Wednesday, April 2, 2008
New York State Governor Eliot Spitzer, who resigned after a government leak about his involvement in a sex scandal, was reportedly stung by a White House-Wall Street nexus to silence his relentless criticism of their handling of the current financial crisis. Observers predict at least 2.5 million American families may lose their homes this year due to predatory lending practices protected by the White House.
Mr. William Engdahl, author of A Century of War: Anglo-American Oil Politics and the New World Order, argues in Asian Times Online that Spitzer had an impressive record as State Attorney General for pursuing financial crimes like the Enron fraud and corruption by Wall Street investment banks during the 2002 dotcom bubble. He made powerful enemies, such as Hank Greenburg, former head of AIG insurance group, and Wall Street. As New York Governor, Spitzer was attacking Bush administration complicity in fixing covert bailouts for Wall Street friends from taxpayer funds, at the expense of ordinary homeowners, when the ‘scandal’ broke and drove him out of office.
Spitzer’s crime was his harsh condemnation of the White House for the current financial disaster. In February 2008, he testified before the US House of Representatives Financial Services subcommittee on problems in New York-based specialised insurance companies, called “monoline” insurers. He told CNBC he blamed the crisis and its broader economic fallout on the Bush administration.
He said years ago the US Office of the Comptroller of the Currency (OCC) went to court and blocked New York State efforts to investigate the mortgage activities of national banks. The OCC did not stop questionable loan marketing practices or uphold higher underwriting standards. The crisis could have been avoided if OCC had done its job, but the “Bush administration let the housing bubble inflate and now that it’s deflating we’re dealing with the consequences. The real failure, the genesis, the germ that has spread, was the sub-prime scandal,” he said. Fraudulent marketing and very low ‘teaser’ mortgage rates that ballooned higher should have been stopped. When mortgages are marketed, it is mandatory to ensure the borrower can afford to repay the debt; these ground rules were ignored.
Spitzer was doomed with a signed article in the Washington Post on February 14, 2008, titled “Predatory Lenders’ Partner in Crime: How the Bush Administration Stopped the States from Stepping in to Help Consumers.” He blamed the government for the sub-prime crisis: “In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act pre-empting 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.” Indian readers may note that national banks in America, including the Federal Reserve, are private banks, not government-owned.
The former New York Governor alleged the Bush administration failed to protect consumers, but “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.” He accused President Bush of being the “predator lenders’ partner in crime” and a fugitive from justice. He decided to launch a campaign to take on the Bush regime and the most powerful financial powers on earth, thus scripting his own exit.
Diplomat Bhaskar Menon feels there was a political method in the sub-prime mortgage crisis. He argues that since Alan Greenspan began lowering interest rates to get the US economy out of the post 9/11 recession, the descent into economic madness can only be explained as politically motivated. The sub-prime mortgage mess has two elements: first, people with little capacity to repay were given mortgages; second, the mortgages were packaged into investment grade securities.
For unknown reasons, the most sophisticated bankers in the US and Europe, insurance companies and hedge funds plunged deep into the sub-prime mess, and are now saddled with bad debt. New York Times reports an arcane form of risk insurance in the bond market has led to an inverted pyramid of obligations amounting to $16 trillion. Other unconfirmed reports say the funds available to the FDIC, which guarantees inpidual bank deposits, are a quarter of what is needed in the event of a general financial collapse. The ratio of American personal debt to GDP is the highest ever at $3 trillion; if mortgage debt is included, personal debt is over $13 trillion, almost equal to the $14 trillion GDP. America can take the entire international financial system to ruin.
Menon says the political nature of events can be understood by looking at Asia. The American invasion of Iraq in 2003 and the subsequent mess in that country was not, he claims, the result of ignorance or miscalculation, but a deliberate attempt to dismantle Iraq. Add to this the propaganda over Iran’s nuclear programme, the deteriorating situation in Afghanistan and Pakistan, the fragility of Nepal following brutal civil strife, insurgencies in India’s resource-rich and strategically important places, and the current turmoil in Tibet, and you have a macro-picture of Asia being destabilised. It needs hardly to be added that all fingers point to Washington as the source of instability.
One reason could be to destabilise China, because a stable world and peaceful Asia will made China a formidable power. But if the world economy collapses and there is unrest in Asia, Beijing will be cornered. This will also threaten the stability of South East Asia and India. The Islamic world is already in turmoil; matters could get worse with rising regional distress. No doubt America and Europe would also suffer, but their elites have the ability to shift the cost of distress on the general masses while cushioning themselves perfectly. America’s rich have grown richer with every world or regional war! What is more, the Euro-Americans would have staved off an economic and political challenge from Asia. This is now the challenge before Asia’s ruling elites - do they still believe their future lies with the West rather than with their own nations and peoples?