Eric Harrington – The Bush Administration PREVENTED States from controlling the bubble!
I have stated in previous posts that if one wants to place blame for the housing collapse, and the current economic crisis it set in motion, one only has to look as far as Alan Greenspan.. It was he and the Federal Reserve’s JOB to reel in a runaway economy with an increase in the interest rates, and instead they lowered interest rates at the very height of the bubble, with no other reasonable intent but to continue the bubble.. I have speculated in a previous post that the reason was to keep peoples minds on their remodel, and off of the trillion dollars being pissed away in Iraq.
Greenspan subsequently used the time tested “Oops, we made a mistake” defense at the Senate hearings, suggesting that he couldn’t believe that the banks would allow themselves to be ruined like that… and he has suggested in a subsequent commentary that the Fed didn’t control long term mortgage rates. While this may be in part true, and it was the subject of much speculation as to why the mortgage rates were not exactly following the Prime rate, as they had in the past, I still maintain that a 2 point rise in the prime still would have likely stopped the housing bubble in its tracks. Instead they lowered them.. It doesn’t take a forensic expert to do the math here.
Now while many are suggesting that it is time to stop placing blame and focus on fixing the problems, with the outcry over AIG’s largess, I think it is far more important that we discover who really CAUSED the collapse, because it wasn’t AIG, and from the information I will present now, it is clear the housing bubble and it’s financial house of cards was not only supported by the Federal Reserve, but also the Bush administration.
Ex New York Governor Elliot Spitzer is now famous for his liaison with a high priced prostitute just months before the collapse, but as we shall see, he was conspicuous not only in his rapid fall, but also for his dire warning about the coming crisis, which was completely stifled by the mainstream media.
Back in February of 2008, Eliot Spitzer, in one of his last acts as Governor of New York, warned about the impending crisis created by predatory lending and revealed that the Bush Administration was blocking state efforts to deal with it. His extraordinary warning in the February 14th edition of the Washington Post is worth quoting at length:
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 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.
Elliot Spitzer submitted hi op-ed to the Washington Post on February 13th. If it had an impact, it was not what Spitzer had hoped for. On March 10th, the New York Times broke the story of Spitzer’s liaison with a prostitute. According to the March 21st Times story, “on February 13th (the day Spitzer’s op-ed went up on the Washington Post website) federal agents staked out his hotel room in Washington.
It is not surprising that the mainstream media found Spitzer’s private life far more important than charges that Paulson’s treasury was prolonging the bubble and intensifying the impending financial crisis that inevitably would follow.
After Spitzer’s op-ed was published, according to journalist Greg Pallast, (March 14th) the Federal Reserve “…for the first time in history, loaned (sic) 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.”
The benefits to the Bush administration in preserving the housing bubble are obvious: It could be argued that the housing bubble facilitated Bush’s re-election because the artificial financial boom covered the trillions being spent in Iraq, money that without the bubble would have caused dramatic inflation, as it did previously with the Vietnam War. As I stated earlier, it kept peoples minds on their remodel, and off of Iraq, but also it artificially propped up the economy keeping the real impact of such unprecedented deficit spending delayed, until the next President could have to clean up the mess.
So Bush got his war, Cheney got his Halliburton reconstruction and Oil price windfall, and Greenspan, Paulson got his banking cronies not only a spectacular bailout, (after they had of course socked away secure fortunes during the bubble) but literally the power to hold America hostage with the credit crisis.. On can easily suggest it was probably these crooks that were the first to sell their stocks in the banking house of cards, and even short the very banks they helped to push to the edge of the cliff. AIG is just a symptom of this crisis, and is simply a (well deserving) scapegoat. Let’s prosecute the real culprits for criminal negligence, fraud, and war-time profiteering. Let’s prosecute the Bush administration and Greenspan for intentionally preserving the housing bubble and its toxic mortgage ponsi scheme until it the very last minute.
And at the minimum, let’s let the world know who it was that caused such global grief and suffering. The same people that allowed New Orleans to drown. The same people that killed a half-million Iraqi’s to further our “interests”, The same people that morphed Al-Kaida from a rag-tag band of extremists to a poster child for anti-imperialism. The same people that now talk about their legacy in speeches for $10,000 a pop.
Yes, arrest them all…