FTX Bought Government’s Silence; Did Fintechs Buy Attacks on Appraisers?
Fallen crypto whiz kid Sam Bankman-Fried and his associates are a living testament to the power of political donations in American politics. It’s unclear precisely what the more than $70 million in political donations bought FTX during an 18-month period leading up to the midterms, but one can speculate the money silenced what was once a brisk debate on Capitol Hill and at the U.S. Treasury on the regulation of crypto-currency.
The nation’s 80,000 licensed real property appraisers should pay close attention to the manipulation of Washington by FTX, which turned out to have the characteristics of a Ponzi scheme. It may help the appraisers explain their own predicament as a result of a campaign underway since 2018 to weaken or eliminate appraisals in mortgage transactions through ad hominem attacks on appraisers by federal officials; robo-complaints to state boards by the politically compromised Fannie Mae; now-discredited research by the Brookings Institution (an organization that has itself been linked to influence peddling); formulaic lawsuits bankrolled by donation-seeking nonprofits; and attacks on time-tested analytical methods and economic principles.
Who’s funding the campaign against appraisers? We know that thousands of workers at loanDepot, Guaranteed Rate, Fairway Independent Mortgage, Caliber Home Loans, New American Funding and United Wholesale Mortgage have funneled millions in small-dollar donations to political action committees across the political spectrum; much of this activity was during the 2020 campaign and much of it went to the people currently in office. More on that in a bit.
In the now unfolding FTX debacle, Bankman-Fried and Ryan Salame, an executive at FTX Digital Markets, became two of the biggest donors to both parties during the last election cycle. Bankman-Fried personally gave $40 million to politicians and political-action committees ahead of the 2022 midterm elections, according to OpenSecrets.org, a nonpartisan group that tracks campaign donations. Salame donated more than $23 million.
“Sam Bankman-Fried influenced Washington across basically every mechanism available,” said Jeff Hauser, who runs the Revolving Door Project at the Center for Economic and Policy Research.
The New York Times explained how Bankman-Fried “built a massive operation to woo politicians, regulators and nonprofits to support his crypto goals.” In May, Bankman-Fried signaled he might spend $1 billion on donations in the 2024 election cycle.
According to research by the Wall Street Journal, Sens. Debbie Stabenow (D., Mich.) and John Boozman (R., Ark.) took money from FTX. They co-introduced a bill this past summer that would have given FTX a path toward regulatory compliance in the United States. FTX made maximum donations to Sens. Kirsten Gillibrand (D., N.Y.), Cory Booker (D., N.J.), Lisa Murkowski (R., Alaska) and Susan Collins (R., Maine), among others, as well as dozens of House candidates.
As of this writing, the extent to which members of the House Financial Services Committee may have been compromised by FTX is not yet known.
The nation’s appraisers have been the target of a similarly well-financed influence campaign – one as obvious as it has been clumsy. Its aim: to co-opt members of the 117th Congress and officials currently in the executive branch. The goal: To link the nation’s real estate appraisers – an important bulwark for taxpayers and investors against bogus collateral values in mortgage lending – to the culture wars playing out in other segments of society.
While the point of the FTX campaign may have been to silence debate on crypto-currency, the well-choreographed campaign against appraisers seeks to paint them as hopelessly biased and to delegitimize the sales comparison approach to value and its underlying bedrock principle of substitution. The goal is to replace these gatekeepers of value with computer models, waivers or to create something akin to a social score for collateral – affirmative action for buildings.
Eliminating human appraisers suits the nonbank mortgage lenders and so-called fintechs in their quest to originate loans and refinancings at high velocity and sell them to, or have them guaranteed by Fannie, Freddie and the FHA, i.e., the U.S. taxpayer. After Dodd-Frank, eliminating long-accepted valuation norms seems to have been identified as the easiest way to keep the party going.
Using the Federal Election Commission’s screening tool, author-appraiser Jeremy Bagott has compiled an Excel spreadsheet with over 43,000 small-dollar donations totaling more than $11 million from individual employees of nonbank lenders. You can view and download the Excel file here. Or you can run the filters yourself at the Federal Election Commission’s website. All of the information is public and available to anyone with a browser and a little time.
Many of the donations are in uneven amounts and many repeat donations were made at irregular intervals – as if created by a random-number generator. This becomes apparent when the data is sorted by donor and date in Excel.
Now that the damage is done, those caught flat-footed with the FTX lucre are scrambling to make amends. A spokesman for Sen. Gillibrand told the Wall Street Journal she has donated the money she received from Bankman-Fried to a nonprofit in the Bronx. Sen. Manchin said he has donated the ill-gotten gains to a food bank in West Virginia. Representatives for Boozman and Collins said they were planning to give the money to charity.
The damage done by this high-profile dumpster fire eclipses the $70 million one rascal – now standing naked in the low-tide zone – donated to politicians who sold out their constituents. The same might someday be said when valuations are eliminated in federally insured mortgages by the same group of bought politicians.
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