[Dialogue] The Spitzer Case

[AWOODEWM at aol.com]

Here's a story with a twist.....In case you missed this article. I have to 
say that I am not familiar with Greg Palast but it does sound plausible

Anne Wood

The $200 billion bail-out for predator banks and Spitzer charges are 
intimately linked

 By Greg Palast
Reporting for Air America Radio's Clout
  
 Listen to Palast on Clout at www.GregPalast.com
 While 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 it's 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 chuck 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 a month 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. 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 hardy – 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 
Grinnings, 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 bail-out. 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 he federal government 
was turning a blind eye."
 Bush, said Spitzer 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."
 But now, the Administration can rest assured that this love story – of Bush 
and his bankers - will not be told by history at all – now that the Sheriff of 
Wall Street has fallen on his own gun.
 A note on "Prosecutorial Indiscretion."
 Back in the day when I was an investigator of racketeers for government, the 
federal prosecutor I was assisting was deciding whether to launch a case 
based on his negotiations for airtime with 60 Minutes. I'm not allowed to tell you 
the prosecutor's name, but I want to mention he was recently seen shouting, 
"Florida is Rudi country! Florida is Rudi country!"
 Not all crimes lead to federal bust or even public exposure. It's up to 
something called "prosecutorial discretion."
 Funny thing, this 'discretion.' For example, Senator David Vitter, 
Republican of Louisiana, paid Washington DC prostitutes to put him diapers (ewww!), yet 
the Senator was not exposed by the US prosecutors busting the pimp-ring that 
pampered him.
Naming and shaming and ruining Spitzer – rarely done in these cases - was 
made at the 'discretion' of Bush's Justice Department.
 Or maybe we should say, 'indiscretion.'
 ************
Greg Palast, former investigator of financial fraud, is the author of the New 
York Times bestsellers Armed Madhouse and The Best Democracy Money Can Buy.




**************
It's Tax Time! Get tips, forms, and advice on AOL Money & 
Finance.
      (http://money.aol.com/tax?NCID=aolprf00030000000001)
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://wedgeblade.net/pipermail/dialogue_wedgeblade.net/attachments/20080316/84144352/attachment-0001.html