<html>
<body>
<h1><b>The $200 billion bail-out for predator banks and Spitzer charges
are intimately
linked</b></h1><font size=3>
<a href="http://www.zcommunications.org/znet/viewArticle/16902" eudora="autourl">
http://www.zcommunications.org/znet/viewArticle/16902<br>
</a>March 18, 2008 By <b>Greg Palast</b> <br>
Source: GregPalast.com <br><br>
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.
<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
Who are they kidding? Spitzer's lynching and the bankers' enriching are
intimately tied.<br>
<br>
How? Follow the money.<br>
<br>
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.<br>
<br>
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 chuck of these "sub-prime."<br>
<br>
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.<br>
<br>
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.<br>
<br>
"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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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."<br>
<br>
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).<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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:<br>
<br>
"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."<br>
<br>
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.<br>
<br>
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."<br>
<br>
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.<br>
<br>
A note on "Prosecutorial Indiscretion."<br>
<br>
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!"<br>
<br>
Not all crimes lead to federal bust or even public exposure. It's up to
something called "prosecutorial discretion."<br>
<br>
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.<br><br>
Naming and shaming and ruining Spitzer - rarely done in these cases - was
made at the "discretion" of Bush's Justice Department.<br><br>
Or maybe we should say, 'indiscretion.'<br><br>
<i>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.<br>
</i> <br><br>
<br><br>
</font><x-sigsep><p></x-sigsep>
<font size=3 color="#FF0000">Freedom Archives<br>
522 Valencia Street<br>
San Francisco, CA 94110<br><br>
</font><font size=3 color="#008000">415 863-9977<br><br>
</font><font size=3 color="#0000FF">
<a href="http://www.freedomarchives.org/" eudora="autourl">
www.Freedomarchives.org</a></font><font size=3> </font></body>
</html>