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

March 14, 2008 at 14:55:03

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

by Greg Palast (Posted by Greg Palast) Page 1 of 1 page(s)

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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 chunk 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." You can read Spitzer's letter in its entirety here.

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.

Hear The Palast Report weekly on Air America Radio's Clout.

And next Wednesday March 19, join Palast and Clout host Richard Greene on a dinner cruise on the Potomac River. For more information click here.

And this Sunday, at noon, on WABC-TV New York, catch Amy Goodman, Les Payne and Greg Palast on Like It Is with Gil Noble.

The views expressed in this article are the sole responsibility of the author
and do not necessarily reflect those of this website or its editors.

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18 comments

ramsheyi

Spitzer And Clinton, Quelle Ressemblance !

Thank you Greg Palast. You are an extraordinarily outspoken and courageous journalist and an honor to the business of journalism.

When are you going to reveal to us the truth about Clinton's impeachment circus. We know that it had absolutely nothing to do with the sperm stain on Monika's skirt. Sperm drops from crooks in power shower in on virgin skirts every day like heavy rain and nothing happens. So, where did Clinton go wrong with respect to his boss's at the Establishment? We are waiting for Truth ro come out. 2008 is the year of Truth

by ramsheyi (0 articles, 0 quicklinks, 0 diaries, 793 comments [1 recommended, 0 rejected]) on Friday, Mar 14, 2008 at 4:13:53 PM

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syed mahdi

Reply: "Spitzer & Clinton, Quelle Resemblance!"

"Elementary, my dear Watson!" Sherlock Holmes style. When you threaten any Mafia a contract is taken out on you whether it is by the Wall Street Mafia, as in the case of Spitzer or the Star of David Mafia, as in the case of Bill Clinton. In the latter case both the 'cuties' who accused Bill, Monica and the earlier one from Arkansas were both (patently) of Jewish faith or origin. Check out for yourself the timing and contents of what Bill was trying to offer as a 'fair' solution on Palestine which of course was not palatable to AIPAC and other legitimized US Jewish Mafias and the match it with the timing of the parallel blitzkrieg of Breaking News' on Bill's, Monica 'indiscretion'. You will be surprised with what you will discover. A President of the United States was chastened by one such Mafia and forced to change his intended 'just solution' into what he later offered to Yasser Arafat at Camp David, inorder to avoid his ignominious ouster by the "Parliament of Whores" (the title of a published book). Of course the Camp David offer was 'unjust' and was rejected by Arafat. Now, the Wall Street Mafia is much more powerful and all pervading. Poor Spitzer didn't stand a one in a million chance! Let not anyone on Capitol Hill or for that matter in the Imperial Capital, Washington DC, sermonize on chastity or character or misdemeanors! Who isn't doing what Clinton or Spitzer did? Even, one of the richest tele-evangelists admitted in public, "I have sinned, my Lord" and went straight forward getting richer and richer selling the hottest commercial product in America, WARPED religion, to the hilly billies and couch potatoes! In an election year one can only surmise who the mafioses next victim would be. Obama? Yes and no. If he is seen a threat to the EXISTING ORDER OF THINGS, he will be taken out, but not through a SCANDAL but by a bullet and the assassin will be shot dead at the crime scene. Ring any bells? During Jack/Bob's time there was just one Hoover. Now? Guess!

by syed mahdi (1 articles, 0 quicklinks, 0 diaries, 156 comments [17 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 12:33:53 PM

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ramsheyi

Reply: Mafiosi Intriguings And Their MSM Enablers

Thank you Syed Mahdi for your cogent fact-based remarks. As a matter of fact it is no more a secret that Monika was an AIPAC/CIA agent with a particular and precise mission, that Bill Clinton had conficts of interests with Zio Godfathers of the Establishment, that the MSM ( Mafiosi Sycophant Media) lies and misleading informations were meant to divert us from what actually was going on behind the scenes. But learning the truth from someone knowledgeable is always reassuring.

by ramsheyi (0 articles, 0 quicklinks, 0 diaries, 793 comments [1 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 1:18:54 PM

