The Big Takeover by MATT TAIBBI

[Joanne98]

The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution

MATT TAIBBI Posted Mar 19, 2009

It's over — we're officially, royally fucked. 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).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

Next

http://www.rollingstone.com/politics/story/26793903/the_big_takeover

[SteppingRazor]

1. Read this story this morning. Excellent primer for anyone who wants to know...

who the villains of the economic downturn are, what exactly a credit default swap is, etc.

[xiamiam]

13. i want to know exactly WHO because i think they are a much smaller group who own us than imaginable.

great article..thanks..

[WhaTHellsgoingonhere]

18. Thank you so much! I heard Taibbi on MSNBC this a.m.

...and immediately went searching for the article, but could not locate it.

Taibbi makes many great points, I'll just highlight one more:

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.

[DemReadingDU]

20. Taibbi - Matt or Mike

Mike Taibbi is the father who is a reporter for NBC/MSNBC, and Matt is the son who writes for RollingStone.


Matthew C. Taibbi (born March, 1970) is an American journalist and political writer. He currently works at Rolling Stone where he authors a column called "Road Rage" for the print version, and an additional weekly online-only column called "The Low Post". He is best known for his coverage of the 2004 US presidential election, and for his former editorial positions at newspapers the eXile, the New York Press, and the Beast. Recently, Taibbi has been a regular contributor to Real Time with Bill Maher.
http://en.wikipedia.org/wiki/Matt_Taibbi


Mike Taibbi is a television journalist working at NBC. In high school, Taibbi won the national forensic championship in Original Oratory with a speech he wrote about the death of idealism entitled "Whisper of Death at La Mancha". He received Bachelor of Science degrees from Rutgers University in sociology and English in 1971. He worked for ABC and CBS affiliates before settling in at NBC. He specializes in international news and has reported on the war on terrorism from Iraq and Afghanistan in recent years.<1> He has a son, Matt Taibbi, who is a contributing editor and writer for Rolling Stone.
http://en.wikipedia.org/wiki/Mike_Taibbi

[Joanne98]

2. I like the last paragraph....

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.

[truedelphi]

3. Sniff, Cannot afford my RS subscription

But glad DU'ers are keeping me in the loop. respect Taibbi a great deal. Not always 100% right, but then who is?

[azul]

4. And how can we fix this broken system during this opportunity

presenting financials as a crisis?

1. Don't let any of these players that broke the thing to be part of the correction. (The players should probably be held in Gitmo cells for their own protection.)

2. Tax income earned from wages or work at different rates than income from interest and speculation/gambling -with some fractional exceptions for investment income from urgent sustainable and charitable businesses. Say 5% on wages less than $100k and 50% on interest, etc., and determine if that would cover govt expenses.


The financial system has been pushed to and over the edge the last decades toward capital at the expense of labor. Now is a good time to correct these excesses of money power over people's lives.

Is part of the problem of this crisis that people can't get mad enough to not take it anymore? Prozaced nation where the rough edges are smoothed-over, and the idiot box points elsewhere entertainingly. Drugged and deceived by somewhat happy willful blissers?

[truedelphi]

8. Jes a few days ago someone here was more or less bragging that they never learned their multiplicati

Or other tables. the "Calculater" can do that.

Learning math means you entrain the part of your brain that must develop in order to examine complex realities logically. Without knowing even minimal math, you may well be unable to think about complex political realities either.

And that is HOw the Masters of the Universe have achieved so much. While they are cashing their bonus checks and buying their eleventh vacation home, you and I are unable to make headway - in large part becaue there are so many unthinking sheeple out there.

[WhaTHellsgoingonhere]

19. You are missing the big picture, delphi

I have a degree in economics and have even created econometric models. What good has that done me AND you? None. And here's where you're argument misses the mark. Neither you nor I are privy to what goes down in the boardrooms of private corporations. The big picture: power is bought, crimes are legitimized, the regulatory body is turned into a toothless paper tiger, books are cooked, audits... what audits? Taibbi has been research this article for weeks. I didn't need to rely on my mathmatics to appreciate the forrest.

[AlbertCat]

28. Uh....the Wall Street big guys can't add either...obviously. They use a calculator more than we do.

[JDPriestly]

11. Get people from Goldman Sachs out of the government.

That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/6

Goldman Sachs was the best customer of AIG's Cassano, the architect that built this fraudulent trap, the vulture that reaped the profits from this carcass of what was a world market, the man who, as Taibbi suggests, has brought down Western civilization.

No one wants socialism, but what are our choices? Capitalism has broken down. What is left but feudalism or socialism? Which one is worse. Neither permits much individual freedom.

Can we devise a system that transfers wealth to small business and discourages the formation of businesses too big to fail, businesses that can bring down everything like AIG's Cassano did?

Any suggestions?

[burythehatchet]

5. LIddy was Goldman Sachs also. I was unaware.

[Joanne98]

7. Yeah. He sat on the board.

[BrklynLiberal]

6. Holy crap! That is the best, most clearly written and therefore the scariest article about the

American economy. It explains quite well about the thieves who have brought the economy to its knees thru their own greed and an insane sense of entitlement. Madoff and the other "scam artists" that we have heard about are merely the tip of the iceberg. We are on the Titanic and headed straight for it.
This article MUST be read by everyone.....Matt Taibi, once again, does an incredible job!!!

