Barack Obama wants to crush an investigation that’s getting too close to him and some really close friends:
Attorney General of N.Y. Is Said to Face Pressure on Bank Foreclosure Deal
Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.
In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.
But here’s where it gets interesting:
Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.
If allowed to be completed, this investigation would pull the scab off the grave wound inflicted on this country by Bill Clinton, Robert Rubin, and Andrew Cuomo with the assistance of Penny Pritzker and Obama’s good friends at Goldman Sachs.
The involvement of Clinton, Rubin and Cuomo in creating the housing/financial crisis has been written about extensively in FA.
Penny Pritzker, not so much.
Pritzker is the financial genius who took a solvent bank and helped destroy it.
Chicago’s billionaire Pritzker family and their partners bought Lyons Savings for a quite reasonable $42.5 million, but were also given $645 million in tax credits. The kicker was that the buyers only had to come up with $1 million in cash, and got access to the $645 million, and all the bank’s deposits insured by the Federal Savings and Loan Insurance Corporation (FSLIC).
The Pritzker family’s Superior Bank “started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC assistance agreement,” said financial consultant Bert Ely in a Oct. 16, 2001, statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs.
Penny Pritzker is known as the “Queen of the Subprime Mortgage” and for good reason.
Ms. Pritzker served as Superior chairman until 1994. During that period, Superior “embarked on a business strategy of significant growth into subprime home mortgages,” which were then packaged into securities and sold to investors, according to a 2002 report by the Treasury Department’s Inspector General.
Subprime mortgages were the Pritzkers’ junk bonds
“The [sub-prime] financial engineering that created the Wall Street meltdown was developed by the Pritzkers and Ernst and Young, working with Merrill Lynch to sell bonds securitized by sub-prime mortgages,” Timothy J. Anderson, a whistleblower on financial and bank fraud, told me in an interview.
“The sub-prime mortgages,” Anderson said, “were provided to Merrill Lynch, by a nation-wide Pritzker origination system, using Superior as the cash cow, with many millions in FDIC insured deposits. Superior’s owners were to sub-prime lending, what Michael Milken was to junk bonds.”
The Pritzkers needed a vehicle to ride those mortgages:
Ely stated, “Superior’s trick, or business plan” under Penny Pritzker’s leadership was apparently “to concentrate on sub-prime lending, principally on home mortgages, but for a while in sub-prime auto lending, too.” In December 1992, the Pritzkers acquired Alliance Funding, a wholesale mortgage organization.
She championed subprime mortgages until Superior Bank was seized by regulators in 2001. She never admitted any wrongdoing though her family paid out $460 million to defray the cost of the bank collapse.
1400 families lost their life savings.
This is also a story about how the Pritzkers made enormous amounts of money while shafting thousands of Americans:
Wanting to avoid a lawsuit, the secretive Pritzkers quickly agreed to what the FDIC hailed in December as the biggest settlement they had ever negotiated. The Pritzkers would pay $100 million immediately, then $360 million over 15 years. But there were lots of little provisions in the agreement that benefit the Pritzkers. First, as former bank consultant and longtime thrift watchdog Tim Anderson notes, the $100 million doesn’t even quite pay back all of the unpaid loans made to the owners. The Pritzkers also pay no interest on the $360 million, and since it is paid over many years, the real cost to the Pritzkers may be only around $250 million. As of September 2002, according to FDIC figures, the insurance fund was still out $440 million after this settlement.
But it gets even sweeter for the Pritzkers. The FDIC also agreed to pay the Pritzkers 25 percent of any claim won in a lawsuit against Ernst & Young. Since the FDIC is now suing for $548 million, the Pritzker share could be $137 million. On top of that, the agreement stated that the Pritzkers get half of any civil penalties from such a lawsuit (after certain agency expenses). The FDIC is asking for triple damages, or $1.64 billion; the Pritzker share could be over $800 million.
Even taking into account the “record” settlement they made with the FDIC, the Pritzkers could make more than $700 million in additional profit for running a financial institution into the ground. They had already profited handsomely, sharing in the more than $200 million in dividends to the owners in the ’90s. They accomplished all this with an investment of about $21 million for each partner—though the Pritzkers had also already benefited from $645 million in tax credits.
via Karl
The Pritzkers made vast fortunes on subprime mortgages and raised boatloads of cash for Obama, and he has guarded their interests.
It all stems from the questionable practices of Penny Pritzker and the Superior Bank of Chicago. Prtizker, by the way, is a major bundler for the Obama campaign. Indeed, the scion of one of Chicago’s wealthiest families has raised between $200,000 and $500,000 for Barack Obama’s Presidential bid. Her family also donated over $40,000 to Obama’s 2004 Senate campaign. Now wonder why Obama is opposed to interest rate freezes and a moratorium on sub prime mortgages: most of his campaign cash is from those who have shamelessly profited from our current economic collapse.
So what does one do with a grifter? Give her a high level position.
