The Truth behind the Spitzer take down -- two words: Economic Meltdown
We trim this 2008 podcast of March 14. The author, former investigator of financial fraud, is the author of the New York Times bestsellers Armed Madhouse and The Best Democracy Money Can Buy. Hear The Palast Report weekly on Air America Radio's Clout.
by Greg PalastWhile 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. Spitzer's lynching and the bankers' enriching are intimately tied.
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 of fancy loan-sharking.
'Steering' borrowers to 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.
When the Bush regime took over, a company called 'Countrywide' and its banking brethren were told to party hearty -- it was OK now to steer'm, fake'm, charge'm and take'm. From out of nowhere, Countrywide became America's top mortgage lender, accounting for one in five home loans, a large chunk of these 'sub-prime.'
But the Attorney General of New York, Eliot Spitzer tried to sue these guys.
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. The feds actually filed a lawsuit to block Spitzer's investigation.
Spitzer not only took on Countrywide, he took on the investment banking community for their "securitization." What that means is that they took a bunch of junk mortgages, re-packaged them into "tranches" of bonds, and got them 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.
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 the CEOs left their companies floundering. Countrywide's stock was down 50%, and Citigroup was off 38%. 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.
When the Fed dumped $200 billion on bankers, they got the public treasure and to keep foreclosed private homes. 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.
Spitzer was in Washington to launch a campaign to take on the Bush regime and the biggest financial powers on the planet. Writing for the Washington Post, Spitzer said Bush was the "Predator Lenders' Partner in Crime." The President, said Spitzer, was a fugitive from justice.
That very same day the bail-out was decided, the man called, 'The Sheriff of Wall Street' was cuffed. Spitzer was silenced.
Back in the day when I was an investigator of racketeers for government, I saw "prosecutorial discretion." Not all crimes lead to federal bust or even public exposure.
Senator David Vitter, Republican of Louisiana, paid Washington DC prostitutes to put him in diapers, yet the Senator was not exposed by the US prosecutors. Naming and shaming and ruining Spitzer - rarely done in these cases - was made at the 'discretion' of Bush's Justice Department.
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