Ties for Edwards
For John Edwards, the negative returns from his work at an investment in a New York hedge fund keep on accumulating.
The State newspaper in Columbia, S.C. reportedthis week that a subprime lender that is part owned by Fortress Investment Group, Green Tree Servicing, has foreclosed on or is in the process of foreclosing on 132 homes in South Carolina since Edwards went to work for Fortress in October 2005. Edwards earned nearly $500,000 for part-time work as an adviser to Fortress last year, and has about $16 million invested in it.
The Washington Post reported in May that Fortress owned a large stake in Green Tree Servicing when Edwards joined the firm, and then purchased several other large subprime lenders while Edwards was at the firm. The article noted that Green Tree had been cited in trying to foreclose on New Orleans residents shortly after Hurricane Katrina, Edwards, who has spoken strongly against the predatory practices used by some subprime lenders and made New Orleans' recovery a centerpiece of his campaign, said at the time that he was unaware of Fortress' subprime holdings and that he was asking Fortress to look into any Green Tree foreclosures in New Orleans.
Last month, The Wall Street Journal reported that Green Tree and another lender owned by Fortress, Nationstar Mortgage, had foreclosed on 34 homes in New Orleans since Katrina. Edwards acknowledged that Fortress had not dealt with the issue as he had requested, and said he would divest himself of holdings in any Fortress funds invested in the lenders, and that he would also seek to redress the New Orleans families, either by paying them out of his own pocket or arranging for a nonprofit group to assist them.
Now comes the article on the South Carolina foreclosures, which hits close to home for Edwards for two reasons: he was born in South Carolina, and it will hold the first primary in the South, an election that Edwards needs to do well in to prove his point that he can outperform Hillary Clinton and Barack Obama in the South. The State quoted University of South Carolina political scientist Blease Graham, who said Edwards could be damaged by the appearance of inconsistency between his populist message and Fortress connection.
"There's a famous old South Carolina saying: 'You have to be right as well as look right,'"Graham was quoted as saying. "Edwards looks right, no doubt about that. His message is passionate, and I'm sure well-intended and comes straight from the heart. (But) ... he may have raised some real questions again about the compatibility of that message."
The Edwards campaign played down the South Carolina article, noting that Edwards' Fortress holdings did not include any money invested specifically in Green Tree (they did include investments in Nationstar.) "Edwards' record and policies speak for themselves," said campaign spokesman Eric Schultz. "Edwards has been a long-time advocate in the fight to stop predatory lending. For many families, home ownership is not possible without subprime lenders, and he believes they can serve a valuable purpose. At the same time, he has proposed tough regulations to stop lenders from taking advantage of families who need help the most. Edwards has proposed the strongest national legislation against predatory lending and new steps to let homeowners escape unaffordable mortgages."
Washington Post editors
September 11, 2007; 3:54 PM ET
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