Just hours after former investment banker Frank Pallotta announced the formation of an exploratory committee for a possible House bid, the Democratic Congressional Campaign Committee is calling the potential Republican candidate “the Subprime King of New Jersey.”
The DCCC alleges that Pallotta, a Mahwah businessman mulling a challenge to Rep. Josh Gottheimer (D-Mahwah), was the leader of a Wall Street effort to push risky subprime mortgage loans.
“When the housing bubble burst, thousands of hardworking New Jerseyans found themselves underwater on their mortgages and deeply in debt through no fault of their own,” said Mike Gwin, a spokesman for the DCCC. “The last thing we need in Washington is a guy like Frank Pallotta — the Subprime King of Jersey — who literally got rich ripping off struggling homeowners.”
Pallotta was a partner at Morgan Stanley, where he helped build a global mortgage business.
According to American Banker, Pallotta led mortgage origination efforts for Credit Suisse and then Morgan Stanley. These loans, the DCC says, encouraged irresponsible lending through high-interest loans.
After the housing crash, Morgan Stanley settled a complaint with the Justice Department for $3.2 billion for their part in the national mortgage crisis.
Republicans are actively seeking a self-funder to run against Gottheimer, the human fundraising machine.
A wealthy opponent is exactly what Gottheimer fears in a district that slightly favors Republicans, and the DCCC has been in rapid response mode in a bid to swat down any potential millionaire challenger.
Pallotta says that he was the co-founder of a start-up to help homeowners affected by the mortgage crisis after he retired from Wall Street in 2008. He says those efforts won him a Time Magazine Award for one of the 50 Best Inventions of 2010.
“If New Jersey families want to build a better future for their children, why would they want to turn to someone who was a key figure in one of the darkest periods in American history?” Gwin asked. “The Great Recession caused untold pain for millions of Americans, hundreds of thousands in New Jersey, costing them their homes, their jobs and their livelihoods. It would be the height of irony if Frank Pallotta, the “Subprime King,” now thinks New Jersey families should trust him to create jobs and strengthen the economy.”