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dogindia Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 02:33 PM
Original message
greg palast/spitzer/sub primes
Edited on Sat Mar-15-08 02:54 PM by dogindia
Little pecker may have been pecking on the wrong tree. Do we smell a rovian rat? How about the clanking of chenes?


http://www.gregpalast.com/elliot-spitzer-gets-nailed /

Eliots Mess

Published March 14, 2008

Greg Palast
Reporting for Air America Radios Clout
March 14th, 2008


Palast text continues below but here is the url to Spitzer Washington post text:
http://www.washingtonpost.com/wp-dyn/content/article/20...


While New York Governor Eliot Spitzer was paying an escort $4,300 in a hotel room
in Washington, just down the road, George Bushs 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 theres a BIG difference. The Governor
was using his own checkbook. Bushs man Bernanke was using ours.

This week, Bernankes 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? Spitzers lynching and the bankers enriching are intimately
tied.

How? Follow the money.

The press has swallowed Wall Streets line that millions of US families are about to
lose their homes because they bought homes they couldnt afford or took loans too
big for their wallets. Ba-LON-ey. Thats blaming the victim.

Heres 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 Americas top mortgage lender, accounting for one in five home
loans, a large chunk of these sub-prime.

Heres 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 aint 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. The
Grinnings move into their Toyota.

Now, what kind of American is sub-prime. Guess. No peeking. Heres a hint: 73% of
HIGH INCOME Black and Hispanic borrowers were given sub-prime loans versus 17% of
similar-income Whites. Dark-skinned borrowers arent stupid they had no choice.
They were steered as its 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 hearty it was OK now to steerm, fakem, chargem and takem.

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, Bushs 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 Spitzers investigation of ugly
racial mortgage steering. Bushs 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 Citigroups 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. Countrywides 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. Countrywides 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? Thats 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
Grinnings house. There was no quid of a foreclosure moratorium for the pro quo
of public bailout. Not one family was saved but not one banker was left behind.

Every mortgage sharking operation shot up in value. Mozilos Countrywide stock rose
17% in one day. The Citi sheiks saw their companys 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, thats
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 Bushs
enforcers at Justice who their number one target should be. And it wasnt 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, Spitzer said 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.

snip
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jeanruss Donating Member (194 posts) Send PM | Profile | Ignore Sat Mar-15-08 02:53 PM
Response to Original message
1. hypocrisy
If Spitzer is such a heroic figure, why did he jeopardize the important work he wanted to do? His comments seemed so token and insincere. His wife did not look surprised. There seems to be alot of the story is still missing. Everyone, including Bush, just seem to be puppets on a string of people who have decided that America should be over. It is obvious that the President and the Congress are working hard to destroy our country. I am tired of reading about the symptoms, I want to talk about "the cure".
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Hugin Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 02:54 PM
Response to Original message
2. Just so everyone knows last week wasn't a series of coincidinks...
:kick:

Meanwhile, the Corporate Media stooges are bumbling on...
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 03:19 PM
Response to Original message
3. I disagree with much of this
First of all, Spitzer was dumb, dumb, dumb. He has made a ton of enemies in Wall Street. They have plenty of money to hire the best private detectives to tail him and investigate him. I think that's what happened. And, frankly, Spitzer, for all his squeeky clean image, did some things that were not ethical. He went after people's private sex lives even when they weren't illegal. He would threaten people with criminal penalties if they didn't agree to the civil ones. That is not ethical.

I hate what has happened to us economically as much as everyone else. Keep in mind, though, that The Federal Reserve does not belong to the U.S. taxpayers. It is owned by member banks, and it is very secretive. So it is not "our" money that is being handed over. I bet the owners are more pissed off than we are. What we have here is unregulated capitalism that has come home to roost. But this doesn't have anything to do with Spitzer in a meaningful way. He just made powerful enemies, and he acted recklessly.
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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 03:24 PM
Response to Reply #3
4. Not to argue, but it's not "our" money being handed over?
Where is it coming from then? Or perhaps the better question is where WILL it come from, as I suspect right now they're just printing what they need and will saddle the US taxpayer with the bad debt down the road.
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 03:29 PM
Response to Reply #4
5. it is Federal Reserve money
Not saying it won't affect us, but it is coming straight from the balance sheet of the Federal Reserve. The Federal Reserve has private shareholders. We don't own it. But they make the rules.

