November 7, 2007 9:56 AM

How Can You Identify Real Corruption?

This is a harder question than it sounds, but we have a very good example to work off of from Matt Stoller of OpenLeft. As he shows, a group of "Blue Dog" Members of Congress are trying to block a modest measure that would let homeowners being foreclosed on renegotiate the terms of their loans. He quotes a CongressDaily story noting that when the bill started moving "bankers quickly worked sympathetic lawmaker offices with their in-house lobbyists. And they knew exactly whom to go to in order to stop the bill in its tracks: the Blue Dog Coalition of moderate-to-conservative Democrats."

The story reports that 16 of these Blue Dogs signed a letter asking the Democratic leadership "to delay consideration of the bill because it might undermine implementation of the 2005 bankruptcy overhaul law" - the infamous law that was written by the banking industry and that allows them to jack interest rates up to absurd levels.

Now, I at least can understand the rationale it when lawmakers sometimes stray from the Democratic Party line to "vote their districts." That is typically the rationale from Blue Dogs, who often represent swing, rural districts. The "vote the district" rationale is not corruption (though it is often disingenuously invoked to cast bad votes). What is corruption is when lawmakers actually do things overtly against their districts and that are generally unpopular, like, for instance, helping the banking industry raise interest rates and foreclose on people.

That's where we see the sheer corruption in this move by the Blue Dogs - because the foreclosure crisis is actually hitting such conservative rural districts harder than everywhere else. Here is an excerpt from Real Estate Magazine:

While Cleveland's Cuyahoga County had more than 13,600 foreclosures in 2006 with 10,000 vacant structures, Geoff Dutton and Doug Haddix of The Columbus Dispatch reported as early as February, 2006 that "...subprime lending and foreclosures are even more pronounced in rural areas" of Ohio.

In Hardin County, a farming area northwest of Columbus, they found high default rates, linked to subprime mortgages embedded with very high interest rates, prepayment penalties and adjustable interest that could rise but not fall below the introductory rate.

Tom Robertson of Minnesota Public Radio reported in August that foreclosures outside of the seven-county Minneapolis-metro area were projected to rise to 8,700 in 2007, up from 2,700 in 2005.

A study from the Greater Minnesota Housing Fund showed that counties outside this metro area were being hardest hit.

The Center for American Progress reported this spring that the percentage of rural mortgage loan originations classified as high-interest loans (17.4%) exceeded both the urban percentage (15.5%) and the national percentage (15.6%).

Rural subprime borrowers were 20% more likely than urban borrowers to have loans with prepayment penalties.

In 500 rural counties, one-third or more of mortgage originations involved high-interest loans.

So what we see here is a group of Blue Dog Democrats being bought off, plain and simple. There's just no way around that simple fact. They aren't "voting their districts." In exchange for campaign cash, they are voting to destroy the very rural districts that they represent - the very rural districts which are being hit hardest by a crisis that the banking, credit card and financial services industry created, and that these industries are using their clout in Washington to sustain.

This, my friends, is real corruption.