On reading Matt Taiibi's latest RS piece on Wall Street and the Texas suicide note in the same day

At one level, we can reassure ourselves that Joe Stack, the pilot who crashed his small plane into the Austin IRS offices, was a whack-job who overreacted to a series of business and personal reversals, generalized these personal problems into "societal issues" (sort of the way bloggers do, come to think of it), and went over the edge.

Then you read Matt Taiibi's latest essay in Rolling Stone (reproduced by Zerohedge at this link,

http://www.zerohedge.com/article/taibbi-goldman-raped-taxpayer-and-raped-their-clients, and you're not so sure anymore. Taiibi likens Wall Street's record "bonuses" and banner profit years to the take of con artists, and details the different grifter techniques which Goldman Sachs, JP Morgan Chase, BofA, et al. have used to make boatloads of money in America's eviscerated economy. The essential point he makes is pretty simple, and it's the one that Eliot Spitzer and William Black have made elsewhere with greater legal precision: it is not a coincidence that these "Too Big to Fail" counting houses are about the only successful companies in America's shitty business environment. In effect, GS, JPMorgan and the rest have profited because they are the direct beneficiaries of most of the "money" the Federal Reserve has conjured out of thin air to "deal" with the financial crisis. This notional money (part of Quantitative Easing, or the money printing operation) has found its way into the hands of the Too Big to Fails. The enormous sums made available to the Big Banks, coupled with the super-low interest rates charged to the banks to borrow it, mean that GS & the Boyz can print money with almost the same alacrity as the Federal Reserve.

It is highly telling, as Taiibi points out, that outfits like Goldman and JPMorgan are making most of their money in "prop trading:" that is, proprietary trading or trading for their own account. They're not making money for "clients," as in the bygone days when there used to be "stock brokers." No, Goldman Sachs is now a freshly-chartered "bank holding company" (its membership application fast-tracked by its friends in Washington), and it exists to make money for itself. All of which is enabled and potentiated by Washington, because if GS Failed, well...well, we're never going to find out what would happen if it failed, because Obama assures us that the financial system has been brought back from "the Brink," and it's because of Washington's intervention in favor of Wall Street that we avoided another Great Depression, when even the greatest banks crashed. No, this time it's different: the American people have again been sacrificed, but the banks were saved with the dwindling resources of the federal government.

As Taiibi lucidly explains, the easiest, virtually guaranteed way to make a gigaton of money is by playing a simple spread game, borrowing cheap from the Federal Reserve through such windows as the Primary Dealer Lending Facility and buying something as basic as a 10-year Treasury yielding 3%, in effect recycling the money the Fed just gave you and forcing the Treasury to pay the vig. If the spread is 2%, and the amount borrowed (or raised by selling the Fed your crap portfolios of shitty mortgage-backed securities at par value when they might actually be worth 22% of that), is large enough (and we're talking about huge amounts), it is enough to make enough money to fund all those obscene bonuses. Add to this the infamous back-door bailouts paid through AIG by the New York Fed (facilitated by Tim Geithner) which added another $14 billion or so to Goldman's bottom line (on claims that were essentially worthless), and you start to wonder: when President Zero says that Lloyd Blankfein (of GS) and Jamie Dimon (of JPMorgan) are "savvy businessmen" and just like Alex Rodriguez or someone, is it that Obama is just kind of clueless or just kind of corrupt? I mean, how do you miss something like this? Who can't make money borrowing $1 billion at 1/2 percent and investing it in guaranteed returns of 3%? How would you not make $25 million? How savvy do you have to be? And why are we helping them do it? Don't they own enough islands in the Bahamas already?

These things take some time to understand, but they are not that arcane or abstruse. In an economic environment where the common man can derive virtually no yield from stock market investments, or money market or savings accounts, or from investments in housing, how is that the Fat Cats of Wall Street are making an absolute killing? Record profits? I mean, come on. This isn't savvy business; this is playing a rigged and corrupt game, a con, as Taiibi says. And the con is on the American people. These "banks" (or casino operators who play their own craps table with loaded dice) aren't lending to the American people. Commercial and residential lending is way down. Yes, it's true this is also because of a dearth of qualified borrowers, because the economy sucks. But then what is the point of making all this money available to the Too Big to Fails? Why are their prosperity, and their obscene profits, such a matter of import to the Obama Administration and the Democratic leadership of the Banking Committees, et al?

So Joe Stack blew his stack, finally, and voiced many resentments about all of these things, echoing many of the complaints one hears from Tea Party people, and from Americans in general. I couldn't follow Stack's argument, really, about his specific grievances concerning the tax code and certain amendments affecting his work as a software engineer. The Mainstream Media have been quick not to label him a terrorist because that's a term that is applied to Muslims with grievances against the United States, not to Americans with grievances against the United States. An American flying a plane into a building for "political" reasons is a nut; a Muslim doing so is an "enemy combatant." If the two major parties start calling all the Tea Party people "terrorists," their monopolistic hold on national politics might become more tenuous than it already is. So official hypocrisy will be maintained, even though Stack sounds more or less like the manifesto of every Tea Party rally I've read about, an amalgam of Left, Right, Libertarian, Aryan Nation, NASCAR, Toby Keith ideas all mooshed into an incoherent rant -- yet taken as a whole, as coherent as the Obama Administration's fawning admiration for Lloyd Blankfein and Jamie Dimon.

Yet the MSM must be careful not to treat Stack with kid gloves too soft for the occasion. They can't let him become a modern-day John Brown, because his resentments are really too pervasive. So he will be gradually isolated, personalized, differentiated, and "background checks" will reveal his fundamental instability, and the MSM may, in time, even reach for the Terrorist label to deal with him. It's a lot easier, and more profitable, than calling Lloyd Blankfein and Jamie Dimon con men.

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?