Ever since the Sandlers started their Oakland-based Golden West Financial in 1963, which they grew into 285 branches under the name World Savings, the Sandlers were hailed for their careful, conservative lending. World Savings was voted the nation’s most admired mortgage services company three times by Fortune magazine in 2003, 2005, and, finally, in 2006. It was in 2006, just before the housing crash, that the Sandlers sold their bank to Wachovia and earned $2.3 billion for themselves.
The Sandlers, who at one point lived in the Lafayette/Moraga area, got out of the banking business, they said, in part so that they could focus on directing their fortune to progressive causes, sometimes in association with Democrat philanthropist George Soros.
In November 2007, the Sandler family foundation put $10 million into establishing ProPublica with Herb Sandler serving as ProPublica's board chairman.
On the face of it, Pro Publica is an extremeley worthy foundation, and there's a part of me that has job envy over those who get to work there. ProPublica describes itself as "an independent, non-profit newsroom that produces investigative journalism in the public interest. Our work focuses exclusively on truly important stories, stories with 'moral force."
ProPublica is trying to perform the sort of investigative journalism that was a regular feature of reputable news organizations, but whose budgets for such projects have been slashed in the current dismal news climate. ProPublica has also carried out projects in conjunction with news organizations, such as 60 Minutes.
Now the Sandlers are being vilified and profiled by established news organizations, including, ironically, 60 Minutes, as possibly ruthless home lenders who helped destroy Wachovia and lead our nation into financial ruin. The main engine of their alleged ruthlessness? Being the first bank in the country, back in the 1980s, to sell the tricky ARM home loan option.
The criticism of the Sandlers has been mounting for months. The U.S. Attorney’s Office in San Francisco announced dual inquires into whether World Savings engaged in predatory lending practices or misled investors about its financial well-being. This criticism culminated recently with a 60 Minutes probe, which aired last Sunday, and Time magazine naming the Sandlers to its list of 25 individuals to blame for the recession.
Time magazine says: “the Sandlers’ World Savings pushed adjustable rate mortgage options with increasing zeal and misleading advertisements over two decades . … Losses on World Savings’ loan portfolio led to the implosion of Wachovia which was sold under duress late last year to Wells Fargo.
A columnist for the Pittsburgh Tribune Review added that “one additional feature of these mortgages pioneered by the Sandlers was called ‘Pick-A-Pay’ This allowed borrowers to choose to pay unusually low monthly payments with their obligations being pushed back and made part of the principal of the loan. This was financially perilous, especially when the housing crash came.”
The Sandlers reportedly now live in San Francisco where their family foundation is based.
(As an aside: I recently heard an interesting anecdote about Marion Sandler. It has to do with how she didn’t think Campolindo High School in Moraga was good enough for her kids. She and Herb then lived in the Campolindo High boundary area, so she approached an administrator with the Acalanes Union High School District about letting her kids attend Miramonte High School in Orinda, which for a long time had been considered the most high-achieving public high school in the East Bay suburbs—though Campo and Miramonte are pretty close in the latest round of state API scores.)
The Sandlers have fought back against the criticism, notably in an October 5 interview with the Associated Press. Herb Sandler, 77, told the AP: “We are being treated unfairly.” The only thing upon which he agrees with his critics is that he and Marion, who were the company's co-chief executives for more than 40 years, “couldn't have picked a better time to sell the company” when they sold their bank to Wachovia in October 2006, the AP reported.
Sandler said that World's pick-a-pay loans “were made under the same qualifying standards that had been in effect during the previous 25 years when the savings and loan's losses were among the lowest in the industry and the Sandlers were consistently praised for their prudence.
“We had a great track record for 40 years," he told the AP. "If this product was so dangerous, how could that be? There is something anomalous about that, isn't there?”