WHAT WE COULD HAVE DONE INSTEAD

So I'm currently reading Matt Taibbi's latest book Griftopia, and I just finished the chapter on the mortgage and lending crisis, "Hot Potato." Here's a bit of summary of that chapter from the Wikipedia article on the book:

Taibbi dissects the housing bubble crisis as a complex scam involving players at many levels. Entry level assessments, income levels, and credit scores were falsified or neglected, allowing unqualified customers to acquire mortgages they could not carry. Taibbi maintains that ARMs and other "financial inventions" enlarged the pool of loans that could never be paid back, yet issuing agents and agencies were made rich by commissions. The real money, however, came in for the big banks that securitized these loans, that is to say, repackaged them as investment vehicles (and in the process took the loan originators off the hook). Collateralized debt obligations (CDOs) then cut these bundled loans into "tranches", where the statistically more likely to be paid-back tranch would be given a AAA rating (rating agencies depend on the banks for their living), remaining CDOs were tranched again, and the better part again AAA rated, and tranched further so that eventually most of the mortgages ended up in AAA-rated instruments. The "time-bomb mortgages" were insured by credit default swaps (CDSs) in an unregulated environment, so that neither sellers (such as AIG) needed capitalization, nor buyers needed to own the insured assets. Further, AIG's investment arm invested in CDOs as a collateral to lend-out stocks further exposing itself to financial calamity.

For the entire summary, click here.

The important thing that the summary doesn't emphasize, but is all too clear in the book, is that pretty much everybody involved, excepting maybe a large percentage of home buyers, knew exactly what they were doing, but were willing to take on the risks because they either expected to sell off their toxic investments before the bubble popped, or, as with mega investment banker Goldman Sachs, expected that the federal government would bail them out using tax payer dollars. So the whole thing was a scam of massive proportions. Everybody knew that the whole thing could blow up at any minute, but the money they were making was just too much to pass up.

That's horrifying enough, that an entire industry was allowed to go to what amounted to an illegal casino using your and my money. But the final paragraphs of the chapter brings it all into an even more depressing light:

And at the tail end of all this frantic lying, cheating, and scamming on all sides, during which time no good jobs were created and nothing except a few now-empty houses (good for nothing except depressing future home prices) got built, the final result is that we all ended up picking up the tab, subsidizing all this crime and dishonesty and pessimism as a matter of national policy.

We paid for this instead of a generation of health insurance, or an alternative energy grid, or a brand-new system of roads and highways. With the $13-plus trillion we are estimated to ultimately spend on the bailouts, we could not only have bought and paid off every single sub-prime mortgage in the country (that would only have cost $1.4 trillion), we could have paid off every remaining mortgage of any kind in this country--and still have had enough money left over to buy a new house for every American who does not already have one.

But we didn't do that, and we didn't spend the money on anything else useful, either. Why? For a very good reason. Because we're no good anymore at building bridges and highways or coming up with brilliant innovations in energy or medicine. We're shit now at finishing massive public works projects or launching brilliant fairy-tale public policy ventures like the moon landing.

What are we good at? Robbing what's left. When it comes to that, we Americans have no peer. And when it came time to design the bailouts, a monster collective project spanning two presidential administrations that was every bit as vast and far-reaching (only not into the future, but the past) as Kennedy's trip to the moon, we showed it.

Don't ever tell me again with a straight face that we don't have enough money to provide universal health care, or any other desperately needed social service. Don't ever tell me again that markets are self-regulating. Don't ever tell me again that the rich know how to take care of money better than anybody else. Don't ever tell me again that Democrats are liberal or have the best interests of the nation at heart. Don't tell me that we live in a democracy.

Don't tell me that Obama had so much on his plate that we should cut him some slack.

What the mortgage and lending crisis, and then the multi-trillion dollar bailout in its wake, show us is that everything we're supposed to believe about how this nation functions is a big fat whopping lie. The corporations really do run the nation, really do own both political parties, indeed the entire political establishment. One man, one vote doesn't mean shit. We exist for one reason only: to toil away our years so that assholes in suits can buy yachts.

Fuck you Wall Street. Fuck you Obama. Fuck you Bush. Fuck everybody who says they know what's right.

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