Believe me, Spitzer was not caught because of any kind of Federal Reserve shenanigans. I promise you that. He made a lot of personal enemies.
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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 03:48 PM
Response to Reply #5
6. I agree with you on Spitzer
I think the media is unfairly focused on him (there were other clients who it would be interesting to hear about, to say the least), but that's another story.

I guess I'm one of many who don't understand -- or have made assumptions -- about the Federal Reserve and how it operates. Please help me out. The US Treasury answers to the Fed, doesn't it? And they're running the presses night and day to put more money into the system. The Fed is then giving failing financial entities lots of that money in return for bad loans...temporarily, they say, to help them out, but if those entities fail anyway, isn't the Fed left holding the (empty) bag? That translates into even more massive government debt along with the further devaluing of our currency, doesn't it?
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:18 PM
Response to Reply #6
7. the Fed could be holding the bag but not the taxpayers (directly)
The Federal Reserve Board is a private entity, and they can give away their money without it affecting our budget deficit.

However, it will directly affect things like inflation, the dollar, and interest rates--all things that do affect us.

Basically, we have hired the Federal Reserve Board to try to manage our monetary affairs. They make so much money off of us!! Remember all the talk about Kennedy wanting to get away from the Federal Reserve system? Some people thought that might have been what got him killed. (no I don't believe that, I think it was the anti Castro faction and some mafia types).
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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:34 PM
Response to Reply #7
10. Thank you!
I was thinking the debt they take on is ours too, but it's actually the results of taking on that debt -- how it affects the value of our currency and savings, etc -- that hits us.

The more I understand, the less I see a way out of this that won't have very bad long term effects on every one of us. But others on DU saw this coming and have been raising the alarm for a few years. The Fed has painted itself -- and the entire country -- into a corner with deregulation and free-market economics.
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:03 PM
Response to Reply #10
14. I think WE have done that
through our legislative and executive branches...................

It isn't the Fed who ran up budget deficits.
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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:14 PM
Response to Reply #14
18. You're right
Although I have to protest your pronoun use. WE didn't do it; corporatist politicians (Repub and Dem) and the ignorant rabble who elect them did it.
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:54 PM
Response to Reply #6
12. People who for whatever reason are apologistsfor the Federal R. will
Never ever agree with you, but basically you are right.
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Hydra Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:22 PM
Response to Reply #3
8. It is "our" money though
Because we'll have to pay the Fed back for the phantom dollars they spun out to pay their friends.

As for Spitzer, anyone standing in Bushco's way is wasting their time. If there isn't any dirt on someone(unlikely- most people have at least a few skeletons in their closets), their agents will simply invent it. "Let him disprove our allegations- regardless, he'll already be tarred and feathered in the court of public opinion."
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Hugin Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:31 PM
Response to Reply #8
9. Well, considering it was established by the Federal Reserve Act of 1913...
I guess if it's not 'our' money it's the grand-daddy of all Privatization Ponzi Schemes.

http://en.wikipedia.org/wiki/Federal_Reserve_Act

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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:51 PM
Response to Reply #3
11. From my understanding of the Fed Reserve, they are touted as this
Edited on Sat Mar-15-08 04:57 PM by truedelphi
"National" bank but they are really a private bank.

The idea behind the launch of The Federal Reserve under Woodrow WIlson's reign was that such an institution would keep the USA from bank panics - yet that failed rather miserably. Within fifteen years of its inception, we had the Great Depression, and we have had recessions and bank panics just about every ten years from 1977 on. (The recession of 1979 to 1982, stock market crash in 1987, followed by the recession of 1989 to 1991, the recession of the mid nineties here in California, the dot com collapse in 2000 and now the so-called "sub prime" mortgage failure.) Some protection, huh?

I assume that those London bankers love it when our Stupidos in office go into a war that will bankrupt our economy. This means that the average American, of middle income, who is paying his Federal income and his Social Security (now that the cat is out of the bag on that issue and now most of us realize our 7.5 to 15% Social Security payments will just go to pay for the four trillion dollar war - let's quit fooling around and calling Social Sec an "entitlement" and call it a tax) that average American's taxes are ONLY paying the interest on the debt due to this odious bank.

The Federal reserve wields a lot of internal power - it has a vastly greater power to influence the media to do several things that it doesn';t bother doing right now.

