Spitzer & the mortgage crisis: linked?

I've got five bucks Euros (the bet should have value, at least) that this story gets virtually no play in the national, mainstream media.

Noted journalist & author Greg Palast has a take on deposed New York Governor Eliot Spitzer that's getting virtually no play at all; the short of it is that Spitzer's fall and the mortgage crisis are directly linked. (Two of Palast's books are well-known - Armed Madhouse: From Baghdad to New Orleans--Sordid Secrets and Strange Tales of a White House Gone Wild and The Best Democracy Money Can Buy; the former is sitting on one of my bookshelves, waiting for me to read it.)

His latest column, entitled Eliot's Mess: The $200 billion bail-out for predator banks and Spitzer charges are intimately linked is on his Website and appears in today's Baltimore Chronicle. Some excerpts (my comments follow):

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.

How? Follow the money.

The press has swallowed Wall Street's line that millions of U.S. 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 it's 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 U.S. average household income, gets a $200,000 mortgage at 4% for two years. Their $955 a month 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. 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 U.S. 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 hardy – 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.

[Snip]

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 he federal government was turning a blind eye."

Bush, said Spitzer 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 sub-prime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners the Bush administration will not be judged favorably."

I really wonder when the American people (or at least the moderates, who in recent history are largely determining the outcome of elections) will every truly "get it," and by that I mean that Republicans are so anti-government, it makes little sense to put them in charge of something they are determined to minimize and dismantle at every opportunity.

President Reagan, whose debilitating, deliberate oversimplification of our federal government, "Government is the problem," or the closely related and ever popular "The nine most terrifying words of the federal government are 'I'm from the government, and I'm here to help,'" have really come home to roost during Dubya's administration run amok.

In the last 25-30 years, just about every industry that has been deregulated has done two things: it has enriched the companies via Wall St. (and of course their government-sponsored backers), and it has screwed the consumer. A few examples:

1. The Airline Industry (Actually, President Carter deregulated them, I know, and that has proven disastrous on a number of fronts, so Repubes get a pass here. But, I don't mind bringing up in the spirit of partisanship that Reagan fired the air traffic controllers, and this idiotic and drastic decision's effects are still felt today. Am I the only one who finds it ironic that one of Washington, D.C.'s airports is named after him? But, I digress.)

2. Cable TV - Quickly now, this is not a trick question - has your cable bill gone down or up in the past 15 years? If you are one of the few who have realized a decrease for the same services, then run, don't walk, to your local gas station or convenience store and buy a lottery ticket.

3. The Power Industry - I've got one word - Enron. Anyone remember the faux California Energy Crisis? (I never tire of reminding people that Kenneth Lay's ties to Bush were indeed very close - he donated $500k to Bush's first coronation inaugural ball. As for Big Coal and Big Oil, forget it - their respective claws are dug so deep into our political system, and in these two cases, the Republican Party, the full extent may never be known.

4. The Telecommunications Industry - fewer and fewer telecomms now own more and more. I'm yet to read an adequate explanation as to why this is good for anyone, except for rich corporate investors. Hey, look at the bright side, though - pretty soon there will be one cell phone company left, and one cable news channel, Fox News.

I remember in years' past, when the government used to break up monopolies, while actually giving a damn about the American consumer (what a concept!). The break-up of the Bell System (finally took place under Reagan, but the initial lawsuits began in the 1970s) and the government's case vs. Microsoft for its monopolistic practices are the two most notorious examples of how these high-profile cases in the end benefited consumers.

And that brings us back to the mortgage industry. I wonder when this crisis finally hits bottom (which, evidence says, has not happened yet) if the true story will every come out. I firmly believe that predatory business practices and piss-poor government regulation are a pretty big part of the problem, exacerbated by the "hands off" approach by the Bush administration, as its wont to do in just about any federal regulatory situation, except when it can line the pockets of its donors.

Government regulation and intervention are both not always the best course of action, but they can often protect the consumer.

