That’s the only explanation I have for him vetoing AB1830:

Gov. Arnold Schwarzenegger vetoed a proposal today that would have imposed tougher restrictions on mortgage brokers, such as banning them from issuing exotic loans to subprime borrowers that cause balances to grow rather than shrink over time […]

The bill by Assemblyman Ted Lieu, D-Torrance, would have banned subprime borrowers from obtaining “negative amortization” loans, agreements that offer low initial payments but increase the principal balance over time, boosting interest costs and making them difficult to pay off.

AB 1830 also would have specified that mortgage brokers owe a “fiduciary duty” to borrowers. It would have prohibited brokers from steering borrowers toward higher risk loans than they would qualify for based on their income and credit. And it would have capped prepayment penalties for borrowers who want to refinance their loans to seek better terms.

Schwarzenegger, in his veto message, said the bill had laudable goals but that it “overreaches and may have unintended consequences.”

Overreaches into the profits of his mortgage lending industry buddies, that is.  Schwarzenegger’s concerns about putting state mortgage brokers at a “competitive disadvantage” compared to their unregulated federal counterparts is easily managed (like forcing anyone who does business in the state to work under one standard) and just a pathetic excuse.

We are in crisis mode on Wall Street right now because mortgage lenders, pressured by investment banks and securities markets, abused the process and came up with all sorts of exotic schemes to get borrowers into homes.  This bill would have curbed the worst practices of the industry.  The Governor would rather they continue.  He would rather mortgage lenders rip off their customers.  He would rather the economy sink into a deep recession.

One unexamined aspect of the Governor’s character is how much of a mindless puppet he is for Chamber of Commerce interests.  Let this be another example.

Anything else?

UPDATE by Dave: Yes I have a few more.

Lucas mentioned it in Quick HIts but this needs to be amplified.  Turns out that John and Cindy McCain are the same kind of irresponsible conservatives who are so unpatriotic they don’t believe the country (and in this case, this state) is worth paying for.

When you’re poor, it can be hard to pay the bills. When you’re rich, it’s hard to keep track of all the bills that need paying. It’s a lesson Cindy McCain learned the hard way when NEWSWEEK raised questions about an overdue property-tax bill on a La Jolla, Calif., property owned by a trust that she oversees. Mrs. McCain is a beer heiress with an estimated $100 million fortune and, along with her husband, she owns at least seven properties, including condos in California and Arizona.

San Diego County officials, it turns out, have been sending out tax notices on the La Jolla property, an oceanfront condo, for four years without receiving a response. County records show the bills, which were mailed to a Phoenix address associated with Mrs. McCain’s trust, were returned by the post office. According to a McCain campaign aide, who requested anonymity when discussing a private matter, an elderly aunt of Mrs. McCain’s lives in the condo, and the bank that manages the trust has not been receiving tax bills on the property. Shortly after NEWSWEEK inquired about the matter, the McCain aide e-mailed a receipt dated Friday, June 27, confirming payment by the trust to San Diego County in the amount of $6,744.42. County officials say the trust still owes an additional $1,742 for this year, an amount that is overdue and will go into default July 1. Told of the outstanding $1,742, the aide said: “The trust has paid all bills shown owing as of today and will pay all other bills due.”

Keep in mind, California Republicans want this type of tax-dodging for those who can most easily afford it to be the LAW.  They think it’s perfectly fine for wealthy yacht and private plane owners to avoid their taxes.

There’s also the question of whether people, who are so ridiculously wealthy that they forget about properties where their relatives are living for four years, can be credibly seen to be at all in touch with the concerns of the average American.

Here’s a statement from the Attorney General’s office:

California Attorney General Edmund G. Brown Jr. today sued Countrywide Financial, its chief executive Angelo Mozilo, and president David Sambol, for engaging in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market.

“Countrywide exploited the American dream of homeownership and then sold its mortgages for huge profits on the secondary market,” Attorney General Brown said. “The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme.”

It is certainly true that lenders like Countrywide had to feed the beast of mortgage-backed securities, which investors were gobbling up at the height of the housing boom.  They absolutely valued getting a mortgage into the secondary market over securing a mortgage that the buyer could actually pay back.  The question is the level of criminality here.  Atrios, an economist who’s been following “Big Shitpile” for quite a while, isn’t fully convinced:

We do know that at some point the product that mortgage companies were selling essentially flipped. They went from providing mortgages to people, to providing bundled mortgage securities to Wall Street. While it’s quite possible that there was actual fraud going on with respect to mortgage borrowers, the greater fraud might have been perpetrated against the investors which eagerly bought up their chunks of big shitpile. Obviously I sympathize less with the latter who are paid big money to, you know, have some idea what they’re doing.

Tanta at Calculated Risk is similarly unimpressed with a similar lawsuit out of Illinois, saying that it it trying to sue over established industry practice.

Volume-based compensation structures? There have been volume-based compensation structures in this business since long before Tanta got into it. Does it create perverse incentives? Sure. Do we have to like it? No. Has it operated all these years in plain sight of regulators, investors, and the public? Yes. Is CFC’s pay structure all that different from anyone else’s? I profoundly doubt it.

