Mike Hudson began reporting on the subprime mortgage business in the early 1990s when it was still a marginal, if ethically challenged, business. From his street-level perspective, he could see the abuses and asymmetries of the market in a way that the conventional business press could not. But because it appeared mostly in small publications, his reporting was largely ignored. Hudson pursued the story nationally, via a muckraking book, Merchants of Misery; in a 10,000-word expos√© on Citigroup-as-subprime-factory, which won a Polk Award in 2004 for the magazine Southern Exposure; and in a series on the subprime leader, Ameriquest, for the Los Angeles Times in 2005. He continued to pursue the subject as it metastasized into the trillion-dollar center of the Financial Crisis of 2008—briefly at The Wall Street Journal and now at the Center for Public Integrity. In 2010 he published The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America—and Spawned a Global Crisis. Hudson, 50, is the son of an ex-Marine who also was a legendary local basketball coach. He started out on rural weeklies, covering championship tomatoes and large fish, even producing a cooking column. But as a reporter for The Roanoke Times, he turned to muckraking and never looked back. CJR’s Dean Starkman interviewed Hudson in the spring of 2011. A longer version of their conversation is at cjr.org/feature/hudson.php.

Follow the ex-employees

I was doing a series on poverty in Roanoke, and one of the local legal aid attorneys said, “It’s not just the lack of money—it’s also what happens when they try to get out of poverty.” He said there are three ways out: They bought a house, so they got some equity; they bought a car, so they could get some mobility; or they went back to school to get a better job. And he had example after example of folks who, because they were doing that, had gotten deeper in poverty, trapped in unbelievable debt.

His clients often dealt with for-profit trade schools—truck-driving schools that would close down, medical-assistant schools that no one hired from. And they’d end up three, four, five, eight thousand dollars in debt, unable to repay it, and then of course be prevented from ever again going back to school because they couldn’t get another student loan. So that got me thinking about what I came to know as the poverty industry.

I applied for an Alicia Patterson Fellowship and proposed doing stories on check-cashing outlets, pawn shops, second-mortgage lenders (they didn’t call themselves “subprime” in those days). This was ’91. I came across a wire story about something called the Boston “second-mortgage scandal,” and got somebody to send me a thick stack of clips. It was really impressive. The Boston Globe and other news organizations were taking on the lenders and the mortgage brokers, and the closing attorneys, and on and on.

I was trying to make the story not just local but national. I had some local cases involving Associates [First Capital Corp., then a unit of Ford Motor Company]. Basically, it turned out that Ford, the old-line carmaker, was the biggest subprime lender in the country. The evidence was pretty clear that they were doing many of the same kinds of bait-and-switch salesmanship and, in some cases, pure fraud, that we later saw take over the mortgage market. I felt like this was a big story; this is the one! Later, investigations and congressional hearings corroborated what I was finding in ’94, ’95, and ’96. And it seems so self-evident now, but I learned that ex-employees often give you a window into what’s really going on with a company. The problem has always been finding them and getting them to talk.

Subprime goes mainstream

In the fall of 2002, the Federal Trade Commission announced a big settlement with Citigroup, which had bought Associates, and at first I saw it as a positive development, like they had nailed the big, bad actor. I’m doing a 1,000-word freelance thing, but as I started to report I heard from people who were saying that this settlement is basically giving Citigroup absolution, and allowing them to move forward with what was, by Citi standards, a pretty modest settlement. And the other thing that struck me was the media were treating this as though Citigroup was cleaning up this legacy problem, when Citi itself had its own problems. There had been a big New York magazine story about [Citigroup Chief Sanford I.] “Sandy” Weill. It was like “Sandy’s Comeback.” I saw this and said, “Whoa, this is an example of the mainstreaming of subprime.”

Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.