Eliot Spitzer and the $200 billion dollar bail-out - Greg Palast
Posted March 15th, 2008 by JohnGalt300
output
Macon, Ga. - 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 the 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 in 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.
Bookmark/Search this post with:
No one is defending Spitzer in this article...!
This article was about the illegal actions of the Fed, Bush, and predatory bankers. Spitz was no angel but in this one instance... he stood on the side of what was right.
Semper Fortis
Oh Puh - leeeze!
This whole article is one huge Spitzer love fest. After reading it, I feel like one of Spitzer's concubines.
"... there was one single, lonely politician who stood in the way of this creepy little assignation at the bankers’ bordello: Eliot Spitzer."
"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."
"...the man called, ‘The Sheriff of Wall Street’ was cuffed. Spitzer was silenced."
"...Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet."
"The Governor was using his own checkbook. Bush’s man Bernanke was using ours."
Gimme a break. The only thing missing in the article is the Governor's cape and his white horse. Of course, there's no mention of how all this rooting out of corruption was done by completely skirting, and sometimes just outright ignoring of the law.
Lastly, as I mentioned in a previous post, I am no fan of the Bankers here. Their involvement was despicable. But "predatory" bankers?? Uhh ... tell you what, next time you want to admonish the bankers for praying on some unfortunate "victim" by "steering" him to take below market loans, steer them over to my place. I'll volunteer to be their next victim. Deal??
I take my marching orders from the Constitution!
i don't think spitzer was any good either
Fortune Favors the Bold
but i agree with Ron Paul's sentiment, and do question the timing
No one has touched upon the REAL irony here ...
The real irony is that the real victims in this whole sordid "affair" are the only ones no one is feeling sorry for. The Democrats feel sorry for Spitzer and his family, the Republicans feel sorry for the Bankers and Wall Street, and the vast majority of the American public feel sorry for the blacks and Hispanics that got "steered" into accepting mortgages they couldn't afford. Hello???
The dirty little truth is that the REAL victims were, once again, (surprise surprise) the white middle class. It is this group that never had the opportunity to get mortgages below market rate during those fast years - no, they actually had to QUALIFY for their loans. And it is this group that will eventually pay to bail out ALL the criminals and idiots that were "victimized". Make no mistake, the blacks and Hispanic "victims" WILL be bailed out, and the white middle class will pay for it. And finally, it is this group, composed of huge numbers of people that just want to be left alone, that will suffer even more invasions of their privacy to root out all these "evildoers".
The subprime mortgage debacle was truly a travesty. Don't hold your breath waiting for relief for the REAL victims, though.
I take my marching orders from the Constitution!
Did The Idaho Senator Resign Yet ?
Been what now ... a year?
Certainly longer than the two days it took to roast Spitzer.
Not all sex scandals are created equaly.
I guess passions like Larry's are okay to overlook?
http://craig.senate.gov/k...
Ron Paul weighs in
Fortune Favors the Bold
http://www.politico.com/b...
Rep. Ron Paul (R-Texas), he of the quixotic GOP presidential campaign and unique policy positions, is never one to be shy about his opinions. Take the case of fallen New York Gov. Eliot Spitzer (D), whose political career fell apart this week after his liaisons with high-priced call girls became public. Spitzer resigned his office effective Monday.
Most politicians from both sides of the aisle publicly (at least) offered condolences for Spitzer and his poor family, including his three daughters, but didn't — of course — defend Spitzer's atrocious behavior.
But for Paul, Spitzer's downfall at the hands of a Justice Dept. investigation shows government at its worst. Yes, Spitzer climbed to power on the backs of political enemies he destroyed, making him not a swell guy, but he didn't deserve what happened to him. The FBI should have never been allowed to listen in to his phone call in the first place, according to the Texas Republican.
Here's the statement Paul made on the House floor last night. It's worth reading, at least for the enlightenment it gives into Paul's view of the world, which basically comes down to who controls the money:
"Madam Speaker, it has been said that 'he who lives by the sword shall die by the sword.' And in the case of Eliot Spitzer, this couldn't be more true. In his case it's the political sword, as his enemies rejoice in his downfall. Most people, it seems, believe he got exactly what he deserved.
"The illegal tools of the state brought Spitzer down, but think of all the harm done by Spitzer in using the same tools against so many other innocent people. He practiced what could be termed 'economic McCarthyism,' using illegitimate government power to build his political career on the ruined lives of others.
"No matter how morally justified his comeuppance may be, his downfall demonstrates the worst of our society. The possibility of uncovering personal moral wrongdoing is never a justification for the government to spy on our every move and to participate in sting operations.
"For government to entice a citizen to break a law with a sting operation — that is, engaging in activities that a private citizen is prohibited by law from doing — is unconscionable and should clearly be illegal.
