Matt Taibbi: What Wall Street accomplished

Through his hard-charging and entertaining investigative pieces in Rolling Stone, Matt Taibbi has repeated snuffed out that little spark of hopefulness in me. His latest article in Rolling Stone was the most crushing of all: "Wall Street's Big Win: Finance reform won't stop the high-risk gambling that wrecked the economy - and Republicans aren't the only ones to blame." Taibbi proposes that the recent Wall Street "reform" fixed about 10% of the problem, and that it was designed primarily to cover up an uncomfortable political truth:

The huge profits that Wall Street earned in the past decade were driven in large part by a single, far-reaching scheme, one in which bankers, home lenders and other players exploited loopholes in the system to magically transform subprime home borrowers into AAA investments, sell them off to unsuspecting pension funds and foreign trade unions and other suckers, then multiply their score by leveraging their phony-baloney deals over and over. It was pure ­financial alchemy – turning ­manure into gold, then spinning it Rumpelstiltskin-style into vast profits using complex, mostly unregulated new instruments that almost no one outside of a few experts in the field really understood. With the government borrowing mountains of Chinese and Saudi cash to fight two crazy wars, and the domestic manufacturing base mostly vanished overseas, this massive fraud for all intents and purposes was the American economy in the 2000s; we were a nation subsisting on an elaborate check-­bouncing scheme. And it was all made possible by two major deregulatory moves from the Clinton era: the Gramm-Leach-Bliley Act of 1999, which allowed investment banks, insurance companies and commercial banks to merge, and the Commodity Futures Modernization Act of 2000, which ­exempted the entire derivatives market from federal regulation. Together, these two laws transformed Wall Street into a giant casino, allowing commercial banks to act like high-risk hedge funds, with a whole new galaxy of derivative bets to lay action on. In fact, the laws made Wall Street even crazier than a casino, because in a casino you have to put up actual money to make bets. But thanks to deregulation, financial companies like AIG could bet billions, if not trillions, without having any money at all to back up their gambles.
The Republicans are to blame, right? That's only half right. Consider what happened to the "Volcker rule," a proposal designed to restore the firewall between investment houses and commercial banks. It never had a chance . . . [More . . . ]

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Bill Moyers: Our Capitol’s being looted

Bill Moyers, Robert Kuttner and Matt Taibbi had a vigorous discussion focusing on the health care "reform" and Wall Street "reform": Moyer's take-home statement from the video:

Truth is, our capitol's being looted, republicans are acting like the town rowdies, the sheriff is firing blanks, and powerful Democrats in Congress are in cahoots with the gang that's pulling the heist. This is not capitalism at work. It's capital. Raw money, mounds of it, buying politicians and policy as if they were futures on the hog market.
Robert Kuttner:
[T]hose of us who consider ourselves progressives invested so much in this remarkable figure, Barack Obama. And we read our own hopes into him. We saw him as a potentially great president. We saw this as a potentially transformative moment, I certainly did, where he could've chosen to be the kind of president Roosevelt was. And it turns out that's not who is characteralogically and that's not how he chose to play the moment.
Matt Taibbi:
[T]his individual mandate that's going to force people to become customers of private health insurance companies, the Democrats are going to end up owning that policy and it's going to be extremely unpopular and it's going to be theirs for a generation. It's going to be an albatross around the neck of this party . . . The Democrats are in exactly the same position that the Republicans were in once the Iraq War turned bad. All the Republicans have to do now is sit back and watch the Democrats make a disaster out of this health care effort. And they're going to gain political capital whether they're in the right or not. And I think it's a very- it's a terrible thing for the party.

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Matt Taibbi goes to war against Goldman Sachs

Rolling Stone's Matt Taibbi is one of my heroes. I've often recommended his investigative pieces at DI. Taibbi's latest Rolling Stone article is an all-out attack on Goldman Sachs as the culprit behind the bubbles and busts. No, they don't "just happen." [Note: the full article is here]. No, Goldman Sachs isn't the only culpable entity, but Goldman serves well as a deserving target for the kinds of criminal abuses that have destabilized the U.S. economy and crushed the savings of so many people. Here's one example of many by Taibbi, this one explaining how it was that so many shitty mortgages were approved by lenders across the United States. Step One for this problem (as it is for so many other problems with the economy) is to eliminate sane standards for evaluating the economic worth of commodities, individuals and entities. The first step has the intentional function of destroying the possibility of honest valuation, thereby setting the stage for confusing and misleading investors:

Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages. By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that shit out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

Beware, that if you watch the videos of Taibbi explaining this blatant robbery of investors and taxpayer, as well as the Democrat complicity with this mess, you will seethe. You will feel betrayed.

Continue ReadingMatt Taibbi goes to war against Goldman Sachs