1) Have the media Keep us informed by true scholars of a monetary system as to what is going on. The mass media was touting real estate investments as the best investment ever - and never once a discussion for the average person to read about the hedge funds and the derivative markets.

Most investors are unaware that the "financial experts" usually are on the take and beholden to whatever they are talking about. Other wise the American public would have a far better understanding of what is going on. An understanding that they might not get currently until their pension funds are swiped out from under them when the pension funds are undercut by their bad investments over the last five years.

2) Not allowing for things like moving off the gold standard. Thus insuring that our dollars bills are not redeemable for much more than an IOU. Turning our coinage into junk metals, so that even owning coins means little.

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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:08 PM
Response to Reply #11
16. Part private, part public
The private side (shareholders) gets the benefits, the public side (us) gets the risk and fallout.

Damn every politician and corporatist who had a hand in dismantling and finally repealing Glass-Steagall.

Damn every American who believes in deregulation and the "free market".

We're about to be reminded why forgetting the past dooms us to repeat it.
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:13 PM
Response to Reply #16
17. isn't that the TRUTH!!!!
We can't blame the Fed for this crisis. We can blame deregulation. Of course Greenspan was some sort of Ayn Rand freak, and every time he testified he was loving deregulation.
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magellan Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:19 PM
Response to Reply #17
20. Well now, wait
The Fed does own some of this as they're the ones who are in charge of how much money is printed, what the interest rate is, etc. Also, as you point out, the Fed Chairman is the one everyone relies on to give an accurate picture of what the economy is doing and an unbiased forecast of where it's going. Clearly neither Greenspan nor Bernanke have done that.
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:28 PM
Response to Reply #20
22. their tools are enormous
But I think they may still be too limited to solve this problem. When the countries that we lend to in South America start building up budget deficits, though, we tell them to RAISE interest rates and balance their budgets. That puts them into a severe recession but after a time it leaves them standing.

The only thing between us and complete economic meltdown is our military. BUY OUR BONDS OR GET BOMBED!!

The Fed makes an enormous amount of money and they are putting their capital at risk in this situation. But then, they can create unlimited funds, so.................they can replace it.

Bernacke is probably not a bad guy. He is trying different things, but maybe too late?

Our aggregate bank reserves in this country are negative for the first time ever. The banks are borrowing from the Fed just to have bank reserves. This is completely unprecedented and it gets worse every single month. That's why banks are closing people's credit cards, etc.


http://www.democraticunderground.com/discuss/duboard.ph...

http://www.democraticunderground.com/discuss/duboard.ph...


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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 06:00 PM
Response to Reply #22
23. "The buy our bonds or get bombed" philosophy
Is what tells me that there is simply no way to get out of a war with Iran - Iran's oil trade is based on the Euro and thus we folks see escalating prices - but Europe doesn't see the oil hike price because the Euro is stable even as the dollar sinks.

Too bad for rest of the world that they are relying on the reliable Euro - we will have to nuke 'em all, if that is what it takes to make things okay here.
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Fire Walk With Me Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 04:56 PM
Response to Original message
13. Is this a Silverado/Enron targeting minorities?
Edited on Sat Mar-15-08 04:57 PM by Peake
It's not like minorities were targeted in New Orleans, through inaction...
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laylah Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:08 PM
Response to Original message
15. Oh my goodness!
What a bunch of sleazey bastards, one of them my own mortgage company :mad:
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Celebration Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:15 PM
Response to Reply #15
19. Sleaze is the new capitalism
And businesses are even screwing each other. This is a dog eat dog world.
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benld74 Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-15-08 05:23 PM
Response to Original message
21. You can call it what you want BUT,,,
if Spitzer wold have kept his lil spitzer where it belongs, NONE of this would have happened. Whether the banks actually went after him or not. IF he would have acted like an adult instead of a kid in candy store, he could have done alot of good for everyone.
Insead he dipped the stick into a strange honeypot and ruined not only himself, but his reputation, his kids lives in their schools, his wife's trust in him etc, etc etc
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midnight Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Mar-16-08 09:05 AM
Response to Original message
24. This is story needs to be told
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. Last night on PBS they discussed the countries where prostitution is legal....

There is a handful.....
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yurbud Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-17-08 01:45 PM
Response to Original message
25. kick
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