November 4, 2008, marked the day when Americans went to the
voting booths in droves to say no to eight years of George Bush and the
Republican Party policies by voting in a man that promised to usher in change.
But if one focuses more on the politics and ignores the
policies, one could easily mistake the smell of victory for the smell of a
drenched rat.
Before Obama’s first month was
over he had already taken back many of his campaign promises, expanded the war in Afghanistan, continued a covert war Pakistan, and taken stance in favor of Clinton and Bush’s
CIA sponsored kidnappings.
Obama has been silent on a bill that would allow Americans to be placed in detention
centers, and he's been silent on the Defense Department when it established a civilian workforce for
voluntary and involuntary deployment
overseas.
Is this the change that Obama promised?
Mainstream media has painted Obama as the "new hope" for America. They attempt to demonstrate how he will be different from old Washington politics by reporting his victories against Wall Street.
It was Abraham Lincoln that said,
“Nearly all men can stand adversity, but if you want to test a man's character,
give him power.”
Ironically,
the very financiers that put Obama in this position of power are the same group
of men that Obama, at least on the surface is suppose to be against. Which raises the question—why would members
of the establishment support someone who is seen as a direct threat to them.
“ROC” & STOCK
In his run for president, Barack
Obama raised $745
million, 50 percent more than his rival John McCain, and the most out of
any candidate running. $14
million came from the Securities and investment industry where the first
signs of an economic meltdown originated. Over $650,000
came from Citigroup, a company once headed by Robert Rubin.
Robert Rubin is the 5th
Chairman of the Council on Foreign Relations and served as Secretary of the
Treasury under both Clinton terms. It is during his time as Secretary of the
Treasury that Rubin went on to earn a spot on Market
Watch’s “Top Ten List” as one the most unethical people in business for his
stance on pushing for deregulation. From there he went on to become Director and Senior Counselor of Citigroup, a company
that benefited as direct result of deregulation.
In 1999, the Gramm-Leach-Bliley Act was
ratified by the US Senate and approved by former president Bill Clinton.
The act allowed the mergers of investment banks with commercial banks paving the way Citibank, the largest Wall Street bank, and
Travelers Group Inc., the owners Solomon Smith Barney a major brokerage firm to merge.
Now free from government
oversight, banks were able to fully participate in selling mortgage-backed
securities, which comprised of sub-prime loans, as actual investment vehicles.
Eager to turn a profit, the
banking institutions were ravenous in their pursuit to originate these
sub-prime loans. Their quest was further facilitated with the help of President
Clinton.
During the Clinton
administration, Fannie Mae Corporation was under immense pressure to promote
home ownership amongst
minorities and low-income consumers. In an effort to produce more growth
and profit, Fannie Mae lowered its credit requirements on loans that it
purchases from banks and began buying loans extend to borrowers with poor or
non-existent credit history that later defaulted.
A
typical prime loan consist of borrowers with high credit scores, 20 percent
down payments and with full required supporting documents such as proof of
employment and cash reserves in a savings account.
Sub-prime
loans, however, allows a borrower to state their annual income without
requiring them to submit any documentation. One lender came up with catchy
term for his program: NINJA loans for No Income No Job No Assets required.
African-Americans
and Hispanics found prime loans, which generally went to white borrowers, difficult
to secure but when the sub-prime loans became more prevalent they found
themselves disproportionately
represented amongst the sub-prime
refinance market.
The
large equity position in many of these homes set off a wave of predatory lending
were banks targeted these borrowers and talk them into refinancing their
current loan into a new loan with a higher interest rate. Once the borrower
defaulted the banks took the home and the equity.
United
for a Fair Economy estimated total loss of wealth for people of color to be
between $164 billion and $213 billion for sub-prime loans taken during the past
eight years. When this is looked at carefully, it means losses of between $71
billion and $92 billion for Black/African-American borrowers, and between $75
billion and $98 billion for Latino borrowers for the same period.
Mark
Zachary, a 12-year veteran in the mortgage business before joining Countrywide
in August 2006 told NBC News
that, “You see some of the things that were going on and you just know that
it's not right. It was, what do we do to get one more deal done. [sic] It
doesn't matter how you get there, just how do you get one more deal done.”
NBC News report describe an “anything
goes” culture motivated by increased income for every loan generated.
Citifinancial,
a consumer finance division of Citigroup, found itself in an investigation
before the Federal
Trade Commission.
Former
employee Gail Kubiniec stated that her colleagues would receive quarterly
incentives called “Rocopoly Money” based on how many present borrowers they
refinance. If the goal was met the borrowers would receive Rocopoly Money and
the branch managers would receive bonuses known as “ROC,” return on cash.
To
entice the borrowers into going along with the refinance scheme, Citifinancial
employees would run credit reports, sometimes without the individuals consent,
and look for ways to eliminate debt.
