Palast on Spitzer, Wall Street, and Bush

A must-read from Greg Palast. An excerpt is below. Read the whole thing here:

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.

How?  Follow the money.

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.’

...

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.

Comments

[iloveliberals]

Must read? Why because it says exactly what you want to believe is occurring in the capital markets today? I really don’t know where to start butchering this article, but here goes...

First, in reference that the introduction of the sub-prime mortgage market and the Bush administration are directly correlated is coincidental at best. Since the first brokers met at the buttonwood tree on wall street, bankers have been creating new financial instruments to expand the transparency of markets, enabling the ability to invest in any area of the market possible. The sub-prime loan market was nothing more than another new financial instrument that unfortunately fell well short of its potential. The bankers packaging these loans were not the same ones selling the loans and the ones selling the loans cared only about selling the shitty loans to anyone that walked into their office and had a pulse…a job or a bank account was a plus. I not only disagree with Mozilo’s salary, but he should be put in prison for the way he ran Countywide.

Second, don’t let your heart strings get pulled too hard by thinking that US teachers’ pensions and Finnish towns are the ones who took the blunt of this. The CLOs (collateralized loan obligations) that these types of entities invested in typically made up very small percentages of their overall plan and if we are talking about executive salaries maybe someone should take a look at what the CIO of CalPERS makes. Russell Read, CalPERS CIO made close to $1 Million last year. That’s right the lead man for a public pension plan made a salary typical of the CEO of a small investment bank. The pension plans knew full well what kind of investment they were putting their money. And pay people well to make decisions. They are not the little minnows being swallowed up by the shark.

Third, Carlyle Capital is basically a mutual fund run by the Carlyle Group, which is far from going under. It’s also interesting that Palast mentions Carlyle, but not a firm like State Street. Goes to show idiot film critic liberals know maybe 5 names in the financial markets mostly because of their hero Michael Moore and the Carlyle Group is every liberal’s favorite target.

I could go on and on, but there really isn’t any point. Bottom line is that this is nothing short of tabloid writing and should be taken about as seriously as the 300 pound baby.

[ken]

Hi Jodi,
Whenever you have those moods that you should stop posting and blogging I would urge you to think of days like this. The Palast article is fantastic and moves folks like me who sometime drift further from sensible political positions than they should to return to their senses -- and you didn't have to even write anything -- just post. It has been a rather remarkable couple of weeks in America, eh?
Shakespeareanease for this week, by the way, is Measure for Measure, where the unfortunate Mr. Spitzer has the role of Angelo. The supposedly good hearted Duke wears a religious cloak throughout. Angelo at least pays his "quid."

[matt]

iloveliberals,

are you arguing that political climate, acts of regulation, etc. are all irrelevant to decisions in financial markets, then? also notice you didn't contest the Spitzer connection.

[Jodi]

Thanks, Ken.

iloveliberals: it's weird (meaning ideological) that you refer to the financial instruments associated with the subprime mortgage debacle as increasing transparency when Secretary of the Treasury has criticized banks for creating obscure financial instruments. It makes it pretty much impossible to take anything you've written here very seriously.

[iloveliberals]

Jodi,

I meant more open financial markets. You are right there is little transparency on these sub prime investments beacuse they are off balance sheet items.

I know exactly what I am talking about, and its not impossible to take me seriously.

I would suggest a site like investopedia.com or even wikipedia to search some of these terms before you make a post and throw stones.

Bullishitting only works in useless areas like political philosophy.

[hypotheek info]

I agree this is really interesting and helpful report, provided data explained in this report is reliable and true.