March 29, 2008: A raw March morning in Albany. The wind whistled round the Empire State Asylum for the Politically Insane. Dr. Edwards, the new chief of staff, was making his first tour of the facility. Dr. Murchison, his predecessor, was acting as guide. First up, the day room. X Governor Eliot Spitzer had slipped his restraints and was running amuck. Several orderlies were trying to tackle him. But Spitzer was as nimble as a he-goat. Springing to a table top, he kicked a game of checkers into the laps of State Senate majority leader Joe Bruno (R.) and Assembly speaker Sheldon Silver (D.). The two were deep in a dream of divine right; a not uncommon condition in places where pols hang together forever. Those who hang separately have other problems...
“Welcome to my nightmare” cackled Spitzer as he stripped to his socks in a split second. “Begone lewd varlet” commanded Bruno and Silver. The orderlies made a grab for Spitzer's legs but the Luv Guv (as the nurses called him) evaded their grasp. With a spray of spittle and a cry of Hi Yo Silver, he sprang at the state reps. Silver dodged neatly. Bruno didn't. Spitzer landed on him full force, rassling him to the ground, screaming something about helicopters, a hot poker, and the senator's posterior. A nurse jumped into the fray and jabbed Spitz with a mega dose of horse tranquilizer. That did the trick. The orderlies wrapped Spitz in canvas and stood him in a corner right next to current Governor David Paterson. Paterson didn't notice. He was busy broadcasting his extramarital affairs through a megaphone made from a rolled-up newspaper. A crowd of inmates pretending to be reporters took notes with invisible pencils. “I'm from the Albany Times-Union” shrieked one “and we were not used by Spitzer!”*
“It's not like this all the time” apologized Doctor Murchison “the moon must be full.”
On the sun porch things were quieter. US Senator Hillary Clinton was seated at a desk by the window, making notes on a legal pad. (Patients well enough to be on the porch were allowed to have pencils.) The pad was bulging with pages of closely written notes. Hillary suffered from a form of Napoleon Syndrome. She believed she was entitled to be president. Her belief was buttressed by a complex delusional system, including the conviction she'd already been POTUS. Albeit secretly. Like Pope Joan.
“What are you working on today, Madam President?” asked Doctor Murchison.
“My plan to fix the housing crisis” said Hillary, without looking up.
Muchison and Edwards looked over her shoulder at the notes, half expecting to see the phrase “all work and no play makes Hill a dull girl” repeated again and again. But no. Hillary had indeed been working on a housing fix. Taxpayers, in the form of the Federal Housing Administration (FHA) would “stand ready”** to spend billions upon billions to buy, restructure, and resell failed mortgages. The fix would be “designed to be self-financing over time-- so it would cost taxpayers nothing in the long run.”
“Note the patient's inability to realistically conceptualize time” hissed Dr. Murchison to Dr. Edwards “and her disconnect from the immediate financial needs of wage earners.”
But Edwards didn't hear Murchison's comments, so startled was he by another aspect of Hillary's plan. Her fix was to be guided by a group of economic experts headed by Federal Reserve Chairman Alan Greenspan and former US Treasury Secretary Robert Rubin, chairman of the board at Citigroup.
Dr. Edwards had been on staff at the National Subprime Lending and Derivative Disease Center, so he was familiar with the role Alan Greenspan, via his interest rate cuts and inability to confront lenders, had played in creating the epidemic known as the Housing Bubble and its secondary manifestation, the Credit Crunch. As for Robert Rubin--! Before becoming chairman of the board at Citigroup, Rubin had been chairman of the executive committee. Top exec Rubin snoozed while CDO sickness metastasized. Massive write-offs and write-downs of CDOs and other mortgage related debt gave Citi the shakes in 2007. First quarter prognosis 2008? Not looking great.
Then there was Citi's bailout of Ameriquest Mortgage, as facilitated by Robert Rubin at the behest of Massachusetts Governor Deval Patrick. Patrick was a former board member at ACC Capital, Ameriquest's parent company. Ameriquest was a top subprime lender, with a predatory record.
They did business in 49 states: attorneys general in all 49 sued. Ameriquest settled in 2006, but admitted no wrongdoing. The settlement required, among other things, that Ameriquest not encourage borrowers to lie about their incomes. By early 2007, Ameriquest was coming apart. After Patrick contacted Robert Rubin, Citi kicked in a capital infusion and line of credit. The deal raised eyebrows because Citi did extensive business with the State of Massachusetts. After Ameriquest folded, Citi acquired chunks of ACC Capital, including Ameriquest's wholesale origination lending unit, Argent Mortgage. Argent is now at the center of a major mortgage fraud prosecution in Florida, with prime players based in New York State.
“Sick sick sick” thought Dr. Edwards as he eyed Hillary's housing fix. He conveyed his diagnosis to Dr. Murchison by making a whirling motion near his head with his finger. Murchison nodded and mouthed “back to the day room”.
Hillary seemed to sense something amiss. She ducked her head down close to the desk. Her eyes darted back and forth. “Damn those snipers” she said to an imaginary entourage “This was only supposed to be a greeting ceremony. Kiss the baby, grab the flowers and go.”
Suddenly Hillary leaped to her feet. Bending low to the floor (in her mind, the tarmac of an airport in Bosnia) she bolted for the door. Murchison pressed a buzzer on the wall. Edwards took note of where it was located. He had a feeling he'd be needing it. NYC Mayor Michael Bloomberg had just entered, carrying his Congestion Pricing Plan.
Carola Von Hoffmannstahl-Solomonoff
*'Times Union' State Editor: We Were Not Used By Spitzer, Joe Strupp, Editor & Publisher, 03/24/08
**Clinton proposes Greenspan lead foreclosure group, Jeff Mason, Reuters, 03/24/08
Sources include but are not limited to:
Update: Citi To Post Deeper-Than-Expected 1Q Loss: Oppenheimer, Ed Welsch, Dow Jones Newswires, CNN, 03/26/08
Former Vice President, Account Executive of Subprime Mortgage Lender Charged with Racketeering, Mortgage Fraud, and Grand Theft, News Release: Office of the Attorney General of Florida, 03/25/08
Charges announced in fraud case involving Argent, Sunstate, Tampa Bay Business Journal, 03/25/08
The Housing Crash Recession: How Did We Get Here?, Dean Baker, NOW on PBS, Week of 3/21/08
Robert Rubin on the job he never wanted, Carol Loomis, Fortune/CNNMoney.com, 11/27/07
Governor made call on behalf of lender, Frank Phillips, Boston Globe, 03/06/07
Millions to settle loan abuse, Kathleen Pender, San Francisco Chronicle, 01/24/06
Workers Say Lender Ran 'Boiler Rooms', Mike Hudson, E. Scott Reckard, Los Angeles Times, 02/04/05
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