AMY GOODMAN: Our guest is David Cay Johnston, Pulitzer Prize-winning investigative journalist, has written the book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill). Juan?
JUAN GONZALEZ: Well, David Cay Johnston, the American home subprime crisis has been much in the news and the enormous impact itÂ’s having on the economy. YouÂ’ve got a few chapters here where you talk about the home and home robbery, and you even delve on an issue that very few people have ever talked about: title insurance companies and the enormous wealth transfer that have gone on there. Could you talk about that?
DAVID CAY JOHNSTON: Oh, sure. You know, when you buy a home — and I remember the first time I did it as a young man — you have this enormous sense of accomplishment, and you sit down in a room, and they throw all these papers at you —
“Sign this, sign this, initial this page, OK, sign this.” So when you’re all done, you get a little sheet listing all the costs you have, and you get dinged for $15 here and $25 there. But there’s one big item called land title insurance. If you buy a $200,000 house, it will probably cost you close to $1,000. Well, it turns out that ninety cents out of every dollar you are forced to pay for this goes to pay commercial bribes. And this goes on all throughout the industry all across the United States, and nobody is prosecuted for it.
And here’s what happens. Well, you wrote the check for the $1,000, the land title insurance companies, who are insuring the risk that someone will come along and say, “That’s really my piece of land,” or “I have the right to put an oil well in your backyard.
Here’s this document from 1848,” or your new outbuilding encroaches one inch onto the neighbor’s land, supposedly. That’s what you are insuring against. These companies’ real customers are the real-estate agent that you thought was representing you or the lawyer you paid to represent you or the mortgage broker who arranged to get you the mortgage, because they steer you to the title company. And in return, they get kickbacks.
The state insurance commissioners of California and Washington wrote very detailed reports about this, because one of the land title companies tried to spear the insurance commissioner of Colorado.
And thereÂ’s emails and tape-recorded conversations about a very Machiavellian plot to use the news media to a plant a question that would smear this woman. And what did the insurance commissioners say should be done after they found that 90 percent of this money is paid in kickbacks? And by the way, one of the big title companies, in its report to shareholders, says that its customers arenÂ’t you and me, when we buy a house; it says its customers are the bankers and the brokers and the lawyers.
Well, the insurance commissioners said what we need is an education program. We need to make sure that the land title companies know that they canÂ’t pay these kickbacks and referral fees, as theyÂ’re politely called. Well, if the education program worked, the cost of land title insurance would have dropped 90 percent. It hasnÂ’t. So itÂ’s another example of the kind of institutionalized corruption that I write about in Free Lunch that takes money from the many and concentrates it in the hands of the politically connected few.
"Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill)"
