An Associated Press investigation reveals Texas Gov. Rick Perry, one of the leading Republican candidates for president, pioneered a grant program to bring mortgage companies to his state shortly before the housing bubble burst. In the end, the state's taxpayers subsidized companies for $35 million before being swept into the nationwide foreclosure crisis.
The funding went to Countrywide Financial Corp. and Washington Mutual Inc.; both have been blamed for contributing to the depth and length of the recent recession, the AP reports. The news agency's analysis concludes that, after receiving the state's money, the companies began engaging in the kind of risky lending that facilitated the housing market crash. Texas ranked third in the number of risky mortgages, second to only California and Florida, according to the AP.
In late 2007, as credit agencies began to warn of overvalued Wall Street assets, largely backed by mortgages, a Perry spokesman called Texas "one of the hottest housing markets in the nation" and dismissed concerns about the looming economic implosion as "slightly alarmist."
Perry pushed for the program as a source of job creation, the AP reports. Bank of America, which acquired Countrywide in 2007, returned $8.45 million of its $20 million grant because it couldn't create the targeted 7,500 jobs. Countrywide, which was later acquired by JP Morgan, didn't pay back any of its $15 million grant because the company reached its contractual goal of creating 3,800 jobs, a Perry spokesman told the AP.