Using
their software called Maestro Citifinancial employees were able to see if the
borrower had open tradelines, and if there was available equity in their home,
the employee would offer debt consolidation and would commonly try to sell the
largest loan.
During
a “blitz night” employees would solicit over the phone and present new loans to
borrowers disclosing only the monthly payment and not the escrow amount for
property taxes and homeowner’s insurance.
Information such as interest rates, financed points, fees, closing
costs, and “add-ons” like credit insurance were disclosed only when the
borrowers demanded.
And if
the borrowers objected to the coverages, the branch manager would sometimes
come to closing and “re-pitch” them. If that failed the borrower would be told
that the loan could be done again without coverages but that it would take
longer. Rather than wait additional time, borrowers grudgingly accepted the
loan’s terms.
Citifinacial
targeted borrowers by zip codes and used a direct mail campaign to inform
borrowers about their “Debt Relief Plan.” In her testimony to the Federal Trade
Commission, Ms. Kubiniec describe these mailers as “deceptive” because most
qualified for a higher interest rate and not the one quoted in the mailer.
Ms. Kubiniec said in
Citifinancial’s formal training employees were advised to quote monthly charges
with and without coverages. But she said that it was common practice at the
time of closing to not disclose specific charges to the borrowers.
In fact, Citifinancial did
“closed folder” closings. This is when the Citifincial employees discuss the
loan with the borrower orally and only open the folder when the borrower has
shown signs that they would actually sign it.
Ms. Kubiniec said that, “[she]
and other employees would often determine how much insurance could be sold to a
borrower based on the borrower’s occupation, race, age and education level.” In
fact she said that, “if someone . . . was a minority . . . I would try to
include all the coverages Citifinancial offered. The more gullible the consumer
appeared, the more coverages I would try to include in the loan . . . . It was
encourage that [employees] . . . try to sell the coverage with the highest
premiums.”
“ORGY OF EXCESS”
After 9/11 former President Bush
encourage Americans to spend more money. According to political researcher
and analysis Tanya Hsu the Nation “borrowed at unprecedented levels so as
to not only pay for its war on terror in the Middle East (calculated to cost $4
trillion) but also [to] pay for tax cuts. ... ” Bush then went on to lower the
reserve requirements for Fannie Mae and Freddie Mac, from 10 percent to 2.5
percent.
This meant, for example, if Fannie Mae or Freddie Mac had $100 they would only be required to keep $2.00 on reserve to back up $98.
This further exacerbated
predatory lending to the point that former New York Governor and attorney
general Eliot Spitzer was prompted to team up with attorneys
general in 49 states to bring litigation to sub-prime lenders engaging in
predatory lending. In Eliot Spitzer’s state, laws were passed to eliminate the
practice.
According to Mr. Spitzer, in
2003, the height of the predatory lending crisis
the Office of the Comptroller of the Currency, a federal agency started nearly
140 years ago to supervise national banks, invoked a clause preempting all state predatory lending laws, thereby
rendering them inoperative.
When 50 states opposed the new
ruling, the OCC filed a federal lawsuit blocking the investigation.
Spitzer’s campaign took on Countrywide and
their owner Bank of America, Goldman Sachs, Merrill Lynch and Citigroup’s
Citibank.
But before his expulsion of
corruption could fully gather steam, Spitzer found himself under investigation
by the Internal Revenue Service and the Federal Bureau of Investigation for suspicious
wire transfers.
The agents initially believe
Spitzer was hiding brides but later found out the money was going to Emperor’s
Club, a prostitution service.
On March 12, 2008, Spitzer
announced that he would resign after threats of impeachment by state
lawmakers. March 17, 2008, Spitzer
effectively resigned.
No further actions were taken in
relation to his investigation into predatory lenders.
A REAL CLASS ACT ?
Citizens desiring retribution for
being wrong by predatory lenders now face a new obstacle.
Federal courts.
On Feb. 18, former President Bush
in his second term scored a major win with the signing of the Class
Action Fairness Act of 2005. The bill was design to restrict class-action
lawsuits. The bill allowed nationwide class actions
cases to move from state jurisdiction to federal jurisdiction.
The same federal government that,
under the OCC, invoked a clause permitting state consumer laws to be violated
in the first place was now in charge of setting things back right.
While state
courts historically ruled in favor of the plaintiffs, federal courts are
tougher when it comes to granting plaintiffs the right to unite and bring a
single suit against the defendant.
Salon.com reported that,
even if cases are heard there is a long waiting list at the federal level
because the system is already backlogged. They went on to say that federal
courts typically refuse to hear class action lawsuits requested by petitioners in
multiple states.
"No one wants to file a
class-action suit at a federal level because they often get dismissed if they
include plaintiffs from a patchwork of different states, all of which have
different laws," explained Jude McCartin, an aide to Sen. Jeff Bingaman,
D-N.M. "There isn't one state law that is applicable, and there is no guidance
for federal judges as to where they can apply just one state's laws."
