[clue-talk] The stimulus bill

[Sean LeBlanc]

On 02-06 21:11, Collins Richey wrote:
> On Fri, Feb 6, 2009 at 7:23 PM, Angelo Bertolli
> <angelo.bertolli at gmail.com> wrote:
> 
> > Subsidizing mortgages not withstanding, I think you'd at least agree that
> > the mortgage crisis we're in right now has way more to do with banks/loan
> > officers/whoever not doing their risk assessment "properly."  Unless you
> > mean that our attitudes about houses and the culture created by our laws
> > gave the banks the feeling that they could get away with it.
> >
> 
> You missed Jed's point entirely. It's not a matter of the banks
> feeling that they could get away with it. They were actively
> encouraged (if not required) to ignore the ability to pay back loans
> by Freddie and Fannie and the Barney Frank types in Congress. The
> "proper" risk assessment was the desire to get a loan, not the ability
> to pay back the loan.

I thought the stuff about Frank and CRA has been debunked long ago?

This is a little older, but Palast seems to have a different take on this.

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

Also note the mention of the double standard for David Vitter.... who
recently went on a silly tirade in the Senate about ACORN this week.

---- Begin long quote ------ 

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 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 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 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 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. The 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 hearty  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
Grinning's, 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 bailout. 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 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."

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 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  rarely done in these cases - was
made at the `discretion' of Bush's Justice Department.

Or maybe we should say, 'indiscretion.'
-- 
Sean LeBlanc:seanleblanc at comcast.net
http://sean-leblanc.blogspot.com
"But don't you worry, its for a cause -- feeding global corporations
paws."