March 23, 2008

Was Eliot Spitzer set up over predatory lending? (Bush, banks, the Fed, and, yes, Greg Palast)

I confess that when the Eliot Spitzer story broke I felt like I'd won four free hours with Ashley Alexandra DuPre's librarian cousin and put aside all concerns about whether there was something else involved. Frankly, after the issue with driver's licenses for illegal aliens I didn't really care.

However, thankfully, Greg Palast rushed into the breach on the 14th of this month with this, raising the possibility that Elliot Spitzer was driven out of office due to his efforts to stop predatory lending practices:

This week, [the Federal Reserve Board, run by Chairman Ben Bernanke], 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.

And, in fact, back on February 14th, Spitzer offered a Washington Post guest editorial called "Predatory Lenders' Partner in Crime/How the Bush Administration Stopped the States From Stepping In to Help Consumers" (link):

Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers' ability to repay, making loans with deceptive "teaser" rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks...

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.

...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. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

Comptroller of the Currency John C. Dugan responded to Spitzer's claims here: occ.gov/ftp/release/2008-16.htm

A video with the provocative title "The Assassination of New York Governor Eliot Spitzer" (link) consists mainly of a reading of that editorial. On March 21, the New York Times - source of the report that started Spitzer's downfall - offered "U.S. Defends Tough Tactics on Spitzer" (link)

Obviously, at this point in time there's no evidence that Spitzer's downfall was the result of a conspiracy of some kind. But, it certainly isn't something that I'd put past the Bush administration.

Posted to Politics at March 23, 2008 12:27 PM