"Though Spitzer used the same tools to destroy individuals charged with economic crimes that ended up being used against him, gloating over his downfall should not divert our attention from the fact that the government spying on American citizens is unworthy of a country claiming respect for liberty and the Fourth Amendment.
"Two wrongs do not make a right. Two wrongs make it doubly wrong.
"Sacrifice of our personal privacy has been ongoing for decades but has rapidly accelerated since 9/11. Before 9/11, the unstated goal of collecting revenue was the real reason for the erosion of our financial privacy. When 19 suicidal maniacs attacked us on 9/11, our country became convinced that further sacrifice of personal and financial privacy was required for our security.
"The driving force behind this ongoing sacrifice of our privacy has been fear and the emotional effect of war rhetoric — war on drugs, war against terrorism and the war against Third World nations in the Middle East who are claimed to be the equivalent to Hitler and Nazi Germany.
"But the real reason for all this surveillance is to build the power of the state. It arises from a virulent dislike of free people running their own lives and spending their own money. Statists always demand control of the people and their money.
"Recently we've been told that this increase in the already intolerable invasion of our privacy was justified because the purpose was to apprehend terrorists. We were told that the massive amounts of information being collected on Americans would only be used to root out terrorists. But as we can see today, this monitoring of private activities can also be used for political reasons. We should always be concerned when the government accumulates information on innocent citizens.
"Spitzer was brought down because he legally withdrew cash from a bank — not because he committed a crime. This should prompt us to reassess and hopefully reverse this trend of pervasive government intrusion in our private lives.
"We need no more Foreign Intelligence Surveillance Act! No more Violent Radicalization & Homegrown Terrorism Prevention Acts! No more torture! No more Military Commissions Act! No more secret prisons and extraordinary rendition! No more abuse of habeas corpus! No more Patriot Acts!
"What we need is more government transparency and more privacy for the individual!"
ironically
The government always has a distraction tactic.Have you ever wondered why the presidential debates always coincided with an american idol special ?
Greg Palast is a shill!
Spitzer's father is a NYC real estate billionaire.
During the trial between Larry Silverstein and the insurance company for the World Trade Center disaster Spitzer filed a "friend of the court" brief on Silverstein's behalf.
What?!
This guys is a martyr?!
Some kind of freedom fighter?
A group of the families of the victims and noted members of society formally applied to Spitzer's office to request the NY AG to investigate 9/11. He never even answered them! Never even acknowledged their request. An assistant AG took the letter personally!
This thug was the Attorney General for the State of New York on September 11, 2001. He ignored the biggest crime scene violation in the history of this country.
He has been using hookers for the better part of 25 years. The office for the United States Attorney for the district of New York has known about the hookers for years. The state Attorney General's office has known about the hookers for years. The New York State Police has known about the hookers for years. The NYC media has known. He was being black mailed with his hooker addiction when he was the attorney general.
His reputation as an a%$hole is a mile wide. Bush took him down? Spitzer covered Bush throughout the entire event.
This guy is a billionaire scumbag who would sell his mother for $26 and a BJ.
A martyr?! What the hell are you talking about?!
This is disinformation. Spend two minutes researching this piece of sh%$ and you will reach the same conclusion. He is a shill...get used to it they are everywhere.
What?!
He was the attorney general on 9/11 HE BLOCKED THE FU%$#ING INVESTIGATION FOR GOD'S SAKE....GET IT RIGHT.
Good post, reading between the lines
that we are always fed. Since when do you do loans without asking for any type of proof of income ? I knew these loans that were being handed out like they were candy, were suspicious from the beginning. This mess was not a mistake, it was planned. The Grinning family are not grinning anymore, I'm sure, maybe will be out in the street soon. Victims?, maybe not just got sucked in the American dream being offered for almost nothing. As far as Mr. Spitzer goes, questionable character or not, victim or preditor or hero for trying to expose crimes, who knows for sure----but when all that is coming out in the open now, there are alot of people getting thrown under the bus, and it looks like it will get alot more nasty as things implode. In desperation to cover up the crimes that have taken place, it is going to be the wild,wild,West----it will be the domino effect, and who will be the last man standing?
Hold on a minute here
Painting the slime ball Eliot Spitzer as some paragon of virtue and a defenseless victim of the Bush flunkees, leaves me a little frosted. Give me a break. I'm starting to worry that the Ron Paul movement is swinging way too far to the left. Hitching the movement to the saying "The enemy of my enemy is my friend" is a very dangerous tactic. The fact that he spent the majority of his political capital trying to take down Wall Street types doesn't make him a Ron Paul Revolutionary. Make no mistake - this guy was no friend of freedom. His next target was likely to be gunowners. How quickly we have forgotten "driver's licenses for illegal aliens". This guy only had motives to serve himself and his party.
