While no detail has been left behind in the mainstream press’ prurient “probing” into L’Affair Spitzer, what’s not known is that there was another breathless and no less illicit tryst going on in the same town at the same time.

Greg Palast reports:

While New York Governor Eliot
Spitzer was paying an ‘escort’ $4,300 in a hotel room in Washington,
just down the road, George Bush’s new Federal Reserve Board Chairman,
Ben Bernanke, was secretly handing over $200 billion in a tryst with
mortgage bank industry speculators.

Both
acts were wanton, wicked and lewd. But there’s a BIG difference. The
Governor was using his own checkbook. Bush’s man Bernanke was using
ours.

This week, Bernanke’s Fed, for the first time in its history, loaned a selected coterie of banks one-fifth of a trillion
dollars to guarantee these banks’ mortgage-backed junk bonds. The
deluge of public loot was an eye-popping windfall to the very banking
predators who have brought two million families to the brink of
foreclosure.

Up until Wednesday, there was one single, lonely politician who
stood in the way of this creepy little assignation at the bankers’
bordello: Eliot Spitzer.

Who are they kidding? Spitzer’s lynching and the bankers’ enriching are intimately tied.

How? Follow the money.

Palast goes on to give some context to the subprime meltdown:

Now, what kind of American is ‘sub-prime.’ Guess. No peeking. Here’s
a hint: 73% of HIGH INCOME Black and Hispanic borrowers were given
sub-prime loans versus 17% of similar-income Whites. Dark-skinned
borrowers aren’t stupid – they had no choice. They were ‘steered’ as
it’s called in the mortgage sharking business.

‘Steering,’ sub-prime loans with usurious kickers, fake inducements
to over-borrow, called ‘fraudulent conveyance’ or ‘predatory lending’
under US law, were almost completely forbidden in the olden days
(Clinton Administration and earlier) by federal regulators and state
laws as nothing more than fancy loan-sharking.

But when the Bush regime took over, Countrywide and its banking
brethren were told to party hardy – it was OK now to steer’m, fake’m,
charge’m and take’m.

But there was this annoying party-pooper. The Attorney General of
New York, Eliot Spitzer, who sued these guys to a fare-thee-well. Or
tried to.

Instead of regulating the banks that had run amok, Bush’s regulators
went on the warpath against Spitzer and states attempting to stop
predatory practices. Making an unprecedented use of the legal power of
“federal pre-emption,” Bush-bots ordered the states to NOT enforce
their consumer protection laws.

In fact, so frustrated was Spitzer with the Bush Administration’s role
in thwarting him from curbing predatory lending practices, he wrote an
op-ed piece about it in the Washington Post.  Spitzer writes:

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.

Palast picks up the story…

When the housing bubble burst and the paint flaked off, investors
were left with the poop and the bankers were left with bonuses.
Countrywide’s top man, Angelo Mozilo, will ‘earn’ a $77 million buy-out
bonus this year on top of the $656 million – over half a billion dollars – he pulled in from 1998 through 2007.

But there were rumblings that the party would soon be over. Angry
regulators, burned investors and the weight of millions of homes about
to be boarded up were causing the sharks to sink. Countrywide’s stock
was down 50%, and Citigroup was off 38%, not pleasing to the Gulf
sheiks who now control its biggest share blocks.

Then, on Wednesday of this week, the unthinkable happened. Carlyle
Capital went bankrupt. Who? That’s Carlyle as in Carlyle Group. James
Baker, Senior Counsel. Notable partners, former and past: George Bush,
the Bin Laden family and more dictators, potentates, pirates and
presidents than you can count.

The Fed had to act. Bernanke opened the vault and dumped $200
billion on the poor little suffering bankers. They got the public
treasure – and got to keep the Grinning’s house. There was no ‘quid’ of
a foreclosure moratorium for the ‘pro quo’ of public bailout. Not one
family was saved – but not one banker was left behind.

Every mortgage sharking operation shot up in value. Mozilo’s
Countrywide stock rose 17% in one day. The Citi sheiks saw their
company’s stock rise $10 billion in an afternoon.

And that very same day the bail-out was decided – what a coinkydink!
– the man called, ‘The Sheriff of Wall Street’ was cuffed. Spitzer was
silenced.

Whatever you think of Palast, this is an important story and at the very least should be vetted and investigated by Congress (since it’s too much to ask the mainstream news to report the actual news). 

Read the whole ugly story (and hear his interview on Air America) at Palast’s site. 

Now that the “why” has been answered, what about the “how”?  How did Spitzer walk into this?  Was it a sting on a prostitution ring that he got caught up in? 

No. 

The investigation was on Spitzer himself.  The prostitution ring was the cherryy on top.  But the chain of investigatory events is wonky, the timeline doesn’t make sense, the “just cause” doesn’t quite wash, and the whole affair brings the possibility of warrantless wiretaps into the equation. 

And that’s how Elliot Spitzer learned what Richard A. Clarke, Valerie Plame and Don Siegelman learned before him …