Little pecker may have been pecking on the wrong tree. Do we smell a rovian rat? How about the clanking of chenes?
http://www.gregpalast.com/elliot-spitzer-gets-nailed/Eliot’s Mess
Published March 14, 2008
Greg Palast
Reporting for Air America Radio’s Clout
March 14th, 2008
Palast text continues below but here is the url to Spitzer Washington post text:
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783_pf.htmlWhile New York Governor Eliot Spitzer was paying an ‘escort’ $4,300 in a hotel room
in Washington, just down the road, George Bush’s new Federal Reserve Board Chairman,
Ben Bernanke, was secretly handing over $200 billion in a tryst with mortgage bank
industry speculators.
Both acts were wanton, wicked and lewd. But there’s a BIG difference. The Governor
was using his own checkbook. Bush’s man Bernanke was using ours.
This week, Bernanke’s Fed, for the first time in its history, loaned a selected
coterie of banks one-fifth of a trillion dollars to guarantee these banks’
mortgage-backed junk bonds. The deluge of public loot was an eye-popping windfall to
the very banking predators who have brought two million families to the brink of
foreclosure.
Up until Wednesday, there was one single, lonely politician who stood in the way of
this creepy little assignation at the bankers’ bordello: Eliot Spitzer.
Who are they kidding? Spitzer’s lynching and the bankers’ enriching are intimately
tied.
How? Follow the money.
The press has swallowed Wall Street’s line that millions of US families are about to
lose their homes because they bought homes they couldn’t afford or took loans too
big for their wallets. Ba-LON-ey. That’s blaming the victim.
Here’s what happened. Since the Bush regime came to power, a new species of loan
became the norm, the ‘sub-prime’ mortgage and its variants including loans with
teeny “introductory” interest rates. From out of nowhere, a company called
‘Countrywide’ became America’s top mortgage lender, accounting for one in five home
loans, a large chunk of these ‘sub-prime.’
Here’s how it worked: The Grinning Family, with US average household income, gets a
$200,000 mortgage at 4% for two years. Their $955 monthly payment is 25% of their
income. No problem. Their banker promises them a new mortgage, again at the cheap
rate, in two years. But in two years, the promise ain’t worth a can of spam and the
Grinnings are told to scram - because their house is now worth less than the
mortgage. Now, the mortgage hits 9% or $1,609 plus fees to recover the “discount”
they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. The
Grinnings move into their Toyota.
Now, what kind of American is ‘sub-prime.’ Guess. No peeking. Here’s a hint: 73% of
HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of
similar-income Whites. Dark-skinned borrowers aren’t stupid – they had no choice.
They were ‘steered’ as it’s called in the mortgage sharking business.
‘Steering,’ sub-prime loans with usurious kickers, fake inducements to over-borrow,
called ‘fraudulent conveyance’ or ‘predatory lending’ under US law, were almost
completely forbidden in the olden days (Clinton Administration and earlier) by
federal regulators and state laws as nothing more than fancy loan-sharking.
But when the Bush regime took over, Countrywide and its banking brethren were told
to party hearty – it was OK now to steer’m, fake’m, charge’m and take’m.
But there was this annoying party-pooper. The Attorney General of New York, Eliot
Spitzer, who sued these guys to a fare-thee-well. Or tried to.
Instead of regulating the banks that had run amok, Bush’s regulators went on the
warpath against Spitzer and states attempting to stop predatory practices. Making an
unprecedented use of the legal power of “federal pre-emption,” Bush-bots ordered the
states to NOT enforce their consumer protection laws.
Indeed, the feds actually filed a lawsuit to block Spitzer’s investigation of ugly
racial mortgage steering. Bush’s banking buddies were especially steamed that
Spitzer hammered bank practices across the nation using New York State laws.
Spitzer not only took on Countrywide, he took on their predatory enablers in the
investment banking community. Behind Countrywide was the Mother Shark, its funder
and now owner, Bank of America. Others joined the sharkfest: Goldman Sachs, Merrill
Lynch and Citigroup’s Citibank made mortgage usury their major profit centers. They
did this through a bit of financial legerdemain called “securitization.”
What that means is that they took a bunch of junk mortgages, like the Grinning’s,
loans about to go down the toilet and re-packaged them into “tranches” of bonds
which were stamped “AAA” - top grade - by bond rating agencies. These gold-painted
turds were sold as sparkling safe investments to US school district pension funds
and town governments in Finland (really).
When the housing bubble burst and the paint flaked off, investors were left with the
poop and the bankers were left with bonuses. Countrywide’s top man, Angelo Mozilo,
will ‘earn’ a $77 million buy-out bonus this year on top of the $656 million - over
half a billion dollars – he pulled in from 1998 through 2007.
But there were rumblings that the party would soon be over. Angry regulators, burned
investors and the weight of millions of homes about to be boarded up were causing
the sharks to sink. Countrywide’s stock was down 50%, and Citigroup was off 38%, not
pleasing to the Gulf sheiks who now control its biggest share blocks.
Then, on Wednesday of this week, the unthinkable happened. Carlyle Capital went
bankrupt. Who? That’s Carlyle as in Carlyle Group. James Baker, Senior Counsel.
Notable partners, former and past: George Bush, the Bin Laden family and more
dictators, potentates, pirates and presidents than you can count.
The Fed had to act. Bernanke opened the vault and dumped $200 billion on the poor
little suffering bankers. They got the public treasure – and got to keep the
Grinning’s house. There was no ‘quid’ of a foreclosure moratorium for the ‘pro quo’
of public bailout. Not one family was saved – but not one banker was left behind.
Every mortgage sharking operation shot up in value. Mozilo’s Countrywide stock rose
17% in one day. The Citi sheiks saw their company’s stock rise $10 billion in an
afternoon.
And that very same day the bail-out was decided – what a coinkydink! – the man
called, ‘The Sheriff of Wall Street’ was cuffed. Spitzer was silenced.
Do I believe the banks called Justice and said, “Take him down today!” Naw, that’s
not how the system works. But the big players knew that unless Spitzer was taken
out, he would create enough ruckus to spoil the party. Headlines in the financial
press – one was “Wall Street Declares War on Spitzer” - made clear to Bush’s
enforcers at Justice who their number one target should be. And it wasn’t Bin Laden.
It was the night of February 13 when Spitzer made the bone-headed choice to order
take-out in his Washington Hotel room. He had just finished signing these words for
the Washington Post about predatory loans:
“Not only did the Bush administration do nothing to protect consumers, it embarked
on an aggressive and unprecedented campaign to prevent states from protecting their
residents from the very problems to which the federal government was turning a blind
eye.”
Bush, Spitzer said right in the headline, was the “Predator Lenders’ Partner in
Crime.” The President, said Spitzer, was a fugitive from justice. And Spitzer was in
Washington to launch a campaign to take on the Bush regime and the biggest financial
powers on the planet.
Spitzer wrote, “When history tells the story of the subprime lending crisis and
recounts its devastating effects on the lives of so many innocent homeowners the
Bush administration will not be judged favorably.”
snip
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