The self-made billionaire Roland Arnall was a pioneer of sub-prime mortgages in the US, the collapse of which industry led to the present credit squeeze in the West and huge banking uncertainty. The reverberations of the sub-prime disaster have been felt in the collapse and takeover by the State of the Northern Rock bank in Britain and the failure of the Bear Stearns investment bank in the US, bought for a song by its rival JP Morgan Chase last week.

Arnall was also a philanthropist, one of the biggest donors to the Republican Party and, latterly, a diplomat, being appointed US Ambassador to the Netherlands in February 2006. He was also a founding co-chairman and trustee of the Simon Wiesenthal Centre, the Jewish human rights organisation which has its headquarters and its Museum of Tolerance in Los Angeles.

But it is for his role in promoting the lending of money at high rates of interest to millions of Americans with poor credit ratings for which Arnall will chiefly be remembered. His lending company, Ameriquest Mortgage, used databases to identify customers and joined forces with Wall Street businesses that provided the funds and bundled his loans into mortgage-backed bonds. The company, and its wholesale sister, Argent Mortgage, became America’s biggest sub-prime lenders. They advertised on television and sponsored Super Bowl half-time shows and a Rolling Stones tour.

Ameriquest’s logo was the Liberty Bell, but the business that styled itself the proud sponsor of the American dream was increasingly accused of operating “boiler rooms” of agents who persuaded borrowers to take out loans that they could ill afford with fees buried in the small print and interest rates higher than promised.

The number of borrowers’ complaints mounted, and in 2006 no fewer than 49 state attorney-generals launched class-action suits charging the company with using “bait and switch” schemes to cheat borrowers into taking out costlier loans than they seemed. Ameriquest agreed to pay $325 million (£161 million) to settle the accusations of predatory lending while admitting no wrongdoing. It agreed to a number of reforms but was forced to close 229 branches and make 3,800 employees redundant. Only five call centres remained, and Ameriquest was sold to Citigroup last year. The parent company, ACC Capital Holdings Corp, of Orange, California, remained in business but had little or no involvement in mortgages. Arnall ceased to be its chairman in 2005.

The US Congress had had to postpone his long-awaited appointment as Ambassador at The Hague until the matter was resolved, and lawyers representing some borrowers were threatening to pursue Arnall personally for compensation.

Roland Edmond Arnall was born in Paris in 1939 to East European Jewish parents who had fled to the French capital and was brought up as a Roman Catholic to evade the Nazi deportations to the death camps. His father was a tailor and his mother a nurse. In 1953 the family emigrated to Montreal and in 1957 they moved to California. The young Arnall began his business life by selling flowers on street corners in Los Angeles.

He began investing in property in the 1970s and expanded into financial services, oil and technology. He saw a niche market among those unable to get bank loans through traditional methods and provided them with the money by aggressive selling techniques. In 1979 he founded the Long Beach Savings and Loan company which became Ameriquest in 1994 and eventually America’s largest sub-prime mortgage provider.

It was one of the first businesses to use computers to seek out prospective borrowers. In a single year it generated loans worth $83 billion. At one point Forbes magazine ranked Arnall the 73rd-richest man in the US with an estimated worth of $3 billion. But rising interest rates led to a steady increase in the number of defaults by borrowers unable to pay, the business found itself in trouble and in 2007 the bubble burst.

Earlier this month Arnall had stepped down from his ambassadorial post at The Hague in order to be with his ailing son, Daniel, who was suffering from Hodgkin’s disease, cancer of the lymph nodes.

Arnall and his wife, Dawn — at one point co-chief executive officer of Ameriquest — were generous Republican benefactors. They were among the top ten donors to the party during the 2003-04 presidential campaign and gave $1 million to President Bush’s inauguration party. They also donated at least $1.5 million to the political ventures of Arnold Schwarzenegger, the Governor of California.

Arnall is survived by his second wife, Dawn, and his son and daughter.

Roland Arnall, businessman, philanthropist and diplomat, was born in 1939. He died of cancer on March 17, 2008, aged 68