71°F
weather icon Clear

Former Trump adviser says ‘waitress in Las Vegas’ shares blame for recession

Updated September 19, 2018 - 11:16 pm

Gary Cohn, the former economic adviser to President Donald Trump, said this week that market speculators and lenders share the blame for the housing bubble that popped 10 years ago, devastating the local economy.

And to make his point, he jabbed a favorite punching bag of national pundits: the Las Vegas middle class.

“Who broke the law? I just want to know who you think broke the law,” Cohn said, as quoted by Reuters. “Was the waitress in Las Vegas who had six houses leveraged at 100 percent with no income, was she reckless and stupid? Or was the banker reckless and stupid?”

The former Goldman Sachs chief operating officer made the equivalence Monday at a Reuters Breakingviews discussion in New York on the financial crisis that was unleashed a decade ago this month, when Lehman Brothers collapsed amid surging subprime loan defaults.

Las Vegas was the epicenter of the housing boom and the Great Recession. Home values more than doubled, then fell as much as two-thirds. The collapse forced tens of thousands of people from their houses, through foreclosure, eviction and abandonment, displacing owners and renters alike. And Cohn’s remark reopened local wounds that still haven’t completely healed.

“He doesn’t want to take responsibility for his mistakes and is just looking to blame others,” said Paul Thistle, a UNLV finance professor, adding banks did not adhere to strong underwriting standards.

Too big to fail

Goldman, where Cohn worked for nearly 30 years, was among the banks that issued and underwrote mortgages and securities backed by subprime residential loans that played a major role in the crisis. Loans made to individuals with low credit scores are considered subprime and carry a higher interest rate than prime loans.

Goldman later bet against the U.S. housing market, sparing it from the type of massive losses suffered by other lenders like Bank of America. The government spent billions of dollars to help bail out banks like Goldman during the darkest days of the crisis.

Culinary Local 226, which represents 57,000 Nevada workers, including cocktail and food servers, pointed the blame back at bankers for encouraging and profiting from mortgage-backed securities.

“We don’t know of any workers who destroyed the U.S. economy with fraudulent esoteric credit products, but we hope that former and current Wall Street bankers like Mr. Cohn will remember and always be reminded of the great harm they caused to millions of homeowners and workers when they recklessly and irresponsibly sold all sorts of risky financial weapons of mass destruction and fattened their own wallets with fees, commissions, and bonuses while we the taxpayers, bailed out the big banks that were ‘too big to fail,’ ” union Secretary-Treasurer Geoconda Arguello-Kline said via email.

Douglas French, former executive vice president of lending at Nevada-based Silver State Bank, said, “There was plenty of hubris on both sides.”

Silver State Bank folded under the weight of bad real estate loans a week before Lehman’s collapse.

“Unfortunately, too many waitresses, bartenders and dealers left their jobs to become real estate agents and mortgage brokers, and a few trying their hand at real estate development or investment,” French said.

Dancer to real estate agent

Scarlett Grable, a former Tropicana showgirl dancer, became a Las Vegas real estate agent in 2003 after she could no longer perform on stage.

Grable said she saw dealers, waitresses and strippers buying homes with the hope of flipping them at a profit. Mortgage lenders did not carefully study borrowers’ financial situation to see if they could afford the payments, she said, because property values kept going up.

“The workers had the cash that the loan officer wanted to see. As long as they could put a significant amount of cash down, the mortgage lenders would overlook other issues,’’ she said.

Grable said she and her boyfriend at the time lost three homes and a Corvette during the crisis when they could not meet their payments.

She bought a home with a cash down payment of just 7.5 percent. The bank never asked for her tax filings, she said.

George Burns, commissioner of the Nevada Financial Institutions Division, said many actors played a role in the crisis. The government subsidized home borrowing with “artificially low interest rates,” while banks allowed companies and individuals to borrow more than 100 percent of property values. And homebuilders kept pumping out new projects.

“Everyone was reaping reward in this equation, but no one considered the risk of making low-interest-rate loans to Las Vegas waitresses at over 100 percent loan-to-value. All of the parties involved in the crisis had responsibility, but they all have blamed the other for it,” Burns said.

Contact Todd Prince at 702-383-0386 or tprince@reviewjournal.com. Follow @toddprincetv on Twitter.

