p until Wednesday, there was one single, lonely politician who
stood in the way of this creepy little assignation at the bankersâ€™
bordello: Eliot Spitzer.
Who are they kidding? Spitzerâ€™s lynching and the bankersâ€™ enriching are intimately tied.
How? Follow the money.
press has swallowed Wall Streetâ€™s line that millions of US families are
about to lose their homes because they bought homes they couldnâ€™t
afford or took loans too big for their wallets. Ba-LON-ey. Thatâ€™s
blaming the victim.
Hereâ€™s what happened. Since the Bush regime
came to power, a new species of loan became the norm, the â€˜sub-primeâ€™
mortgage and its variants including loans with teeny â€œintroductoryâ€
interest rates. From out of nowhere, a company called â€˜Countrywideâ€™
became Americaâ€™s top mortgage lender, accounting for one in five home
loans, a large chunk of these â€˜sub-prime.â€™
Hereâ€™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
ainâ€™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 â€œdiscountâ€ 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
â€˜sub-prime.â€™ Guess. No peeking. Hereâ€™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 arenâ€™t stupid â€“ they had
no choice. They were â€˜steeredâ€™ as itâ€™s called in the mortgage sharking
â€˜Steering,â€™ sub-prime loans with usurious kickers,
fake inducements to over-borrow, called â€˜fraudulent conveyanceâ€™ or
â€˜predatory lendingâ€™ 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.
when the Bush regime took over, Countrywide and its banking brethren
were told to party hearty â€“ it was OK now to steerâ€™m, fakeâ€™m, chargeâ€™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, Bushâ€™s regulators went on the warpath against
Spitzer and states attempting to stop predatory practices. Making an
unprecedented use of the legal power of â€œfederal pre-emption,â€
Bush-bots ordered the states to NOT enforce their consumer protection
Indeed, the feds actually filed a lawsuit to block
Spitzerâ€™s investigation of ugly racial mortgage steering. Bushâ€™s
banking buddies were especially steamed that Spitzer hammered bank
practices across the nation using New York State laws.
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 Citigroupâ€™s Citibank made
mortgage usury their major profit centers. They did this through a bit
of financial legerdemain called â€œsecuritization.â€
means is that they took a bunch of junk mortgages, like the Grinningâ€™s,
loans about to go down the toilet and re-packaged them into â€œtranchesâ€
of bonds which were stamped â€œAAAâ€ - 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
When the housing bubble burst and the paint
flaked off, investors were left with the poop and the bankers were left
with bonuses. Countrywideâ€™s top man, Angelo Mozilo, will â€˜earnâ€™ a $77
million buy-out bonus this year on top of the $656 million - over half
a billion dollars â€“ he pulled in from 1998 through 2007.
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. Countrywideâ€™s stock
was down 50%, and Citigroup was off 38%, not pleasing to the Gulf
sheiks who now control its biggest share blocks.
Wednesday of this week, the unthinkable happened. Carlyle Capital went
bankrupt. Who? Thatâ€™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
The Fed had to act. Bernanke opened the vault and
dumped $200 billion on the poor little suffering bankers. They got the
public treasure â€“ and got to keep the Grinningâ€™s house. There was no
â€˜quidâ€™ of a foreclosure moratorium for the â€˜pro quoâ€™ of public bailout.
Not one family was saved â€“ but not one banker was left behind.
mortgage sharking operation shot up in value. Moziloâ€™s Countrywide
stock rose 17% in one day. The Citi sheiks saw their companyâ€™s stock
rise $10 billion in an afternoon.
And that very same day the
bail-out was decided â€“ what a coinkydink! â€“ the man called, â€˜The
Sheriff of Wall Streetâ€™ was cuffed. Spitzer was silenced.
believe the banks called Justice and said, â€œTake him down today!â€ Naw,
thatâ€™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 â€“ one was â€œWall Street Declares
War on Spitzerâ€ - made clear to Bushâ€™s enforcers at Justice who their
number one target should be. And it wasnâ€™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:
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.â€
Bush, Spitzer said
right in the headline, was the â€œPredator Lendersâ€™ Partner in Crime.â€
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, â€œWhen
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.â€
But now, the
Administration can rest assured that this love story â€“ of Bush and his
bankers - will not be told by history at all â€“ now that the Sheriff of
Wall Street has fallen on his own gun.
A note on â€œProsecutorial Indiscretion.â€
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. Iâ€™m not
allowed to tell you the prosecutorâ€™s name, but I want to mention he was
recently seen shouting, â€œFlorida is Rudi country! Florida is Rudi
Not all crimes lead to federal bust or even public exposure. Itâ€™s up to something called â€œprosecutorial discretion.â€
thing, this â€˜discretion.â€™ 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 â€“ rarely done in these cases - was made at the â€˜discretionâ€™ of Bushâ€™s Justice Department.
Or maybe we should say, â€˜indiscretion.â€™