Milford Dispatch #4

BV Dispatch #4       Griftopia, by Matt Taibbi

Reviewed by Jay Gilchrist, GBVD

I have only read a lengthy review of this book in the 12/27/10 edition of The Nation, but maybe that’s OK.  It’s easier to pick out the points that apply to our understanding of our tasks.  Mr. Taibii appears regularly on progressive talk shows from his straight job as a contributing editor for Rolling Stone Magazine.  But he can’t seem to stop writing big books on the various messes we all see in Washington.  He moved from the campaign beat into financial journalism shortly after the 2008 meltdown.  He took on Goldman Sachs in 2009 and muffed a few things and took a lot of heat. But most of the facts proved to be right on.  Griftopia corrects the minor errors and enlarges the spectrum so we can get our head around the whole financial system.

Here’s what struck me as important.  The take away points are below in italics

This book focuses on Bailout America, a broad indictment of the way the political class and the investor class collude –“…a highly complicated merger of crime and policy”  ….as if they had “ reached the cynical conclusion that our society is not worth saving … to abscond with whatever wealth remains…”

A hedge fund operator told him Goldman’s initiative to sell short on the same mortgage deals it hyped was securities fraud.  The SEC got the largest civil settlement in the agency’s history. Still, Goldman had much to do with the collapse of the Greek economy as well.  And, the penalties were comparatively small or non existent.

Our partisan shadow play underscores the painful irrelevance of our political process to the ongoing consolidation of a new political economy.  The right is eternally fighting against Lyndon Johnson; the left, George Wallace. “Political power is being taken from us in a grubby kind of fiat, in little fractions of a percent” every day while we remain unconscious of it.

Take the CDO Squared for example.  It’s a debt instrument composed wholly of debt instruments yet somehow allowed a massive package of substandard BBB or lower mortgages to be nudged upward into AAA.  That’s all most of us care to know – AAA is good.  Yeah  – investment banks as casinos.

Bottom line – all these wild market lurches happened because credit default insurance was completely unregulated. Banks did not have to show anyone they had their bets covered.  Casinos are different. They do not allow bets that people can’t cover.

The whole mortgage fiasco is akin to a shameless con man preying on families with kids: that is looked down on even by other criminals.  Then, when the bailout plans were forming, Goldman Sachs held all of us hostage while they pillaged AIG over everyone’s dissent.  Regarding the bailout:

It was straight out of Scorese’s Godfather film:  Pump up a local restaurant with supplies extorted from your protection-paying debtors.  When leached of its last dollar of profit, set it afire for the insurance money. Taibbi finds the AIG episode makes sense only as a textbook example of gangster capitalism.  The Fed acted like a hopelessly corrupt police force straight out of Serpico.

This is not a new event.  These events have been repeated in our history.  It strikingly happened in 1895 to another pro business Democratic President – Grover Cleveland.  That time the extorter was JP Morgan. It was rather the mirror image event.  Instead of private capital extorting the government by keeping it solvent, this time the extortion was on government funds.

We make regulations to halt these extortions, forget why we put them in place and take them away.  Repeat.

William Jennings Bryan used his populist movement to correct the last takeover by capital.  This time we have tea bagger populists voting, as if on steroids, against their self interest.  That’s new.