Don't miss the big stories. Like us on Facebook.
Business Videos
How much do Las Vegas casino CEOs make?
Las Vegas gaming CEOs made anywhere between $1 million and $24 million last year, according to company filings with the U.S. Securities and Exchange Commission. ((Las Vegas Review-Journal)
30-year-old Rio needs a little TLC
Nearly 30 years after the Rio opened, the red and blue jewel that helped catapult Las Vegas to a new level with its buffet and nightclub has lost its status along with its shine.
The latest on the Drew Las Vegas - VIDEO
Eli Segall recounts his tour of the Drew Las Vegas, formerly the Fontainebleau, on the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
Pinball Hall of Fame to move near south Strip
Operators of the Pinball Hall of Fame have been approved to build a new, larger arcade near the south edge of the Strip on Las Vegas Boulevard near Russel Road. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
National Hardware Show underway Las Vegas
The National Hardware Show kicked off Tuesday at the Las Vegas Convention Center (Mat Luschek / Review-Journal)
Caesars for sale?
Caesars Entertainment Corp. has been swept up in takeover speculation since the company’s share price tumbled last year amid disappointing earnings and concerns over a recession. Amid the decline, hedge funds scooped up shares. Billionaire activist investor Carl Icahn began buying shares of Caesars as early as January. Icahn acquired nearly 18 percent by mid-March. In February Icahn called on the Caesars board to study a sale as a way to boost shareholder value.
Las Vegas home prices
Las Vegas home prices grew fastest among major markets in February for the ninth straight month. But amid affordability concerns, the growth rate has slowed down. Southern Nevada prices in February were up 9.7% from a year earlier, according to the latest S&P CoreLogic Case-Shiller index. The last time Las Vegas' price growth fell below 10% was in September 2017, S&P Dow Jones Indices reported.
Free Parking Coming To Wynn
Free parking will come to the Wynn and Encore resorts on May 1, 2019. (Mat Luschek / Review-Journal)
Founding Venetian employees talk about 20 years at the Strip resort
The Venetian, which opened May 3, 1999, is celebrating 20 years on the Las Vegas Strip. Seven original employees talk about opening the luxury resort and working there for two decades. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Circa aiming for December 2020 opening
The 1.25-million-square-foot property will have 44-stories and 777-rooms. It will also have a separate nine-story, 1,201-space parking garage.
Boxabl official explains the building concept
Boxabl business development manager Galiano Tiramani shows off a room built by his company. (Blake Apgar/Las Vegas Review-Journal)
TI/Mirage Tram reopens
The tram that shuttles guests between TI and Mirage reopened this week after being closed for much of 2018.
Las Vegas Convention Center expansion taking shape
Renderings and actual footage show how the Las Vegas Convention Center is evolving.
Former Starbucks CEO Howard Schultz at Las Vegas convention
Former Starbucks CEO and potential presidential candidate Howard Schultz spoke at the Epicor Insights user conference at Mandalay Bay Convention Center Wednesday, April 17, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Drew Las Vegas to open in the second quarter of 2022
The 67-story Drew Las Vegas is slated to open in the second quarter of 2022 at the north end of the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
NAB Day 1 (Time Lapse)
NAB kicked off at the Las Vegas Convention Center on Monday, April 8, 2019. (Mat Luschek / Review-Journal)
National Association of Broadcasters Show shows 1mm thick 8K TV with 22.2 channel digital sound
Japan’s NHK Science & Technology Research Laboratories booth featured a 1mm thick 8K TV system used in conjunction with a 22.2 channel digital sound system at the National Association of Broadcasters Show at the Las Vegas Convention Center. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Nevada shoppers react to Smith’s no longer accepting Visa credit cards
On March 1, Smith’s announced that it would no longer be accepting Visa credit cards at any of its 142 supermarkets, including the 45 in Nevada.
Massachusetts Gaming Commission asks how long Wynn executives knew about misconduct
Business reporter Rick Velotta gives an update on the adjudicatory hearing on the suitability of Wynn Resorts to retain its gaming license in Massachusetts.
Henderson app developer part of Startup in Residence
Henderson based developers of the app On Point Barricade are taking part in Startup in Residence, a North America program dedicated to pairing tech companies with governments. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Sam's Town employees and customers talk of their love for the iconic casino
Longtime Sam's Town employees and customers love each other and love their casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Las Vegas apartments rents
Las Vegas’ apartment market has accelerated in recent years. Developers are packing the suburbs with projects, landlords are on a buying spree, and tenants have filled buildings.
William Boyd talks about the birth of Sam's Town
On the eve of the 40th anniversary of Sam's Town, William Boyd, executive chairman of Boyd Gaming and son of hotel namesake Sam Boyd, talks about how the casino became one of the first local properties in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
High Roller observation wheel turns five
The world’s tallest observation wheel celebrates it’s fifth year on Sunday, March 31, 2019. (Michael Quine/Las Vegas Review-Journal) @Vegas88s
Escape Room Industry Growing In Las Vegas
Escapology employees discuss the growing escape room industry in the U.S. and Las Vegas. (Bailey Schulz/Las Vegas Review-Journal)
Impact of parking fees on visiting the Las Vegas Strip
There are no data showing a relationship between Strip resort and parking fees and the number of out-of-state visitors to Las Vegas. But there are data showing a relationship between Strip parking fees and the number of local visitors to the the Strip. ‘’As a local, I find myself picking hotels I visit for dinner or entertainment, based on whether they charge for parking or not,”’ said David Perisset, the owner of Exotics Racing. ‘’It is not a matter of money, more of principle.’’ A 2018 survey by the Las Vegas Global Economic Alliance found 36.9 percent of Clark County residents reported avoiding parking at Strip casinos that charge for parking. 29.1 percent reported avoiding using any services from a Strip casino that charges for parking.
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Faraday puts Las Vegas land on the market
Nearly two years after Faraday Future bailed on its North Las Vegas auto factory, the company has put its land up for sale. (Michael Quine/Las Vegas Review-Journal)
El Cortez owner Kenny Epstein on running the iconic property
Kenny Epstein, owner of the El Cortez Hotel in downtown Las Vegas, talks about Jackie Gaughan mentorship and answers rumors about bodies in the basement at the mob-era casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
LVCVA recommends construction of underground people mover
The Las Vegas Convention and Visitors Authority announced the recommendation for an underground people mover for the convention center. The system would have the potential to expand and connect Downtown and the resort corridor all the way to McCarran. (Michael Quine/ Las Vegas Review-Journal)
THE LATEST
Lucky Dragon’s foreign investors demand refund

The Lucky Dragon’s developers and prior management are facing lawsuits from Chinese investors, the project’s main lender and a Canadian high-roller who paid a $400,000 deposit to lease the casino just one month before it abruptly closed.

Trump removes tariffs on Mexico, Canada, delays auto tariffs

President Donald Trump took steps Friday to ease tensions with America’s allies — lifting import taxes on Canadian and Mexican steel and aluminum and delaying auto tariffs that would have hurt Japan and Europe.

Boeing finishes software update for grounded 737 Max jet

Boeing says it has finished updates to the flight-control software implicated in two deadly crashes involving its 737 Max, moving a step closer to getting the plane back in the sky.