Penny Pritzker was Barack Obama’s 2008 Campaign Finance Chairman
During the time Penny Pritzker was hawking subprime mortgages, Jim Johnson, President of Fannie Mae, was buying them as Andrew Cuomo pushed Fannie into buying 51% subprimes. Eager to sell subprime mortgages to Fannie, private institutions (think Countrywide) found predatory lending a windfall once Cuomo declared that the YSP was “not illegal, per se.”
Enter Goldman Sachs.
Goldman Sachs, interesting in duping taking advantage of meeting the needs of investors seeking greater returns, started buying those mortgages from Fannie. After all, once Fannie bought those mortgages became backed by the full faith and credit of the United States.
To accomplish this, Goldman exploits the RMBS, or MBS.
Goldman buys up subprime mortgages, bundles them as MBS’s and sells them to investors.
In selling them, Goldman mislead investors.
Even though the MBS’s contained risky subprime loans and second loans, under rules set by Moody’s and S&P Goldman was allowed to rate them “AAA.” After all, they were guaranteed by the US Treasury. They weren’t worth a damn but Goldman failed to disclose that little detail.
Worst of all? Goldman shorted all those sales. They knew that those securities weren’t worth squat and they bet that they would fail. Again, without disclosing it to investors.
In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Wall St. was eventually bailed out by the Bush administration. The plan was devised by then-Treasury Secretary Hank Paulson.
Paulson’s Wall St. bailout has been labeled a “panic.” It might have been worse than that.
Goldman was saved by Paulson’s bailout plan. AIG was saved by Paulson. Lehman was allowed to fail.
Paulson is a former CEO of Goldman Sachs. Lehman was a competitor. If you were wondering why AIG was saved, this might be something to consider:
The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board’s blessing, AIG later used $12.9 billion in taxpayers’ dollars to pay off every penny it owed Goldman.
Goldman Sachs was the second largest contributor to Barack Obama’s Presidential Campaign, right after a state school.
It’s no wonder Barack Obama wants this investigation killed. It could get really messy for him and all involved.
UPDATE:
Schneiderman has been removed from the investigation.
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The only shocker here is, why are the republicans not raising hell about this and every other crime committed by Obama and his regime?
Isn’t it Hank Paulson?
Removed from the investigation by “whom”?? And yes, why AREN’T the republicans raising HELL about this…. sounds like more Democrat Corruption on an immensely large scale….I would like to see the truth come out….I am tired of Bush and Republicans taking the ‘heat’ for all this BS and con games… Sounds like many all too “Wealthy” Liberal con artists were getting squirmy with the NY Attorney General’s “Investigation” eh?
@johngalt: It is. I meant to fix it.
Most likely the reason the republican party has not said anything in my opinion is there is something against them as well. Or just pure simple laziness.
@DrJohn…. done, drj
Dr.John,
Nice job of getting at some of the roots of the Political and “Wall Street” corruption that went on without anyone caring until the meltdown occurred, and the idiots (Paulson et al.) panicked.
Few AGs will have the guts to do what is right, but if NY’s AG goes to the wall on this, the most powerful Democratic Senators in Congress, such as Barney Frank, Kerry, etc., may end up finally facing the music.
The shrapnel on this spreads far and wide. One little country called Iceland, for example, which went bankrupt from the weight of worthless paper Goldman Sachs sold it’s leadership, will be cheering from the sidelines.
What is truly sad, IMNSHO, is that people like Paulson, Blenheim etc., are egocentric dummies of the first order who reached positions of power, so it is assumed by the general public that they “must know what they’re doing.”
Don’t we hear the MSM sing their praises? Even their employees claim they’re smart guys after all. Wrong. I don’t doubt for a moment that most people here who follow Curt’s FA could “Drink their milkshakes” on any given afternoon.
They took the taxpayers to the cleaners, and then when other guys like W.Buffett nodded their approvals, the MSM, including CNBC went, “whew, because we weren’t really sure, so thanks for making us feel better about our pockets getting emptied.”
The public got PICKED. And, Buffett (Mr. I’m-clean-and-independent) and the likes, had a stake in the game.
Sad? Actually no, . . . it’s pathetic.
And the media covers for it’s leftist cronies. Disgusting.
Thanks for posting this, Dr. John. Karl Denninger of The Market Ticker is on the case as well today. I’ll just post the link and his conclusion:
The Fed’s Zero Interest Rate Policy combined with their debasement of the currency is absolutely killing senior citizens. It’s stealing the life savings of an entire generation – the biggest theft in living memory.
This whole scam and the intertwining of the financial players, companies, and Democratic Party bigwigs and Obama is simply too complex for the average citizen to get their arms around. Republicans trying to explain this will see their audience’s eyes glazing over.
Malice aforethought.
The paving stones were laid with the best of intentions…
Then the Con was unleashed against us all, and who has the strength to stand against such evil. Not John McCain’s little hobbits.
I worked for Drexel Burnham in the late eighties, and for Merrill through out the nineties as a low level employee. One could feel something was wrong with the mortgage department. There was an air of frenetic action, to complete the deals before the hammer came down, but it did not fall until 2007-2008.
There is a great line in Schindler’s list after the Jews are gathered into the ghetto. They are trying to reassure themselves that things can’t get worse; in fact there is some benefit to be had with their change of fortunes. “Yesterday I had a complete thought” one character observes.