And please stop painting blacks and Hispanics as victims here also. No one held a gun to their heads as they signed mortgage contracts that they knew they couldn't afford. And here's the real irony. Do you recall "red-lining"? This was the supposed tactic of mortgage companies in the 1990's to keep blacks and Hispanics from obtaining mortgages, when in truth the practice was simply to keep people that couldn't afford mortgages from obtaining them. Well the "black leadership" got wind of this, and demanded that the practice be abandoned. Well, they got their way and the subprime mortgage industry was born. Now the same S.O.B.'s that demanded these mortgages 15 years ago are the one's today bitching the loudest about "predatory" lending practices. What a joke. If you're too stupid to avoid buying a mortgage that a 10 year old could see that you simply couldn't afford then I say too bad so sad. Why should my taxpayer dollars subsidize your idiocy.
Am I excusing the bankers? Absolutely not. Giving them a $200 billion "loan" to tide them through these "hard times" is the ultimate cold slap in the taxpayers face, but I'll stop short of labeling the mortgage borrowers "victims", thank you. Everyone involved in this despicable charade, whether they're criminals or idiots, should suffer, if you want my opinion. Call it tough love. No one ever learns unless they are made to deal with the consequences of their bad decisions.
In the meantime, please don't put Eliot freakin Spitzer on some kind of pedestal, or associate him in any way with our movement. He was a prosecutor that skirted the law shamelessly, and someone that never saw a regulation that he didn't like. The last thing we need to do is to hitch our wagon to his train.
I take my marching orders from the Constitution!
I agree with what you say about
not painting blacks and hispanics as victims.
I was in the middle of it all here in
California when the price of houses
were sky rocketing.
The feeling people had was an urgency
to hurry up and buy before they were priced
out.
I had that feeling too. The cheapest house you
could find was in the $400k's and most
were at least $500k. I found a house and
I went to apply for a loan, I was offered
some variety, fixed rate and arm's.
I was looking at the fixed rate.
With insurance and taxes , the house would have cost
at least $3500 per month. It was just too much
and I could'nt sign.
Those people that that chose ARM's were offered
fixed rates also, they just wanted the loan
that offered the cheapest payments up front,
and they would worry about the higher payments
later on. And if it got to be too much, they would
just sell and make lots of money anyway. That was
the mentality all over California, regardless of skin color.
Great Post John
Makes unfortunate sense.....
Greed and corruption
Just when you think that our government can't get any worse, we read this and unfortunately it makes sense. It's all one big puzzle and you just have to put the pieces together. I love this country but I despise our leaders, the very men and women that are being paid to represent the American people. A small majority of individuals or groups are the only ones that benefit from what is happening right now at the expense of the American people.
I believe what you are saying about Spitzer and the corrupt and greedy mortgage companies and as a idealist these types of things used to shock me, now then sicken me and make me very angry. But, my question is, IF this is true then why doesn't Spitzer expose this? Is it out of fear that if he does that the Feds will come down on him and he'll end up in prison?
Where is just ONE person that will take on the corrupt bankers, corporations, oil companies and politicians?? Why isn't there a citizen class action lawsuit against these mortgage companies to expose them and punish them for their greed and corruption? Where are the consumer advocates that are supposed to protect Americans from this and punish those who profit from destroying our economy and the middleclass?
I'm not a rocket scientist BUT after finding Dr Paul, I have listened to him and done research on my own. I now understand about the FED, printing money and the consequences, the declining dollar etc. I am trying to protect my assets knowing what will most likely happen in the near future but the majority of American's have no clue as to how they are being manipulated.
We have a Congress that is there for checks and balances but they seem to be ignorant of how our economy works, otherwise they would be stopping all of this dead in its tracks before total collapse happens. Maybe they should take a course on "Economics for Dummies"
The stock market will survive, the big bankers will survive and the big corporations will survive but the American people will not survive because our government doesn't care what happens to them. America will never be the same just because of power and greed and I am ashamed of our leaders because of their lack of compassion, greed and desire for power.
This administration and Congress will go down in history as the ones that destroyed the greatest country in the world but then is will be too late for "We the People" God help us because no one else will.
What is the source?
You should give a link for this.
Famous Quote from Justice William O. Douglas
"The Constitution is not neutral.
It was designed to take the government
off the backs of people."
Boycott Fox. Boycott PayPal. Boycott ChipIn.
source
Fortune Favors the Bold
http://www.gregpalast.com...
Great post!
Thank you. Required reading for everyone. Who is responsible for the cancer that's killing our nation and the world? The banksters.
Yep
Makes BIG sense to me. This whole thing was fishy since the get-go. I'm not surprised it's Bush. I'd wondered about all the fat cats on Wall St., too.
Thanks for the post!