Who’s Behind the Financial Meltdown?

Published — May 6, 2009 Updated — May 19, 2014 at 12:19 pm ET

No. 3 of The Subprime 25: New Century Financial Corp.

Introduction

Total high-interest loans 2005-2007:

At least $75.9 billion

Federal bailout money received:

None

Company overview

  • Status: CLOSED. Filed for bankruptcy protection April 2, 2007. New Century’s mortgage billing and collections unit was sold to Carrington Capital Management, LLC, for $188 million.
  • History: Founded by three subprime industry veterans, New Century went public in 1997, survived the subprime crash of the late 1990s, and rocketed to the top in less than a decade. Its collapse was swift. On February 7, 2007, the company announced it would be restating its earnings for the first three quarters of 2006. On March 2, the company said it would not file its annual report on time. New Century stopped accepting loan applications on March 8 and the New York Stock Exchange delisted its securities on March 13. On April 2, it filed for bankruptcy protection. An investigative report commissioned by the United States Trustee overseeing the bankruptcy case described a “brazen obsession with increasing loan originations, without due regard to the risks associated with that business strategy.” It said the company made loans in “an aggressive manner that elevated the risks to dangerous and ultimately fatal levels.”
  • Parent/subsidiary companies:
  • CEO: Founder/CEO: Robert K. Cole (Brad Morrice replaced Cole in 2006 and led the company until his termination in June 2007)
    • Most recent salary: 2005 — $569,250 salary; $1,070,235 bonus
  • Location: Irvine, California
  • Year founded: 1995
  • Backers: Goldman Sachs Mortgage Company, Morgan Stanley Mortgage Capital, Bank of America, Citigroup Global Markets Realty, and Residential Funding Corporation are among the firms listed in the top 50 unsecured creditors in New Century’s bankruptcy petition. In an SEC filing, New Century said it was supported by $14.1 billion in credit from banks including Bank of America, Barclays, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, and UBS to finance its loan originations.

Lobbying overview

  • Lobbying: 2004-2008: New Century reported spending $1.9 million in lobbying expenditures. **
  • Total Contributions: At least $924,967 *
  • Top Recipients:
    1. National Republican Congressional Committee $61,300
    2. Democratic Congressional Campaign Committee $50,000
    3. Former Representative Robert Ney, R-Ohio $46,900
    4. Representative Paul Kanjorski, D-Pennsylvania $44,095
    5. Representative Joseph Crowley, D-New York $42,542

** Lobbying totals calculated by the Center for Public Integrity using data from the Senate Office of Public Records.

* Contribution grand total includes employee and soft money contributions from the lender and its subsidiaries. Top recipient totals include employee and political action committee contributions. Data provided by CQ Money Line, analysis by the Center for Public Integrity.

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