Tuesday, June 23, 2009

"Suck on Our Yachts"

Matt Taibbi uses his razor wit to slice up Goldman Sach's non-apology apology for destroying the finance and credit markets, from AlterNet:

Let's be clear about what that meant. These crap/sham mortgages, a lot of them adjustable-rate deals with teaser rates that featured sudden rate hikes two or three years after closing, they would never have been possible had not someone devised a method for selling them off to secondary buyers. No local bank is going to keep millions of dollars worth of Alt-A mortgages on its books, because no sensible company lends out money to very risky customers and actually keeps those loans on its balance sheet.

So this system depended almost entirely on banks like Goldman finding ways to securitize these instruments, ie chop the mortgages up into little bits, repackage them as mortgage-backed securities like CDOs and CMOs, and sell them to unsuspecting customers on the secondary market, most of them large institutional buyers like pensions and insurance companies and workers' unions, many of them foreigners.


This isn't really commerce, but much more like organized crime: it was a gigantic fraud perpetrated on the economy that wouldn't have been possible without accomplices in the ratings agencies and regulators willing to turn a blind eye. Imagine a meat company that bred ten billion rats, fattened them on trash and sewage, ground their bodies into chuck, and then sold it all as grade-A ground beef to McDonald's and Burger King, right under the noses of the USDA: this is exactly the same thing, only with debt instead of food. We're eating it, they're counting the money.

More here.

So, as you may know, I really dig Taibbi because of his ability to make me laugh self-righteously while he skewers the powerful entities that fuck us over on a daily basis. But to type him as simply a funny guy is to miss the fact that his analysis is always dead on. I've compared him to Hunter S. Thompson, but in the most important ways he's more like I. F. Stone with a black sense of humor.

Case in point: Taibbi's assertion that the subprime mortgage crisis is less of a systemic failure of the banking and finance industries than it is the result of straight up fraud. That is, the crash resulted from what amounts to a criminal enterprise.

I mean, c'mon. I'm willing to believe that many of the players involved were innocent dupes, but some of these people had to know exactly what was going on. How can one make "mistakes" that result in triple-A security ratings for loans made to people who can't possibly pay them back? The way that Goldman Sachs is coming out of this smelling like roses, the way that so many of GS's alumni have managed the crisis from insider positions within both the Bush and Obama administrations, the way the Fed bailed out AIG, who owed GS hundreds of billions in insurance payouts for subprime losses, but not GS rival Lehmann Brothers, well, they call New Orleans corrupt, but the Big Easy's got nothing on these guys.

As Senate Majority Leader Harry Reid recently said of the relationship between bankers and Congress, "Frankly, they own the place." Meanwhile, President Obama offers financial "reform" that by and large allows to remain intact the same regulatory structure that was incapable of stopping this grand scale Mafia work in the first place.

Personally, I think we'd all be better off if John Gotti was running the country.