesse Jackson, have defended Patrick’s work for Coca-Cola as substantive. But some companies can’t be fixed from the inside. It’s hard to imagine a Democratic politician boasting about her ability to boost wages at a tobacco giant, for instance. Patrick knew that Arnall ran a problem company in the 1990s and praised him as a sincere reformer even as his company was falling apart for again mass-producing foreclosures that disproportionately affected minority families. The good guys in 2005 weren’t trying to score ambassadorships for Ameriquest’s founder. They were trying to put him out of business.
“The subprime market had evolved to the point where we needed to do anything we could to shut it down,” says Prentiss Cox, currently a University of Minnesota Law School professor who worked on the states’ settlement with Ameriquest and wanted to bring the case to court.
In corporate America, Patrick was not so much a reformer as he was a public relations figure. He gave corporations a story to tell about the good things they were supposedly doing ― even if when they were simultaneously busying themselves with very bad things. By comparison, his tenure as governor of Massachusetts is pretty tame. His transgressions against progressive orthodoxy ― securing $1 billion in tax breaks and subsidies for pharmaceutical and biotech companies, increasing sales taxes (a regressive change that hits the poor harder than other tax increases) by $1 billion, overruling state regulators to clear the way for Uber ― never came close to threatening his re-election. He finished both terms with sky-high approval ratings.
After leaving government, he accepted a job at Bain Capital, where he focuses on making investments in midmarket companies with high social and environmental impact.
The day Bain announced the hire, Mitt Romney called Patrick to congratulate him.
Zach Carter, Senior Reporter, HuffPost