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Barbara Peterson

Reply: Racism

We need to take racism out of the equation. When will we stop chanting "it's the Jew's fault" or "it's the Muslem's fault"? It is the fault of the power elite, which includes people of varying races and religions, including Muslems, Jews, Catholics, Christians, Jesuits, etc. It is not a "Jewish conspiracy."

by Barbara Peterson (73 articles, 109 quicklinks, 11 diaries, 541 comments [98 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 2:00:17 PM

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tom storey

Spitzer intervened on behalf of Larry Silverstein,

a peer of Spitzer's father, in the insurance trial for the World Trade Center. He did this through the filing of a legal document "Friend of the court" in supprt of Silverstein's multi billion dollar claim in the WTC 9/11 settlement.

As AG for the state of New York, Spitzer ignored Mr. Guiliani's destruction of evidence at ground zero and blocked attempts on the part of injured parties attempting redress from 9/11.

This Spitzer person had been a regular user of hookers for the better part of 25 years. The office of the Attorney General for the State of New York, the United States Attorney for the district of New York, the New York State Police and other law enforcement agencies for the State of New York had known of this fact for many, many years.

Spitzer had already been blackmailed with this hooker addiction when he was NY AG.

I am having a hard time making this man a martyr for anything. A snake among the snakes.

At least one of the hookers said he was a "nice guy" and "good tipper." An appropriate legacy for any politician.

by tom storey (3 articles, 0 quicklinks, 2 diaries, 58 comments) on Friday, Mar 14, 2008 at 5:19:11 PM

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gordon nelson

Reply: not buying this, sorry

With Mozillo,etc, there was already enough blame on deregulation of lenders, I'm not buying your connection. A Spitzer Post story would receive a big yawn. I think it was going up against Bruno, or maybe the Gambinos were using the escort service, or Spitzer's backing of Clinton. Notice the GOP tried to piggy-back on the call for that Michigan Governor(?) to resign almost in the same breath?

Tom, good info, someone infered Spitzer's wife had to know about his "addiction", I see why now.

by gordon nelson (0 articles, 0 quicklinks, 0 diaries, 40 comments [1 recommended, 0 rejected]) on Friday, Mar 14, 2008 at 6:14:53 PM

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August Adams

Banking Scum

Corporate corruption and greed is damn rampant. There is nothing on the horizon that is going to stop it.

The banking predators are the worst, they are flushing this country down the drain. Predatory home loans but also endless bank fees, predatory credit card practices, outrageous interest rates, the extortions are endless.

But there is also the Military Industrial Complex, The Health Insurance industry, Big Pharma and their active campaign to hood every man woman and child in America on a chronic life long medication.

Greg, thanks for all you do to shine a light on the scum suckers defrauding the middle class and hardworking Americans.

by August Adams (11 articles, 0 quicklinks, 1 diaries, 583 comments [11 recommended, 0 rejected]) on Friday, Mar 14, 2008 at 6:15:18 PM

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Ed Encho

Something About This Stank

Thanks to the great Greg Palast for pointing out the corpse that the buzzards are feeding on.

Let's hope that more on this comes out because the Wall Street looters and the Economic Royalists (FDR's term) have been allowed to rip off Americans for far too long.

by Ed Encho (12 articles, 20 quicklinks, 65 diaries, 438 comments [14 recommended, 0 rejected]) on Friday, Mar 14, 2008 at 7:37:41 PM

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Michael Morris

In 2004 I wrote an article....

that exposed this very truth and that his "ethicial" prosecution of wall street and the insurance industry was all a smoke screen. Needless to say, I too was dismissed by the MSM.

The one truth that OpEdNews points out to all of us is that truth is stranger than fiction. Fiction is just what everybody wants to hear.

by Michael Morris (20 articles, 0 quicklinks, 16 diaries, 316 comments [4 recommended, 1 rejected]) on Saturday, Mar 15, 2008 at 9:56:30 AM

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Barbara Peterson

Digging behind the smokescreen

This is the information we get when someone takes the initiative to dig beyond the smokescreen that the MSM puts up. Thanks for exposing the man behind the curtain.

by Barbara Peterson (73 articles, 109 quicklinks, 11 diaries, 541 comments [98 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 11:36:26 AM

