An Inconveniant Politician

Earlier this year ex-New York governor Elliot Spitzer was fingered by the FBI in a prostitution sting which ultimately led to his humiliating resignation on March 17, 2008.

To understand fully why Spitzer was targeted, one need look no further than his stint as the New York State Attorney General. Spitzer was a modern day Elliot Ness, taking on corporate white collar crime, securities fraud, internet fraud and environmental protection. While the Bush Administration feigned surprise and then acted self-righteous and indignant over the Enron and Tyco scandals, Spitzer decided to do something about the culture of criminality on Wall Street and sharpened his cleaver.

Up until his downfall, Spitzer was one of the ONLY prominent politicians raising awareness regarding the less than admirable goings on in the banking industry. Like a bull in a china shop, he went over the head of the Securities and Exchange Commission a number of times. He went after price fixing, investment bank stock manipulation, and prosecuted the 2003 mutual fund scandal. He also set his sights upon former NYSE chairman Richard Grasso, claiming that Grasso's $190 million goodie bag was a payoff courtesy of a hand-picked compensation committee consisting of bigwigs from NYSE-listed companies. (Gee, I don't see any conflict of interest there at all...)

And in an act of supreme hypocrisy, he led investigations into prostitution, supporting legislation targeting the sex trade, including a provision aimed at men who frequent prostitutes. (got his come-uppance there, didn't he?)

In short, Spitzer made some very, very powerful enemies... and dangerous ones as well (he kicked the Gambino crime family out of Manhattan's garment and trucking business) He got $1.4 billion in fines from investment banks (looks as so they are getting that back, and then some...)

So reviled was Spitzer that when word of his resignation hit the NYSE trading floor, spontaneous applause broke out among the traders.

So would the Feds carry out their investigation and prosecution of Eliot Spitzer?

Ummmm... no.

On November 6th, U.S. Attorney Michael Garcia announced that Spitzer would not face criminal charges for his involvement in the sex ring citing that no evidence of misuse of public funds was found and therefore pressing charges would not serve the public interest. Ok, so he used his own money (big deal, he's rich), but Spitzer was guilty of violating the Mann Act, which makes it a federal criminal offense to knowingly transport any individual, male or female, across state lines for the purpose of prostitution or sexual activity.

And yet... charges dropped... interesting...

Makes me speculate there were some negotiations... and fine scotch in a smoke filled room somewhere...

This certainly isn't the first time a powerful man screwed himself royally by thinking with his little head instead of the big one. Spitzer obviously thought he was untouchable... and why wouldn't he be? He swims in the world of the big fish... After all, it is common knowledge that rich, powerful men often seek the comfort of high end prostitutes and mistresses... Captains of industry, politicians, bankers, movie stars, athletes, etc... and most of the time the golden rule of discretion is observed... don't ask, don't tell... It is estimated that Spitzer spent somewhere in the neighborhood of $80,000 on comfort food over several years. Hell, some of W's Saudi friends blow $100,000 on hookers in a single weekend. Why is it they never get prosecuted?

And what of this... The FBI took down an entire prostitution ring and the ONLY client charged was Eliot Spitzer?

Really?

Interesting... because one can safely assume that there were other clients... rich and powerful ones to boot...

So the question remains, why were their names not splashed across the front page of the New York Times?

Did Spitzer commit a crime?

yes...

Was he singled out?

In my humble opinion, most assuredly...

Yesterday the New York Times carried this story speculating that perhaps Mr. Spitzer didn't so much as fall... he was pushed... So in other words, one can deduce that the entire point of the sting was not to actually prosecute Spitzer, but to remove him from office, to shut him up and ruin him, to damage his credibility.

One month before Spitzer's downfall, he wrote this op/ed in the Washington Post, which I have decided to post in its entirety... It's contents were as damning as it's foresight was accurate... The boy was clearly onto something and he needed to be removed.

Predatory Lenders' Partner in Crime
How the Bush Administration Stopped the States From Stepping In to Help Consumers

By Eliot Spitzer
Thursday, February 14, 2008; Washington Post - A25

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.

Throughout our battles with the OCC and the banks, the mantra of the banks and their defenders was that efforts to curb predatory lending would deny access to credit to the very consumers the states were trying to protect. But the curbs we sought on predatory and unfair lending would have in no way jeopardized access to the legitimate credit market for appropriately priced loans. Instead, they would have stopped the scourge of predatory lending practices that have resulted in countless thousands of consumers losing their homes and put our economy in a precarious position.

When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that it used the power of the federal government in an unprecedented assault on state legislatures, as well as on state attorneys general and anyone else on the side of consumers.

So there you have it...

Spitzer has been laying low for the past eight months, trying to rehabilitate his image by doing pro-bono work while managing his father's massive real estate holdings...

Approached by reporter in mid-September, Spitzer bemoaned the federal rescue of the insurance giant AIG and recalled how he had forced their chairman to resign in 2005 amid suspicious accounting discrepancies. “I committed my sins, and I’ve paid for them,” he said. Then, regarding AIG he stated, “But I was right.”

Yes he was... too right for his own good.

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