Tuesday, January 13, 2009

Eliot Spitzer

I recently quoted from an article by Eliot Spitzer, the former Attorney General and Governor of New York. I remember being impressed with his stance on the bailout issue. It prompted me to re-examine his record, here are some highlights:

  • 2002: Global Settlement case. Spitzer sued several investment banks over various conflicts of interest. Ten banks were forced to pay $1.4 billion in compensation and fines- among them Bear Stearns, Goldman Sachs, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch, and Morgan Stanley.
  • 2003: Finds evidence that mutual funds were offering preferential services to certain clients. Secures more than $1 billion in fines.
  • 2005: Brings lawsuit against Maurice "Hank" Greenberg (then-chairman and CEO of AIG) and Howard Smith (ex-CFO of AIG), "alleging fraudulent business practice, securities fraud, common law fraud, and other violations of insurance and securities laws." Spitzer later dropped several of the charges, while AIG "announced in February [2006] that it would pay $1.64 billion to resolve allegations that it used deceptive accounting practices to mislead investors and regulatory agencies."
So what do we know based on the above? Spitzer had a track record of winning billion-dollar-plus settlements against the largest investment banks, as well as targeting the CEOs and other executives of those banks. His focus began to shift in the 2004-2005 to mortgage lending and related predatory lending practices by these banks, and named the Bush Administration as specifically blocking investigations into violations of predatory lending laws. Consumer affairs reported in June, 2005:

Spitzer said the OCC's claim "defies common sense and a century of joint state and federal oversight of the banking industry."

"This position, coming as it does after the OCC effort last year to shield nationally-chartered banks from enforcement of state consumer protection laws, is another indication that the Bush administration sides with corporate interests over consumer interests."

Spitzer noted that the OCC's efforts to protect banks has been opposed by all 50 state attorneys general and all 50 state banking superintendents. Numerous consumer groups also have voiced their opposition, as have the NAACP and AARP.

In recent testimony to Congress, New York State Banking Superintendent Diana Taylor said the OCC's actions "usurp the powers of the Congress, stifle state efforts to protect their citizens, and threaten not only the dual banking system but also public confidence in our financial services industry."

Spitzer ended up losing that case in October, 2005, on a jurisdictional basis. He spent 2006 running for governor, and took office in 2007. His time as governor was plagued with several other scandals, and he apparently didn't focus much on this issue until his editorial in February, 2008, entitled "Predatory Lenders' Partner in Crime: How the Bush Administration Stopped the States from Stepping In to Help Consumers." This prescient editorial ends with this paragraph:

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.

Less than a month after his editorial, he was forced to resign amid a prostitution scandal... an investigation that was "opened in the last few months" (as of March 2008).

Did his investigation begin to hit too close to home? I don't know, but consider a few other facts:
A known GOP "henchman", Roger Stone, tipped the FBI to Spitzer's penchant for prostitutes in late 2007, through a letter from Stone's attorney.
Stone's lawyer wrote to the FBI after investigators asked to speak with Stone, although they didn't specify for what purpose. He refused to talk to them, but sent the letter about Spitzer.
Obviously, something is missing there. If the FBI wants to talk to you, you can't ordinarily say "No, but here's some dirt on Eliot Spitzer!" Well, maybe you can if you're the eponymous author of "Stone's Rules": (Admit nothing, deny everything, launch counterattack.) But why would Stone go after Spitzer? Perhaps because Stone was thown overboard by his client (N.Y. state senate leader Joseph Bruno) after leaving this message for Spitzer's father:
This is a message for Bernard Spitzer. You will be subpoenaed to testify before the senate committee on investigations on your shady campaign loans. You will be compelled by the senate sergeant at arms. If you resist this subpoena, you will be arrested and brought to Albany--and there's not a goddamn thing your phony, psycho, piece of shit son can do about it. Bernie, your phony loans are about to catch up with you. You will be forced to tell the truth. The fact that your son is a pathological liar will be known to all.
So, a known GOP dirty-trickster throws some dirt around to save his own skin, and it works. I'll be the last person to argue that Spitzer didn't do it, or that he's clean. But at least he was trying to stand up on the side of consumers, against an all-powerful banking oligarchy and the Bush administration. What did he learn? You better have more dirt on them than they've got on you if you expect to win that fight.

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