In the frantic pace of life, who can distill this evil, and hunt down the mal-actors?
This calls strongly to mind the artist who mapped out all the connections in the LTCM scandal/rescue on the public fisc.
He went mad and committed suicide and the FBI came around afterward to take in his map.
http://www.housepricecrash.co.uk/wiki/Financial_Crisis
In one neat place.
Cue the crickets…
@John Cooper: #10,
“The Fed’s Zero Interest Rate Policy combined with their debasement of the currency is absolutely killing senior citizens. It’s stealing the life savings of an entire generation – the biggest theft in living memory.”
Absolutely right on that one, J.C. The 0% policy has also decimated the motivation for “savings” and energized the stampede toward debt, that is now flying The herd over the precipice. I see nothing bringing it back or hauling back onto the plateau. Only powerful leadership can do that and there is None.
Furthermore, this completely stupid and destructive policy, has forced everyone with 2 nickels to Risk their cash, since that has been the only way to attempt some sort of return on those nickels.
“Wall Street” and Washington have done their best to kill the greatest sociology-economic system in history.
@MataHarley: Thanks, Mata
@James Raider:
And they have done so without regard to their own futures. What good is having millions of dollars when you cannot get basic items for subsistence because you kill off the people that provide those?
I read a piece the other day, and I forget where, that likened DC, Wall Street, and people like Buffet to parasites, all living off the host, with the host being the great multitude of middle-class workers in America providing the subsistence for the parasites. And the only difference between actual, living parasites, and those analogized to them, is that in life, most parasites take no more than they need to and rarely kill the host, and never on purpose. The parasites in DC and Wall St., though, are intent on killing the host, and they do not care if they do so. To them, it is not about their future. It is all about the here and now, or, as I like to call it, short-term thinking.
@James Raider:
Exactly so. America used to be the country of Capitalism, but Wall St. and Washington have stolen all the capital. You’re probably old enough to remember when banks actually needed savers to deposit their capital before they could lend it out to businesses. No more. Banks don’t need depositors these days; They just borrow printed “money” from the fed at 0% interest and loan out ten times as much at 12%.
Although the “money” didn’t exist until the fed printed it and the bank loaned it out, the bank gets to keep the interest (which adds to the money supply and causes inflation). Banks are no longer facilitators of capitalism – they’ve become government-sponsored agents of theft.
@Bill Henslee: #11,
B.H., the Republicans have great difficulty getting Ahead of the message. They too often look like deer (or moose), in Skook’s headlights.
Throughout my meanderings over the past thirty some years through the byways of Wall Street and corporate America, most of the very wealthiest people I have known, including billionaires, were Democrats. These were not socialists of the Obama kind, and they were tight with their money, however, they knew that Dem politicians could be either bought or flummoxed. I’m not suggesting that some Reps I’ve known weren’t also looking for influence with Pols, but they were more ready to help financially and anonymously where they saw need.
So, I get a chuckle reading some of the comments deposited on FA by fly-by trolls who accuse the rich of owning the Republicans, or Republicans being shills for the rich, or blaming the rich for whatever ails them. They seem to sprout like infectious rashes, spreading ideological stupidities that were blended into the cool aid.
@Katherine: Great link! I’d never read the full, sordid story of LTCM before.
#15,
johngalt,
” And the only difference between actual, living parasites, and those analogized to them, is that in life, most parasites take no more than they need to and rarely kill the host, and never on purpose.”
As you know, California has been descimated financially, morally, and educationally with little light evident on the road ahead. From San Francisco to Los Gatos, there is staggering wealth concentrated in hands which are both powerful financially, and influential politically. And yet, those hands have historically refused to invest, really invest, in education, . . . for example. I’ve personally known a great many of those “hands” and can attest to the fact that they are Democrat supporters. There is also an overabundance of holier-than-thou sanctimonious detachment from the “lower class” portion of the society that has so willingly drunk the cool aid.
Yeah, it’s more than a little horrifying to see it all gathered in one place.
It is like each con was a dress rehearsal for the next con, “How much can we drain the public fisc before they figure out what were doing?”
The rest of us are so busy just trying to have our lives and tend our children we can not combat this.
And they’ve taken the lead investigator off the case.
http://www.huffingtonpost.com/2011/08/23/new-york-attorney-general-eric-schneiderman_n_934517.html
When TARP was going down, I was writing/calling every congress person I could.
My father taught me long ago, “If someone asks you for a lot of money, quick and don’t question the reason, put your hand on your wallet and run, you are being ripped off.”
Dreams from my father indeed.
Because the GOP is afraid that their dirty laundry would wind up in public too.
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Well, the development this morning that Schneiderman, who intended to do his job on behalf of New York citizens, was summarily kicked off the 50-state panel by the head of the commission just about says it all. Obama, Geithner and Holder will never let anyone get close enough to indict Barry.
Thank you, Dr. John, for your informative post, which I intend to ciruclate. The truth is stranger than fiction.
Obama has his hands in the public cookiejar