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Matt Taibbi has written a pretty amazing article about the financial situation


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#1 Fiz

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Posted 22 March 2009 - 01:47 PM

Taibbi sorta personifies that furious middle class rage that used to typify american journalism before it was corporatized.

About Thomas Friedman, he said...

On an ideological level, Friedman's new book is the worst, most boring kind of middlebrow horsepoo. If its literary peculiarities could somehow be removed from the equation, The World Is Flat would appear as no more than an unusually long pamphlet replete with the kind of plug-filled, free-trader leg-humping that passes for thought in this country.

Ten minutes after his talk with Nilekani, he is pitching a tent in his company van on the road back from the Infosys campus in Bangalore:

As I left the Infosys campus that evening along the road back to Bangalore, I kept chewing on that phrase: "The playing field is being leveled."

What Nandan is saying, I thought, is that the playing field is being flattened... Flattened? Flattened? My God, he's telling me the world is flat!


This is like three pages into the book, and already the premise is totally fuged. Nilekani said level, not flat. The two concepts are completely different. Level is a qualitative idea that implies equality and competitive balance; flat is a physical, geographic concept that Friedman, remember, is openly contrastingironically, as it were with Columbus's discovery that the world is round.


he also hates hillary clinton, for example, but for reasons most of you will not identify with.

The other conspirator, of course, was Bill Clinton himself. By screwing everything that moved and especially by publicly engaging, with the irritatingly wide-eyed and much younger Monica Lewinsky, in the kind of weird and interesting sex most older career women only experience in fading memories or at exorbitant per-hour rates in third-world vacation locales, Bill turned his wife into the ultimate martyr for modern feminism. Hillary was educated, driven and accomplished, a super-woman who brilliantly matched wits with CEOs and senators on live national television, and what did it get her? A one-way trip to the sexual scrap-heap, followed by a late middle age lived out as an unsmiling promilitary curmudgeon with a fast-rusting vagina endlessly haunting the Sunday morning news magazine shows, with nothing left to look forward to but the questionable rewards of power and ambition, and a thicker neck every year . . . Hillary's life story, in other words, spoke to the deepest fears of the modern liberated woman, who by the turn of the century was beginning to have serious doubts about what was waiting for her at the end of the rainbow.


He's been giving interviews and attending debates about the economic crisis for the last few months, and it's finally come together in this massive piece.

Yes, it appears in Rolling Stone, but that doesn't necessarily mean anything. any writer or photographer worth anything throughout the past fifty years have contributed to the magazine.

It's pretty long but well worth the read. Here are some choice examples.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

the party selling CDS protection didn't have to post any money upfront. When a $100 corporate bond is sold, for example, someone has to show 100 actual dollars. But when you sell a $100 CDS guarantee, you don't have to show a dime. So Cassano could sell investment banks billions in guarantees without having any single asset to back it up.

Secondly, Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A for its mortgage on the Pope — it turns around and sells protection to Bank C for the very same mortgage. This could go on ad nauseam: You could have Banks D through Z also betting on Bank A's mortgage. Unlike traditional insurance, Cassano was offering investors an opportunity to bet that someone else's house would burn down, or take out a term life policy on the guy with AIDS down the street. It was no different from gambling, the Wall Street version of a bunch of frat brothers betting on Jay Feely to make a field goal. Cassano was taking book for every bank that bet short on the housing market, but he didn't have the cash to pay off if the kick went wide.

as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer!

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullpoo. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."


Edited by Fiz, 22 March 2009 - 01:49 PM.


#2 engine9

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Posted 22 March 2009 - 07:52 PM

I'm going to read the article, but re: your post do you really think that it's hate he holds for Hillary? Sounds more like sympathy/pity.

#3 Fiz

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Posted 22 March 2009 - 09:37 PM

I'm going to read the article, but re: your post do you really think that it's hate he holds for Hillary? Sounds more like sympathy/pity.


that was just a choice funny quote. read the whole article. it's much shorter than the one in the op. he talks about how she completely sold herself out, and argues that she was never really all that interesting anyway.

#4 engine9

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Posted 22 March 2009 - 10:38 PM

They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.


Does this include Obama? McCain's faults notwithstanding, did someone figure out that candidates can be "out-cooled" and that the public would donate THEIR money and big wall street wouldn't have to spend theirs? Wasn't it perfect timing with Bush's incredibly low ratings? Just a thought.

Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D.


I'm glad he explained this, as Gramm's name has come up a # of times but never really explaining why.

Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.


:mad2:

dammit capitol hill....

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullpoo. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."

When AIG finally blew up, the OTS regulator ostensibly in charge of overseeing the insurance giant — a guy named C.K. Lee — basically admitted that he had blown it. His mistake, Lee said, was that he believed all those credit swaps in Cassano's portfolio were "fairly benign products." Why? Because the company told him so. "The judgment the company was making was that there was no big credit risk," he explained. (Lee now works as Midwest region director of the OTS; the agency declined to make him available for an interview.)


This reminds me of the Madoff scandal. More than one whistle-blower tried to draw attention to his scam because of the simple fact that his return percentage NEVER changed. Good times, bad times, his investors always "appeared" to get the same 10% return on their investments.

