This past week's Rolling Stone magazine presents a hard-hitting in-depth investigative article, a Wall Street expose, The Big Takeover, by Matt Taibbi. This lengthy 'can't stop reading this' article presents some widely held and not-so-widely held allegations about Wall Street's inner sanctum.
Here are some excerpts:
The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution.
"It's over - we're officially, royally f----d. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline - a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire."
"The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history - some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses)."
. . ."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 best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders - people who wear seat belts and build houses on high ground - and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people's money would make his dick bigger.
I. Patient Zero
That guy - the Patient Zero of the global economic meltdown - was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP."
. . ."In a span of only seven years, Cassano sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market."
. . . "The CDS was popularized by J.P. Morgan, in particular by a group of young, creative bankers who would later become known as the "Morgan Mafia," as many of them would go on to assume influential positions in the finance world."
. . ."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."
. . ."When Morgan presented their plans for credit swaps to regulators in the late Nineties, they argued that if they bought CDS protection for enough of the investments in their portfolio, they had effectively moved the risk off their books. Therefore, they argued, they should be allowed to lend more, without keeping more cash in reserve. A whole host of regulators - from the Federal Reserve to the Office of the Comptroller of the Currency - accepted the argument, and Morgan was allowed to put more money on the street."
Read this whole, must-read, article here.
Source: The Big Takeover, Matt Taibbi, Rolling Stone, March 19, 2009
Matt Taibbi is a jounalist and political writer, and columnist for Rolling Stone magazine.
