Tuesday, September 23
Bush White House a "Partner" in Federal, Commerical Predatory Lending Scams
Last December, U.S. Treasury Secretary Henry Paulson told Fox News--the cable network a Florida court ruled could legally lie--said he opposed bailing out floundering banks and mortgage companies for their raft of subprime loans to American homeowners.
"I don't think what we need is a big government bailout right now," Paulson said in an interview on Fox Business News. "I think what we need is to help the markets work the way they're intended to work and avoid those foreclosures that are preventable."Well, Washington's federal fiscal brain trust has moved well beyond that initial view.
This past weekend, the Bush, who just a month ago was touting US financial institutions' stability (as did McCain earlier this month) floated a $700 billion trial balloon asking taxpayers to bailout the "distressed" men and women who made those dangerous home loans.
“This is a big package, because it was ["was"?] a big problem,” President Bush said Saturday at a White House news conference....“I will tell our citizens and continue to remind them that the risk of doing nothing far outweighs the risk of the package, and that, over time, we’re [his cronies] going to get a lot of the money back.”Whether any of the estimated 2.5 million American homeowners in jeopardy of loosing their homes to forecloure will see any of the bailout relief is uncertain.
While mainstream media are lapping up this bile as readily as the White House's "al-Qaeda-WMDs-in-Iraq--booooo" bedtime story, online news sources are calling the con by its proper name. For example: "larceny," "a historic swindle,"
As the mounting home foreclosures was spiking the number of homeless and increased number of tent cities around the US., Michael Hudson, an economics professor from Kansas City, articulated the scam dimension hidden in the Bush bailout plan:
These billions of dollars [are to be] devoted to keeping a dream alive - the accounting fictions written down by companies that had entered an unreal world based on false accounting that nearly everyone in the financial sector knew to be fake. But they played along with buying and selling packaged mortgage junk because that was where the money was. As Charles Prince of Citibank put it, "As long as they're playing music, you have to get up and dance." Even after markets collapsed, fund managers who steered clear were blamed for not playing the game while it was going. I have friends on Wall Street who were fired for not matching the returns that their compatriots were making. And the biggest returns were to be made in trading in the economy's largest financial asset - mortgage debt. The mortgages packaged, owned or guaranteed by Fannie and Freddie alone exceeded the entire U.S. national debt - the cumulative deficits run up by the American Government since the nation won the Revolutionary War!Last Friday (19 September), subprime mortgage lender Richard Bitner told the London Guardian that while friends and neighbors view him as a subprime mortgage loan "baron," his work inclined him to view "himself as little better than a mid-rank drug dealer."
"I almost look at the mortgage industry kind of like the drug trade. Wall Street and the investment banks are the Bolivian drug lords," he says. "You look at this and you go: What were we doing? Who doesn't want the feeling of euphoria? Who doesn't like to get money?"In pitching a new book titled Confessions of a Subprime Lender, Bitner, co-founder and president of Kellner Mortgage Investments of Dallas that specialized in "high risk loans," hopes to continue supporting his addiction of separating hayseed rubes from their money by third-person distancing from the scene of the crime, i.e., as if all the "dope dealing" centered on Wall Street.
He continues: "Wall Street, the drug lords, were creating this product. Lenders and brokers are the street dealers who were largely making it available based on a consumer desire; a want for it."
Dishonesty became endemic in loan applications. By the end, Bitner reckons that 70% of submissions to the company from brokers were deceptive. Properties, supposedly objectively appraised, were spectacularly overvalued. He estimates that half of loans were on homes over-egged by up to 10%, a quarter had prices exaggerated by 11% to 20% and the rest were "so overvalued they defied all logic".This past winter, New York Governor Eliot Spitzer was nailed for an honesty about America's criminal mortgage industry that Bitner may never manage without some years behind bars, bent over his bunk by a very gay southern redneck Guido.
His 14 February 2008 Washington Post op-ed piece, buried in the paper's front section, said the Bush White House was predatory mortgage lenders' "partner in crime," and offered evidence supporting his case.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.But machinations of at least one federal agency, Spitzer argues, in providing the predatory mortgage industry with protection from state government oversight that suggests the depth of the scam, including Bush's proposed $700 billion "bailout."
Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York's, enacted laws aimed at curbing such practices.
What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.
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.
The administration accomplished [circumventing intervention by state governments] through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.Spitzer concludes by saying the Bush White House would not be "judged favorably" when history takes a sober, honest look at what the looming disaster for Middle America.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.
But in the adolescent culture of moral illiteracy that is America, Spitzer instead of Bush, at least in the short term, found his head skewered on a political pike.
As he later characterizes American mortgage consumers of predatory lending practices, Spitzer, too, was victimized by "the power of the federal government in an unprecedented assault on state [legislators], as well as on state attorneys general and anyone else on the side of consumers."
The day after Sitzer's allegations appeared in the Post, he was charged as "Client 9" via a federal wiretap for soliciting the services of Emperor Club VIP's "Kristen" (photo), the "high-priced prostitute who met with Spitzer at the Mayflower Hotel in Washington on February 13." Two days later, Spitzer resigned as New York's governor; "Kristen" was not charged in the sordid affair.
Why were DoJ Ass't Attorneys wiretaping a DC prostitution solicitation case of a New York state official? Why was he charged in NYC instead of DC? (I would hope enough DC federal judges laughed so hard at the charge that the case had to be prosecuted in NYC.)
If Spitzer had succeeded in having his allegations heard outside the Beltway, perhaps we taxpayers could have saved our children $10-$20 billion of Bush's proposed bailout of his partners in crime.
The DoJ's smack-down of Spitzer is yet another case illustrating how the federal bureaucracy under Bush's eight-year nonwatch is officially an enemy of the American people, pursuing all strategies within its considerable power to discourage whistleblowers like the former governor who put himself between the rapacious pigs and their feeding frenzy.
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