By the fall of 2007, it was evident that AIGFP's portfolio had turned poisonous, but like every good Wall Street huckster, Cassano schemed to keep his insane, Earth-swallowing gamble hidden from public view. That August, balls bulging, he announced to investors on a conference call that "it is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions." As he spoke, his CDS portfolio was racking up $352 million in losses. When the growing credit crunch prompted senior AIG executives to re-examine its liabilities, a company accountant named Joseph St. Denis became "gravely concerned" about the CDS deals and their potential for mass destruction. Cassano responded by personally forcing the poor sap out of the firm, telling him he was "deliberately excluded" from the financial review for fear that he might "pollute the process."

The following February, when AIG posted $11.5 billion in annual losses, it announced the resignation of Cassano as head of AIGFP, saying an auditor had found a "material weakness" in the CDS portfolio. But amazingly, the company not only allowed Cassano to keep $34 million in bonuses, it kept him on as a consultant for $1 million a month. In fact, Cassano remained on the payroll and kept collecting his monthly million through the end of September 2008, even after taxpayers had been forced to hand AIG $85 billion to patch up his fug-ups. When asked in October why the company still retained Cassano at his $1 million-a-month rate despite his role in the probable downfall of Western civilization, CEO Martin Sullivan told Congress with a straight face that AIG wanted to "retain the 20-year knowledge that Mr. Cassano had." (Cassano, who is apparently hiding out in his lavish town house near Harrods in London, could not be reached for comment.)


:mad2:

In 1997 and 1998, the years leading up to the passage of Phil Gramm's fateful act that gutted Glass-Steagall, the banking, brokerage and insurance industries spent $350 million on political contributions and lobbying. Gramm alone — then the chairman of the Senate Banking Committee — collected $2.6 million in only five years. The law passed 90-8 in the Senate, with the support of 38 Democrats, including some names that might surprise you: Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.


:puke:

#5 engine9

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Posted 22 March 2009 - 10:39 PM

Freed from all capital restraints, sitting pretty with its man running the Treasury, Goldman jumped into the housing craze just like everyone else on Wall Street. Although it famously scored an $11 billion coup in 2007 when one of its trading units smartly shorted the housing market, the move didn't tell the whole story. In truth, Goldman still had a huge exposure come that fateful summer of 2008 — to none other than Joe Cassano.


Goldman wasn't the only entity that did it. Caterpillar. Terex company. Deere and Co. All major equipment manufacturers that make equipment that contractors were using to build their still-empty houses. Anecdotal? Absolutely, but in Fayetville NC one builder was paying over $200k a MONTH in interest on houses that were SITTING EMPTY. The # of contractors, housing/interior designers, and land investors that have bitten the big bullet because of the sting of the housing collapse would blow your mind if you took the time to research just YOUR local area and see how it had been effected.

Want to know ANOTHER entity that made a killing off the housing boom? Wait till your county/parish's NEXT property tax revaluation. In NC, the state "mandates" that every property be evaluated at it's full market worth. That's the # that you and I get taxed on. What do these severely un-educated yokels have to base their evaluation on? The housing boom. Your property tax goes up. Local tax revenue goes up. It doesn't matter that you couldn't sell your property in this market, what matters is that down-the-line governments get to increase their revenues. Since most governments do this on a 4 or 8 year time frame, chances are very good that the government closest to you is the one that will end up profiting the most from fat-cat Wall Street's feeding frenzy.

There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.


:mad:

While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, all of these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments). Although this technically isn't taxpayer money, it still affects taxpayers directly, because the activities of the Fed impact the economy as a whole. And this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.


wtf?

None other than disgraced senator Ted Stevens was the poor sap who made the unpleasant discovery that if Congress didn't like the Fed handing trillions of dollars to banks without any oversight, Congress could apparently go fug itself — or so said the law. When Stevens asked the GAO about what authority Congress has to monitor the Fed, he got back a letter citing an obscure statute that nobody had ever heard of before: the Accounting and Auditing Act of 1950. The relevant section, 31 USC 714(B), dictated that congressional audits of the Federal Reserve may not include "deliberations, decisions and actions on monetary policy matters." The exemption, as Foss notes, "basically includes everything." According to the law, in other words, the Fed simply cannot be audited by Congress. Or by anyone else, for that matter.


This was the first time I've ever seen the issue of "auditing the Fed" explained.

#6 engine9

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Posted 22 March 2009 - 10:41 PM

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Good luck with that, America. And enjoy tax season.


I think this quote, specifically the bolded part, sums up this whole fiasco perfectly, and sadly.

#7 engine9

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Posted 22 March 2009 - 10:42 PM

that was just a choice funny quote. read the whole article. it's much shorter than the one in the op. he talks about how she completely sold herself out, and argues that she was never really all that interesting anyway.


Geez :( I read the RS one in it's entirety. It was depressing enough. Perhaps tomorrow, or perhaps I'll just take your word for it :D

#8 carpanfan96

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Posted 23 March 2009 - 02:22 AM

That was completely depressing even if you know it's going on, reading about it sucks. That's the only way I can describe it. It just sucks. Ridiculous in itself, the notion that the same bunch of dumb asses who screwed this country over in the late 90's to early 2000's pretty much have control over the election system and the federal government is just feeding them more and more money, while saying they must spend the money to save this and that. At the same time they're spending even more money not going into any records that most people will see. All of this money in circulation between the same select group of people. It's an Economic monopoly or better yet it's an Economic Communist system.
Just plain sucks and it's just plain depressing to think about it much less read about it.

Like Engine said above I'll just take your word that he hates Hillary Clinton.


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