Thoughts on the WGA strike

This video above sums up the Writers Guild of America strike in some pretty simple terms - it's footage of former Saturday Night Live writer and actor Tim Kazurinsky giving his thoughts on the strike.

As a liberal Democrat, I don't fit the typical mold of being pro-union in every single situation, but I do find myself being drawn to that line of thinking more and more. I have some experience on both sides of collective bargaining; I was a member of the United Food and Commercial Workers (UFCW) for over 10 years, and I've also worked in management.

However, when it comes to corporate media companies, I trust virtually nothing they say because of one word: GREED. In my view, the WGA strike is nothing different.

From what I've read, the writers are getting screwed by these media companies, big time. In a word - the Internet. Writers of movies and television shows just want a little, small piece of the pie for their work when it's distributed over the Internet, the channel which will be the dominant medium of the 21st century, or at least the first half of it. Right now, the writers get... nothing.

This strike is primarily about two things - union busting and corporate greed. As far as I'm concerned, the Hollywood powers that be would love to see the union go away.

What's more, these companies are being greedy to the nth power, and it's despicable. This reminds me of the record companies, who pushed, pushed and pushed, keeping CD prices at around $18-20 for years, creating a backlash. The result - all of the unpleasantness on the Internet with the record companies, and the theft of music. I don't favor theft, but the record companies brought a whole lot of their problems themselves.

If the Hollywood companies keep screwing the writers, maybe a similar backlash could occur.

What's most outrageous of all is this: According to a recent piece in the LA Times, when Viacom CEO Tom Freston was fired in 2006, he received a $60 million severance package – more than all DVD residuals paid to WGA members that year combined. That certainly puts it into perspective, doesn't it?

A little trip down memory lane...

I sincerely doubt that any significant boycott will take place, but I'm not buying any movies or giving them as presents this year, and I'd encourage everyone else to do the same. A small gesture, but all movements start with one.
h/t to BobHarris.com for the video clips

The Dow is up! All is well! Yea, right.

I'm soo tired of hearing from (mostly) politicians something that goes like this: "The economy is strong, the stock market is (choose one from: booming, surging or rising)."

For the millionth time - just because the stock market is booming, that doesn't mean that a great deal of America (and as of right now, dare I say the majority) thinks the economy is headed in the right direction.

From Gallup:

I won't pretend to be an economist, but to me, when the stock market is on the rise, that means that company profits are up. And two of the principle ways companies have increased their profits in the last decade are offshoring and downsizing - two things that devastate the average American worker.

Proof positive came last Friday on Bill Maher's HBO show, Real Time With Bill Maher. On of his guests was John Fund of the Wall St. Journal. During a discussion on the economy, when Maher brought up some not-so-great statistics about the economy, the first thing Fund said was, "but the stock market is up!" Thankfully, Maher pounced, and when Fund boasted about a four percent unemployment rate, Maher jumped on that, too.

A low unemployment rate is a good thing, but it's not completely indicative of the "health" of the workforce. When I lost my full-time, well-paying corporate job nearly five years ago, I could not find one that even remotely paid what I was earning. This forced me to wait tables and go back to graduate school. But, the minute I took a part-time job, I was no longer considered unemployed. And right now, there are millions of people in that same boat.

Another critical factor is the price of gas. At right is what the price of a gallon of gas was in San Francisco a week or so ago. (It's probably higher now.) And it's not going to get any better, probably ever. I've read in some places that a barrel of oil could top $150 by the end of the summer.

More on the oil crisis in a separate post later tonight or tomorrow.

My point here is that the economy isn't so rosy because stock prices are high. You know who that's good for? Corporations and the very rich, who are only paying 15 percent on dividends now, thanks to the Bush tax cuts. I find it nuts that a vast majority of the middle class pays well into the twenties, yet millionaires and billionaires pay 15 percent on stock dividends.

When I mention this to some Republicans I know, they accuse me of "class warfare." To me, it's only class warfare when liberals fight back. And we need to fight back more.