Watchdog hopeful works for firm in big ’08 fiscal crisis
A city comptroller candidate is pulling a tidy salary from a company led by a Wall Street executive who came under fire for his role in the 2008 subprime mortgage crisis, the Daily News has learned.
State Sen. Brian Benjamin, who’s vying to become the city’s top fiscal watchdog in this year’s election, joined NextPoint Acquisition Corp.’s board of directors in July.
NextPoint’s CEO is Andrew Neuberger, a former Morgan Stanley executive who oversaw loans to subprime mortgage lenders while working at the storied Wall Street firm.
One of the mortgage companies Morgan Stanley floated cash to in the lead-up to the financial crisis under Neuberger’s supervision was New Century Financial Corp., which at the time was the largest independent provider of mortgages to people with poor credit histories.
Through its loans to
New Century, Morgan Stanley was providing it with the capital it needed to make even more subprime loans to home buyers, which in turn caused the housing bubble to balloon and eventually contributed to its collapse. The loans also backed up bonds Morgan Stanley issued, which turned out to be toxic investments and helped trigger the 2008 financial meltdown.
After New Century filed for bankruptcy in April 2007, the Federal Reserve had to loan Morgan Stanley $107 billion to keep it solvent.
But before all of that, in 2006, court documents show that Neuberger urged Morgan Stanley to continue sending loans to New Century totaling $250 million.
“We are their biggest lender and biggest buyer of loans for over 3 years running,” he wrote in an email to colleagues at the time. “I feel confident that we can manage this risk.”
Ultimately, that did not come to pass. And eventually Morgan Stanley was forced to pay $3.2 billion in a settlement with state and federal authorities.
The comptroller helps to oversee the city’s investment portfolio and provides oversight of the city’s finances. And having Benjamin preside over those responsibilities is now giving some political observers pause given his involvement with NextPoint.
“This is not a good sign,” said housing advocate Cea Weaver. “We’re sending negative incentives into the market when people support this. When you are the comptroller for the city of New York, you have a lot of financial influence. It matters.”
It also appears that through NextPoint, Neuberger intends to continue his focus on the subprime lending market once again.
“In our view, the consumer finance and non-prime sub-markets represent a considerable opportunity set and provide an opportunity to deploy capital and generate attractive returns for investors,” the company said in a prospectus it released in August.
The Canadian firm is a special purpose acquisition company, or SPAC, who’s primary purpose is to raise money through taking companies public and then using those earnings to purchase other companies.
According to public records, Benjamin is earning up to $50,000 a year as a NextPoint board member and acquired up to $250,000 in company stock. In addition to those earnings and assets, Benjamin makes $120,000 a year as a state senator.
“As part of his due diligence before joining the board, which included receiving clearance from the New York Legislative Ethics Commission, Brian confirmed that NextPoint has no intentions of investing in subprime mortgage lending,” Benjamin spokesman Neil Reilly said. “Brian has dedicated a significant portion of his life to creating affordable housing and his record as a pro-tenant legislator is clear.”
Reilly said NextPoint’s business is not focused on subprime mortgages, but declined to specify what its focus is.
Neuberger and NextPoint also did not return calls.
Benjamin’s campaign recently came under scrutiny for another controversy after several people listed in public records as campaign donors said they didn’t make donations at all. The news, which was first published in The City, prompted a campaign spokesman to promise to review the donations and return any that are found to be improper.
The lawmakeris facing off against fellow state Sen. Kevin Parker, Assemblyman David Weprin and City Councilman Brad Lander in the comptroller’s race.