You can count on the fingers of one hand the number of people whose phone calls are put through directly to U.S. Senate candidate Rick Lazio, and they include a man regarded as one of the two most legendary Wall Street financial figures of the go-go-gone 1980s, which resulted in the largest financial crisis in American history.
Besides putting the lie to Lazio’s claim that he is running against “Washington insiders,” his relationship with ultimate insider and mortgage industry guru Lewis S. Ranieri has generated hundreds of thousands of dollars of campaign contributions to the Long Island congressman and a powerful link to the financial sharks who can be expected to send him much more before the November 7 election.
A handwritten list posted outside Lazio’s inner sanctum at his campaign headquarters says it all. Placed next to homey photographs of his past campaigns, the note instructs workers to hold all of his phone calls except from five people: his wife, Pat; close adviser Mike Moriarty (Pat’s brother); the campaign manager from his first race for Congress in ’92, Andrew Siben; the chairman of the Suffolk County Republican Committee, Anthony Apollaro; and Lewie Ranieri.
When asked by the Voice in a quiet moment during his “Mainstream Express” campaign tour of a Finger Lakes winery last Wednesday, “You seem to have a special relationship with Lewie Ranieri—what’s that about?” Lazio lost his bright-eyed campaign grin and normal fluency and said, “Oh, yes, he’s been very helpful to me, yes.”
Asked to explain what Ranieri did to be reimbursed $674.42 by Lazio’s campaign on March 13 for “postage and travel-related expenses,” Lazio said he didn’t know. Further questions were cut off by one of Lazio’s handlers.
It’s likely, though, that Ranieri was on a mission for Lazio. (Calls placed to Ranieri at his empire’s headquarters on Long Island were not returned; he was out of town on business.)
Ranieri created—yes, personally created—the multitrillion-dollar trading market on collateralized mortgage bonds, made possible by the Reagan era’s relaxation of trading rules and his lobbying of Congress to establish federal agencies like Fannie Mae, Freddie Mac, and Ginnie Mae to make mortgage-bond trading more lucrative. Ranieri ranks with junk-bond king Michael Milken among “the most influential financiers of the 1980s,” according to Edward Chancellor’s highly respected book Devil Take the Hindmost: A History of Financial Speculation.
Journalist Michael Lewis, a former bond trader for Salomon Brothers, where Ranieri was once the biggest of what were called the “Big Swinging Dick” traders, wrote in the best-seller Liar’s Poker that Ranieri and Milken were “the great bond missionaries of the 1980s,” crisscrossing the country, trying to persuade institutional investors to buy mortgage securities.
Both Milken and Ranieri took advantage of the dim-witted CEOs of America’s savings and loan industry by showing them how they could make really big money. Deregulation during the Reagan years allowed these mom-and-pop thrifts to plunge into financial transactions about which they knew little. And it allowed crafty lawyers like Charles Keating to take over S&Ls and turn them into moneymaking machines.
Their efforts let loose the S&L demon that cost taxpayers billions to exorcise. But there was a difference between Ranieri and Milken. Milken sold junk bonds. But Ranieri traded federally backed mortgage bonds, and he spawned an entire industry that is so huge now that no amount of re-regulation could dismantle it. All of the generalities about capitalism aside, here is how one little corner of this Monopoly game works: While you struggle to pay off your mortgage on Baltic Avenue, people on Park Place and the Boardwalk cluster all of those debts on thousands and thousands of Baltic Avenues and create financial instruments like bonds that they buy and sell, earning for themselves hundreds of millions of dollars.
Naturally, Al D’Amato fits into this picture. In 1986, according to Chancellor’s book, Milken’s firm, Drexel Burnham Lambert, raised half a million dollars in campaign contributions for D’Amato, who at the time was chair of the Subcommittee on Securities of the Senate Banking Committee. Chancellor notes that D’Amato subsequently lost his distaste for junk bonds and hostile takeovers.
Who knows what Ranieri is asking Lazio to support, but the parallels between D’Amato’s and Lazio’s fundraising careers are remarkable. The congressman chairs the House Banking Committee’s subcommittee on housing, which makes him the key politician for the mortgage-bond industry.
After the state GOP officially crowned him in Buffalo on Tuesday, one of Lazio’s first stops in depressed and downhearted upstate New York was at Byrne Dairy in Syracuse. Byrne officials led Lazio and a crush of media people on a tour of the plant, at one point passing under a $1.5 million maze of pipes and tubes that separate, sort, and pasteurize the milk. Family patriarch Vince Byrne pointed out to a Voice reporter how each pipe and tube served a specific purpose. Eventually, thousands of gallons of milk and other dairy products stream out of different tubes and pipes in the maze. But the complexity of the pipes is something that only an absolute insider like Vince Byrne could understand.
Similarly, Lewie Ranieri created the mortgage-bond industry, which is far more intricate than even the Byrnes’s magic milk-producing maze. Campaign records show that hundreds of valves and pipes of the mortgage industry money machine are squirting lucre right at Lazio.
Ranieri personally gave $1500 to Lazio’s campaign chest in 1997, $500 in 1998, and $1000 in 1999. His wife, Peg, gave $1000 to Lazio in 1998 and $1000 in 1999. Through a soft-money pipe, Lewie himself gave $250 to the National Republican Senatorial Committee in 1997 and $25,000 in 1998. In 1999, he and Peg also gave $2500 each in soft money to the Bank United Corp. fund. Ranieri, no longer on Wall Street, is chairman of Bank United, a Texas thrift. So it’s no surprise that Ranieri & Co. employee Patricia A. Sloan of New York City gave $3500 in 1999 to the Bank United Corp. soft-money fund, helping refuel the PAC after it had given $25,000 in 1998 to the National Republican Senatorial Committee. The Bank United PAC, in turn, gave $1000 directly to Lazio in 1999.
The idea that Lazio is a lightweight or lacks “heft” as a candidate is simply not true. He’s had powerful allies for years. The National Mortgage News reported in 1997 that the huge industry’s top 26 executives gave Lazio more money during the 1995-96 election cycle than they did to any other congressional candidate in the nation. Including D’Amato.
This article from the Village Voice Archive was posted on June 6, 2000