Matt Taibbi -- Griftopia: bubble machines, vampire squids, and the long con that is breaking America ====================================================================================================== Yes, it is a rant. A Taibbi fan like me would be disappointed if we got anything less from Taibbi. But, it's also a very illuminating rant that points a finger at each of the problem actors that caused this crisis. You can't fix a problem and you can't prevent it from occurring again if you do not know who and what caused the problem. This recent crisis caused so much pain and took so much away from so many. We desperately need fixes. But, in spite of all the incompetence and thievery, almost no one has gone to jail over the financial crisis. The fall-out and pain from this debacle are still coming down on the middle-class and the those below them. Taibbi's book and his articles in RollingStone magazine are important and valuable because they drive home the importance for action. Where were the watchers? The financial melt-down was a failure at many levels. Loan originators showed a failure of morals and exhibited excess greed in allowing loans that should never have been granted. Loan and security packagers showed incompetence and a failure of risk evaluation by creating too many risky and complex financial instruments; and there is also credible evidence that they hid the high risk and poor quality of the loans inside the securitized packages that they sold. Those in the Federal Reserve Board, Alan Greenspan in particular, failed to protect the system from the excesses of operators within the financial system, even while it was his job to do so. Taibbi is especially brutal at describing Greenspan and both his failure to do his job as regulator as well as his highly politicized support for deregulation and the bubble. The report by The Financial Crisis Inquiry Commission is here: http://fcic.gov/ . While it may not be nearly as much fun to read as this book by Taibbi, it is just as devastating and as critical of those who were in the positions and had the power to prevent this crisis. Unfortunately, both will be read and then we'll pass on. Members of the financial community will learn a lesson from this: They will learn that you can get rich and not be punished, therefore, you should try to do that again. Some of what you will learn from this book: - Alan Greenspan's path the chairman of the Federal Reserve Board and what he did when he got there. - How the home loan industry turned mortgages into a bubble. There is also some help with understanding some of the securities that made it possible and enabled the participants in the financial world to rationalize all that debt. Some of that can be dull, but Taibbi makes most of it entertaining. - How the commodities markets have been turned from a means of hedging and insuring against losses to a speculator's casino that exerts continual pressure for higher prices. Taibbi makes the case that the rising commodity prices were the result of the loosened regulation of the commodity futures markets. The description of the exemptions granted to speculators in the futures markets is especially fascinating. - How the players in the financial markets can securitize and sell anything: the future returns from a city's parking meters, the future cash flow from infrastructure such as a toll road, and more. - Who got what in health care reform, and why before all else, the constituencies that had to be satisfied were the medical insurance industry and the big pharmaceutical companies. - How Goldman Sachs wields power in the and influence on Wall Street and in Washington, D.C. Taibbi describes this chapter as an update and extension of his article on Goldman Sachs in RollingStone magazine (RollingStone, http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405). Who has been hurt by this financial crisis? - Those whose retirement depends on interest bearing instruments whose rates have been kept low in order to assist the banks to recover. - Those who have lost their jobs and who *will* lose their jobs. - Those who are being attacked by state legislatures over their union bargaining rights and are being blamed for government deficits that were actually caused by the creators of the financial crisis. - Those who lost their homes, and *will* lose their homes. And, yet almost nothing has been done to set things right. Why? There is clear information that the crisis was avoidable and identifying those who caused and allowed it. So why is the strongest movement in the country the Tea Party's demand that we cut the deficit? Why is that energy not being channeled into punishing those who caused the previous crisis and into preventing the next one? How has that political energy been sent astray? Corporations rule America. What you have here is corporate democracy. Our U.S. federal government may not come to the rescue of private citizens, but it will save the largest corporations, no matter the cost to taxpayers. Once any class of people becomes powerful and rich enough to have significant influence in politics, a democratic form of government can no longer function. We're currently seeing plenty of examples of this. The recent Supreme Court decision makes this all the worse. The governor of Wisconsin, elected in part by large donations from the Koch brothers is answering their needs by attaching the power of labor unions. The bubble economy creates a cycle of boom and bust that creates the crises that provide the excuse for using taxpayer money for bailouts. This effectively provides a pump that transfers wealth from the middle-class to the financial and corporate elites. The U.S. federal government has saved the largest financial banks, in some cases through the support of mergers. The result is a financial system with an even smaller number of yet larger financial institutions. When the next bubble and crisis occurs, it will likely be even more destructive and the pressure to "save the system" will be even greater. It is simply not reasonable to expect this will not happen again. This morning I heard an interview with Phil Angelides in which he said positive things about the recent financial reform bill passed by the U.S. Congress (H.R.4173 - Dodd-Frank Wall Street Reform and Consumer Protection Act). But, he admitted that there will be strong push-back from industry, and that lots of character and moral fiber will be needed to resist that pressure. I'm cynical: people with character and moral strength were not there last time; it's unlikely that they will be there this time. (The Angelides interview is available at KQED, Forum, 2/22/2011, http://www.kqed.org/a/forum/R201102221000) And, if you do not have time to read this book, at the very least read one or more of Taibbi's articles in RollingStone magazine, for example: http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-20110216 02/25/2011 .. vim:ft=rst:fo+=a: