June 27, 2009

Matt Taiibi & the trompe l'oeil of American politics

I just finished reading Matt Taiibi's latest "screed" on America's economic meltdown (his brilliant writing is always called a "screed" by writers with fewer guts than Matt has) in the latest issue of Rolling Stone. RS doesn't like giving away its magazine on the Internet, but I tracked Matt's piece down through a pdf uploaded by Barry Ritholtz on his Big Picture blog. Barry's obviously another fan. No one writes like Matt, not even Hunter S. Thompson, said by some to be Matt's inspiration. I think Hunter was too booze-and drug-addled to handle the depth of Taiibi's analyses, for while Taiibi's writing is hilariously profane and vicious (he uses the term "asshole" to describe people who are obviously greedy, lying assholes, for example), it strikes me as extremely well-informed and meticulous.

"The Great American Bubble Machine" is about the specific role of Goldman Sachs in a series of Wall Street scams dating back to the Depression, although the focus is on more recent times: the dot.com bust and the subprime mortgage crisis, which has finally blown the American economy to smithereens. Because of the focus on Goldman Sachs, some readers of this piece have derided it as "anti-Semitic," but that's way, way too easy. That's not what it's about at all--it's not an attack on the "money lenders" or the "Elders of Zion." It's about the systemic rot at the base of the American economic and political worlds, about the absolutely corrupting influence of the huge concentration of wealth in a few hands and how the holders of this wealth have managed to rig the political and economic system so it does what they want, which is to keep funneling all the money to them. Or as Taiibi puts it, if the American economy is circling the drain, Goldman Sachs is that drain. I thnk the tight focus on one investment bank (the most powerful in the world) makes for a good narrative line, but in reality the corruption extends far outward into all the major financial players who gleefully pocketed bilions while pension funds, old folks and all the little American people watched ther life savings go up in smoke. Or down the Drain.

Goldman Sachs bundled together crappy mortgages, paid Moody's and Standard & Poor big fees to imprint them with their Triple A gold seal, and then made money by simultaneously taking short positions by means of huge credit default swap positions with AIG, Insurer-Croupier to the World of High Finance. When it all went bust-o, Hank Paulson, former Chairman of Goldman Sachs, arranged to bail out GS and all the other major players (except major competitor Lehman Brothers) and also pulled off the neat trick of bailing out AIG, so that Goldman's CDS bets could be made good. That's a pretty neat double play, and all with your money! How can there be any risk when GS sells shit at the price of gold and is reimbursed by the Fed for its systemic fraud (how can you, while being honest, sell a bundle of mortgages where the borrowers are meth-addicted ex-cons in Riverside County with no jobs, no income and a sub-zero FICO score to a Norwegian teachers fund, representing that the investment is rock solid, and then at the same time brag, as GS did, that their REAL money was being made on the short side of the same investment?). And then Paulson & Bernanke make sure that the insurer, AIG, has the wherewithal to pay off your CDS bets just to make it all a very good year.

So how do Goldman and the rest of the thieves on Wall Street get away with this grand larceny in broad daylight? Easy. Regulatory capture. They own the agencies in the federal govenment which are supposed to be keeping an eye on them. Most of the regulators, in the recent past, just walk in and out of their jobs with Goldman Sachs, like Paulson and Robert Rubin, Clinton's Secretary of the Treasury, who was instrumental in getting the Commodities Futures Modernization Act passed, that is, in getting rid of any oversight whatsoever over CDS bets. Goldman was the single largest contributor to Obama's campaign, and they spend a lot of money on key Senate members. So if you're wondering how all the Wall Street firms could blow a $13 triilion dollar hole in the American economy and nary a perp faces any kind of legal jeopardy (can you imagine how grateful they all are to Bernie Madoff for drawing the public's fire?), that's why. "It's all in the past," as Barack would say, which, oddly enough, is where most criminal acts happened. But there will be no enforcement whatsoever for criminal securities fraud which occurred on a truly massive scale, because that's not how the Mafiosi punish each other. They get together, they talk, they divide up the territory, maybe somebody (Lehman) has to get rubbed out.

Like the famous ambiguous drawing above, at a certain point the picture snaps into place and you can see the vase as clearly as the faces. It's right there in front of you. The high finance crooks of Wall Street are gangsters who have managed to infiltrate law "enforcement" to such a degree that they can operate with impunity. The only check on their ability to make money is the gullibility of the investors - nothing else. And they are "too big to fail," so that there is no chance of real loss - if they overextend themselves, the very people they defrauded will be forced to pay to bail them out, because they're so "essential" to the economy. Neat, huh?

So as to Obama - what am I saying? That he's the Capo di Tutti Capi, the Chicago Gangster now in charge of the whole racket? That cap-and-trade sets up a Climate Exchange in Chicago where carbon credits can be traded because a "private" solution allows the hucksters on Wall Street to game that system too? That Obama's a fake who himself fleeced the general public into millions of private donations (mine included), enough to get himself elected the first time, and will fill his war chest with the usual Gangster Tributes for the second run since the ordinary citizens will realize in 2012 they've been conned? That people will start looking at the stuff about Tony Rezko in Chicago with a slightly more, shall we say, suspicious attitude?

I'm not sure. That's the problem with this creepy kind of conspiracy thinking, of the sort that Taiibi induces with his brilliantly incisive writing. Because he's not really wrong when he says we have a gangster economy and a ganster political system, just as Russia did between the fall of Communism and the collapse of its economy in the late Nineties, during the era of the Oligarchs.

Yeah, partly it's that Gulfstream jet ride to New York. His wishy-washy approach to health care reform. His preventive detention bullshit. Now his "signing statement" crap. His hands-off approach to the corruption and crimes of the Bush Administration. Who is this guy, and how does this whole system work now?

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