The $200 billion bail-out for predator banks and Spitzer charges are intimately linked
While New York Governor Eliot Spitzer was paying an â€˜escortâ€™ $4,300 in a hotel room in Washington, just down the road, George Bushâ€™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 thereâ€™s a BIG difference. The Governor was using his own checkbook. Bushâ€™s man Bernanke was using ours.
This week, Bernankeâ€™s Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion dollars to guarantee these banksâ€™ 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 bankersâ€™ bordello: Eliot Spitzer.
Who are they kidding? Spitzerâ€™s lynching and the bankersâ€™ enriching are intimately tied.
How? Follow the money.
The press has swallowed Wall Streetâ€™s line that millions of US families are about to lose their homes because they bought homes they couldnâ€™t afford or took loans too big for their wallets. Ba-LON-ey. Thatâ€™s blaming the victim.
Hereâ€™s what happened. Since the Bush regime came to power, a new species of loan became the norm, the â€˜sub-primeâ€™ mortgage and its variants including loans with teeny â€œintroductoryâ€ interest rates. From out of nowhere, a company called â€˜Countrywideâ€™ became Americaâ€™s top mortgage lender, accounting for one in five home loans, a large chunk of these â€˜sub-prime.â€™
Hereâ€™s how it worked: The Grinning Family, with US average household income, gets a $200,000 mortgage at 4% for two years. Their $955 monthly 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 ainâ€™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 â€œdiscountâ€ they had for two years. Suddenly, payments equal 42% to 50% of pre-tax income. The Grinnings move into their Toyota.
Now, what kind of American is â€˜sub-prime.â€™ Guess. No peeking. Hereâ€™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 arenâ€™t stupid â€“ they had no choice. They were â€˜steeredâ€™ as itâ€™s …more