Justin
Forlenza of Fordham University School of Law wrote:
“. . . the statute will force federal courts to create
and develop substantive federal common law. . . it is
unconstitutional for federal courts sitting in diversity to create substantive
common law. . . neither Congress nor the federal courts have the power to
declare substantive rules of common law applicable in a [s]tate.”
The legislation was opposed by many Democrats
who believed the “the
legislation is a payoff to big business, at the expense of consumers, for
supporting Bush's reelection.”
The passage of the bill was
part of a five-year
campaign by 475 lobbyists representing business groups who argued that class-action
lawsuits enriched trial lawyers who sought sympathetic judges and juries and
then filed in those jurisdictions.
The Senate, despite the pleas
from 40 civil rights
and labor organizations, including NAACP and American Civil Liberties
Union, voted 72-26 in favor of the bill.
The bill even won support from
newly elected to US
Senate Barack Obama.
“Every
American deserves their day in court. This bill, while not perfect, gives
people that day while still providing the reasonable reforms necessary to
safeguard against the most blatant abuses of the system. I also hope that the
federal judiciary takes seriously their expanded role in class action
litigation, and upholds their responsibility to fairly certify class actions so
that they may protect our civil and consumer rights... ”
-
Barack Obama, Feb. 14, 2004
THE RECOVERY TEAM
Obama,
the self-proclaimed reformer declared he would clean up Washington once
elected; however, he tapped a group of unsavory characters to help him take on
the task.
Although
highly critical of predatory lenders Obama, nonetheless, brought in Penny
Pritzker as head of his national campaign-finance chair. Penny Pritzker is said to be creator of the
mortgage-back.
When Superior Bank, co-owned by
her family, failed there were charges of fraud and mismanagement in pursuing business
in the sub-prime market.
In
agreement with Federal Deposit Insurance Corp., Pritzker’s agreed to pay $460
million over 15 years to cover losses in exchange for the FDIC not pursuing
any charges against the owners.
Mrs.
Pritzker turned down the position as Obama’s Secretary of Commerce because of
her “inability to [free]
herself from a series of complex business ties.”
In a statement released when she
learned Obama had reached a decision to make her his first choice she said, “Speculation has grown that I am a candidate for Secretary
of Commerce. I am not. I think I can best serve our nation in my current
capacity: building businesses, creating jobs and working to strengthen our
economy.”
While
declaring that the lack of government regulations was the one of the causes for the financial collapse,
Obama appointed Timothy Geithner as Secretary of Treasury and Lawrence Summers
as Director of the White House's National Economic Council, all who are
followers of Robert
Rubin’s free trade and deregulation policies.
Lawrence
Summers while Chief Economist for the World Bank in 1991 became the focal point
of resentment when an internal memo leaked of Summers saying, "I think the
economic logic behind dumping a load of toxic waste in the lowest wage country
is impeccable and we should face up to that . . . I've always thought that under-populated
countries in Africa are vastly under-polluted."
Summers
also teamed up with Enron’s Ken Lay to tell former Governor Gray Davis that the
problem with California’s energy crisis was that it was over-regulated and that
Davis
should relax environmental controls.
Geithner, according the Washington
Post, was the primary architect of the Bush administration's response
to the financial crisis, which included the $700 billion bailout bill that went
to some of Obama’s contributors
on Wall Street.
Geithner was also head of the
Federal Reserve Bank of New York when Bloomberg filed
a Freedom of Information Act lawsuit on Nov. 7, 2008, requesting to know what
the Fed had done with $2 trillion of taxpayers’ money.
The Freedom of Information Act
allows the full or partial disclosure of documents controlled by the United
States Government. The Fed, being a private
bank and above congressional over-site, has yet to comply.
Obama’s appointees’ raises many
questions as to whose interest will come first. Those of the average American
or the financial elite.
Best
selling author Michel Chossudovsky is a Professor of Economics at the
University of Ottawa and Director of the Centre for Research on Globalization.
In one
of his columns at www.globalresearch.ca
he declares the Obama administration will use the crisis to set up new
international financial regulator agency.
Mr. Chossudovsky asked:
“Where are Obama's
"Main Street appointees"? Namely individuals who respond to the
interests of people across America.
There are no labor or community leaders on Obama's list for key
positions.
Meaningful
financial reform cannot be adopted by officials appointed by Wall Street and
who act on behalf of Wall Street.
Those who set the
financial system ablaze in 1999, have been called back to turn out the fire
The banking
conglomerates call the shots. They decide on the composition of the Obama
Cabinet.
The Wall Street
blueprint has already been discussed behind closed doors: the hidden agenda is
to establish a unipolar international monetary system, dominated by US
financial power, which in turn would be protected and secured by US military
superiority.”