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Guajolotl

FOR THE LOVE OF MONEY

ITS JUST A QUESTION OF WHICH ONES ARE THE BIGGEST WHORES

by Guajolotl (0 articles, 0 quicklinks, 0 diaries, 131 comments) on Saturday, Mar 15, 2008 at 12:07:22 PM

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Roger

There goes my 33%

Well, I guess the part of my federal taxes that were not explosively dropped on someone in Iraq is again winding up in a Banker's pocket. Swell. Even the old Spanish Hacienda system did not sweat their peons as hard as our government goes for us. They limited required work to 3 months out of the year....a good bit less time than it takes us to come up with the money that we send to Washington DC to squander every year.

by Roger (0 articles, 0 quicklinks, 0 diaries, 465 comments [22 recommended, 1 rejected]) on Saturday, Mar 15, 2008 at 1:37:23 PM

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Edward Ulysses Cate

Well said, Greg, like always. But there's something more.

Why? Why is this going on? Just to make a few dollars more? I don't think so. There's gotta be more to this. Here's my take on it:

03/16/2008 - Owning The U.S. In Fee Simple

03/14/2008 - Bear Stearns - Why?

03/12/2008 - Scientifically-Created Depressions [And Why!]

http://GreatRedDragon.com ::

Hope this helps.

by Edward Ulysses Cate (0 articles, 0 quicklinks, 0 diaries, 232 comments [9 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 4:25:43 PM

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Paul Rye

Billionaire Jim Rogers: Dump the Fed and Bernanke

Wish I had the money to move and live without worries wherever I pleased like Jim Rogers

http://www.youtube.com/watch?v=lTXEWh2yT_g

by Paul Rye (7 articles, 2 quicklinks, 22 diaries, 500 comments [44 recommended, 1 rejected]) on Saturday, Mar 15, 2008 at 4:29:45 PM

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"Hoss" David P.

My Pet Goat

You give Bush too much credit, watching him being marched around after 9/11 was my clue that the President is indeed the useful idiot or pet goat, if you prefer. So was the last one and so will be the next one. Bush did not give the orders to precipitate the current financial crisis, he just followed them. But when you consider that he is surrounded by armed guards known as the secret service, who used to be Treasury but are now Homeland Security, the dots are there for anyone skeptical enough to connect.

We're owned people, get used to it.

by "Hoss" David P. (51 articles, 5 quicklinks, 14 diaries, 338 comments [4 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 9:14:05 PM

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Gustav Wynn

Dismantling the Fed

I hope everyone will agree that campaign finance and electoral reform need to be priorities for 2012 and the incoming President should appoint an Attorney General that will dismantle the Fed, a privatized super-bank making interest off the biggest sucker-account since 1913 (Ron Paul? Dennis Kucinich?).

I think Bush was heard saying 'Checks and Balances? That's when the Fed writes a check to increase my balance...

by Gustav Wynn (77 articles, 65 quicklinks, 5 diaries, 421 comments [34 recommended, 0 rejected]) on Saturday, Mar 15, 2008 at 9:37:52 PM

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lucydavis

Bail-Outs

Sure reminds me of that Savings and Loan scandal - the one that had McCain and Neil Bush involved in bilking the public out of billions of dollars. We, the taxpayers, were forced to bail Bush, McCain, etc. out of their mess at that time, too. Nothing much ever seems to happen to these criminals, does it!! Remember McCain's adulterous affair with little 'ol Cindy? Then his dumping his first wife? Don't hear much about that, do you - not like all the publicity about Spitzer's goof-ups. Sure helps to be able to control the media, doesn't it!!!

by lucydavis (0 articles, 0 quicklinks, 0 diaries, 88 comments) on Sunday, Mar 16, 2008 at 2:28:06 PM

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sharon kayser

Sure Greg

I agree thar there is something to dig in here but political correctess is another killer. Legalizing prostitution is also necessary to get out of the fog...

For a greater picture, that of the world economy, I would recomemnd my latest editorial "Global Elites Gone Bonkers"...

by sharon kayser (13 articles, 1 quicklinks, 0 diaries, 33 comments) on Tuesday, Mar 18, 2008 at 5:42:59 AM

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