Bill Totten's Weblog

Wednesday, March 19, 2008

Why Was Eliot Spitzer Outed?

As Chuck Baldwin asked in "Thoughts on the Spitzer Sex Scandal" posted here the other day,

"Why did the hammer fall on Governor Spitzer now? ... The Republican and Democrat parties alike are awash in sexual immorality - both heterosexual and homosexual. And 99% of this debauchery is never reported. The guilty politicos are never 'caught', never 'outed'.

"So, why was Governor Spitzer 'caught'? Don't forget that Spitzer has been carrying on this way for at least ten years. Suddenly, now, he is found out.

"They say that Governor Spitzer was Client 9 for this particular hooker. So, who are clients 1-8? And who are clients 10-100? Why do we not know their names? Anyone able to afford this prostitute's price of $1,000 per hour has to be someone of means. Who were they?

"Were the other clients CEOs of Fortune 500 companies? If so, which ones? Were they congressmen or senators? If so, who? Were they White House executives? Were they Pentagon brass? Were they media celebrities? If so, what are their names? Were they foreign diplomats? If so, who are they, and from which countries did they come? Do you get my point?

"How is it that in this elaborate FBI sting, only Governor Eliot Spitzer was 'caught'?

Greg Palast offered an answer to these questions in "Eliot's Mess", also posted here the other day:

"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.

"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 ... 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.

"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.


"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'.

"Naming and shaming and ruining Spitzer - rarely done in these cases - was made at the 'discretion' of Bush's Justice Department."

Here is the article that Governor Spitzer wrote for the Washington Post just before the Bushies named, shamed and ruined him:

Predatory Lenders' Partner in Crime

How the Bush Administration Stopped the States from Stepping in to Help Consumers

by Eliot Spitzer

Washington Post (February 14 2008)

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. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

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.

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.

Let me explain: The administration accomplished this feat 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.

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 fifty state attorneys general, and all fifty state banking superintendents, actively fought the new rules.

But the unanimous opposition of the fifty 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.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

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.

The writer is governor of New York.

Bill Totten


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