And if anyone who has ever underwritten a loan in 30 minutes has to go to jail, the jails will be full indeed. I wonder if they’ll let me take my new Kindle. Jesus H. Christ on a Process Re-engineering Consultant Binge, folks, anybody who didn’t tell the analysts on the conference calls that they’d got their average underwriting time down to 30 minutes was Nobody back in 2000. Not to mention the AUS side of the business where underwriting had gotten down to 30 seconds.

The problem with Countrywide valuing volume over quality is that they appear not to have to pay the price for that.  In a traditional system, Countrywide getting stuck with a lot of bad loans would hurt them, creating a disincentive.  Now, they’re passing on that pain to investors, and the feds are swooping in to bail the financial institutions out anyway, so it’s guilt-free.  I don’t know that the remedy here is a lawsuit, other than allowing the market to punish bad actors, something we never do in this country, because for decades we have socialized risk and privatized profits.

California is starting to look more and more like the factory states in the 1980s after everybody pulled out.

California’s deteriorating economy is demonstrated anew by a sharp jump in the state’s unemployment rate to 6.8 percent in May.

The Department of Employment says 60,000 fewer Californians held jobs last month than in April, and 18,000 fewer than in May 2007. Unemployment, meanwhile, hit 1.3 million, up by 300,000 from May 2007.

That’s an over 30% increase in the unemployed in just one year.  

The paralysis of the state’s government is slightly more manageable when job growth is expanding, sectors are booming and money is flowing into the coffers.  When you have a dramatic downturn like this, government simply must have the flexibility to act.  It actually needs that flexibility all the time, but in a downturn people suffer visibly from the structural stasis.

If the Democrats can use the Youngstown-ization of the state economy as a lever to argue for legitimate, long-lasting structural changes, they’d gather a lot of support.  The LA Chamber of Commerce is talking about restoring the car tax, fercryinoutloud.  The problem, of course, is that California’s government is being held for ransom, in a bipartisan way, and it simply eliminates any opportunity for moving forward.

The backers of a package of bills to overhaul subprime lending regulations pointed to a deepening crisis that has put one of every 242 California homes into foreclosure in February, the second highest rate in the nation […]

The package of subprime bills had been approved by the Assembly. But it hit rough waters Wednesday in the Senate banking committee, chaired by Sen. Mike Machado, D-Linden.

Machado has dealt with mortgage issues for years. His district is one of the national epicenters for foreclosures. But Machado is seen by some consumer advocates as overly sympathetic to the industry.

“The arguments he makes are certainly quite similar to those made by the industry folks we are negotiating with, and in many cases don’t seem to put the protection of consumers at the forefront,” Leonard said.

Machado isn’t alone in being bought and paid for, of course.  The lobbyists talk about “regulatory nightmares” that will stop anyone from getting credit and stunt job growth.  They spend lots of money to ensure their argument will be heard.  And they water everything down.  

This is why we have a bitter, angry electorate.  Democrats have the opportunity to channel that anger.  But the universe of those who put their constituents first is narrow indeed.  Broken government leads to broken lives.

Welcome to Youngstown.

(alternatively, you could call it Bankruptsville, USA.  But I like Youngstown.)

Here are a few tidbits on this GOTV weekend!

• Obviously everyone is going to be working hard for their causes and candidates, so it may be a little quiet around here.  I’ll be out walking all day tomorrow.  Oh, and don’t vote for the racist guy, Bill Johnson, as a Judge of the Superior Court (Office number 125) in LA County.

• Yesterday was the deadline for bills to get passed out of their chamber of origin, and the Assembly passed major subprime mortgage legislation, without help from Republicans (6 of them abstained despite being seated right in the chamber).  This bill has some good homeowner assistance elements that will allow people to restructure their financing before foreclosure.  A mortgage bill has also passed the State Senate, so some form of legislation will hopefully get to the governor post haste.

• One of the biggest problems with the housing crisis is that, as home sale prices lower, homeowners are reassessing their value and getting their property tax lowered, decreasing state revenue yet more.

• Sticking in the shiv before riding off into the sunset, Fabian Nuñez writes a puzzling op-ed in the Sacramento Bee approving of the Governor’s horrible idea to borrow against future lottery revenue.  Considering that the only sustainable solution to the permanent crisis mode that we have in our budget is to reorganize the tax structure instead of constantly borrowing, I have no idea why any Democrat would veer so far off message and undermine the new Speaker’s ability to move forward.  What’s more, lotteries are regressive taxes on the poor.

• One spot where there will be a lot of action on Tuesday is in Ventura County, where Democrats now outnumber Republicans and which could have contested elections in the Assembly, Senate and US Congress.  However, the LA Times shows its political acumen by writing:

One of the more closely watched contests on Tuesday will be the Democratic primary in the 24th Congressional District. Insurance agent Mary Pallant of Oak Park; Marta Jorgensen, a Solvang educator; and Oxnard businesswoman Jill Martinez are running.

Marta Jorgensen quit the race over a month ago and endorsed Martinez.  Way to go, LAT.

• Excellent news out of Los Angeles: there’s been a $1 million dollar settlement with Hollywood Presbyterian Medical Center for their dumping homeless patients on Skid Row.  They will also be monitored by a US Attorney for five years.  This unethical practice has reached a reasonable conclusion.  Hollywood Presbyterian deserved punishment.

• Trying to get rid of marijuana grow houses in Arcata is like trying to get rid of the Pacific Ocean on the California coast.

Enjoy!