[JuniperLea]

9. This part says it all...

"And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream."

Far too many players are claiming ignorance. The ratings agencies are in on this too... Standard & Poor's, Moody's, AM Best, all of them. The talk is "these investment vehicles were so convoluted, no one understood them!" Claiming you are stupid is no excuse. If those at the top who allowed these vehicles to float didn't understand them, they are far too incompetent to hold the positions they hold, and the salaries they demand. And if they let them go on, knowing they themselves didn't understand them, they are double stupid. And the ratings agencies are triple stupid for continuing to rate AIG and other companies with credit default swap and sub-prime loan exposure with their highest ratings... until the cat was out of the bag.

Sorry, all you fucking greedy bastards, stupid is no excuse. You blew it. This is the ultimate FUBAR.

[JDPriestly]

10. Thanks for posting this. Everyone should read all 8 pages. Bookmark this, DUers.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

. . . .
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. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington's deregulation of the Wall Street casino. "It's all about the regulatory environment," says a government source involved with the AIG bailout. "These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that."

. . . .
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 fuck-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.)

. . . .
On the weekend of September 13th, AIG's senior leaders were summoned to the offices of the New York Federal Reserve. Regulators from Dinallo's insurance office were there, as was Geithner, then chief of the New York Fed. Treasury Secretary Hank Paulson, who spent most of the weekend preoccupied with the collapse of Lehman Brothers, came in and out. Also present, for reasons that would emerge later, was Lloyd Blankfein, CEO of Goldman Sachs. The only relevant government office that wasn't represented was the regulator that should have been there all along: the OTS.

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/2

Geithner must go. He is too close to the Paulson deal that has harmed our country so much.

[jwirr]

23. Many of us knew even at the time of RR that the pugs were out to

"downsize" government by getting rid of regulations but what is new in this article is the connection to the power that it would give to those who were deregulated. Under *ss & co. we started to see the rise of empire with globalization but again we did not see the extent to which they were willing to go to gain this world power. I think we are just lucky that it started to fall to pieces or we would probably never recognized what this article is talking about.

As it stands we may have to wait for oil depletion before we can become independent again. Much of their power is based on the existence of the world as it is now.

[AlbertCat]

29. Under *ss & co. we started to see the rise of empire

Started.....good grief! Try under Eisenhower & Co. Or at least Ronnie and Co.

[jwirr]

33. Sure but it was not as visible. Today we know about the many permanent

bases ringing the world and the little secret wars that are more assassination than war. I actually think we can take that back as far as Harry Truman. Didn't the cold war start with his administration?

[disndat]

24. Geithner's got to go!

He is also a front for Robert Rubin, the culprit-in-chief. Another DU post today says Obama received his largest campaign money from Goldman Sachs. Say it isn't so, Obama!

[LSK]

12. K&R

[Brucie Kibbutz]

14. Thanks for posting this, Joanne.

K&R

[BrklynLiberal]

15. Ditto. I have been touting it to everyone who mentions the economy....

[Brucie Kibbutz]

16. The same article is being torn apart by the

Obama Defense Force over in GD: Presidential

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=132&topic_id=8275531&mesg_id=8275531

The article is apparently in violation of ODF guidelines for some reason. :shrug:

[BrklynLiberal]

17. What is ODF?

[xxqqqzme]

32. I'm guessing -

Obama Defense Force? I think it is a new religion.

[BrklynLiberal]

35. duh. Of course. I should have seen that. Guess it was getting late.

[HCE SuiGeneris]

21. Keep forking over your tax dollars...

"The bonuses are a nice comic touch highlighting one of the more outrageous tangents of the bailout age, namely the fact that, even with the planet in flames, some members of the Wall Street class can't even get used to the tragedy of having to fly coach. "These people need their trips to Baja, their spa treatments, their hand jobs," says an official involved in the AIG bailout, a serious look on his face, apparently not even half-kidding. "They don't function well without them."

[Jefferson23]

22. K&R, thanks for posting.

[chimpymustgo]

25. K&R! I posted this in GD and GDP and some nuts attacked the piece WITHOUT EVEN READING IT!

Taibbi was attacked...some people were really trying to shut the thread down. It was incredible to watch unfold yesterday morning. Then someone posted that many "detractors" see any criticism of the bailouts as an attack on Obama.

I'll post more frequently in editorials for intelligent discussion.

[disndat]

26. Look at it this way.

20 years of Alan Greenspan and 8 years of GWB has finally brought us socialism.

[JBoy]

27. K&R! A great well-written article.

Fuck Phil Gramm.

[AlbertCat]

30. Fuck Phil Gramm.

Uh....no thank you....

How about JAIL Phil Gramm?

[B o d i]

37. +eleventy!!11!!!

[sasquatch]

31. Wow, that's some good writing

[rhymeandreason]

34. ABCPMMMFLF!!!!!????

Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

Time for Tom Wolfe to pen a sequel detailing the further adventures of Sherman McCoy.

[Overseas]

36. K&R ! I loved the article, too.

I'm delighted to see someone telling the history who feels the same outrage that I do.

That's why I like Matt's articles, whether or not I agree with all of his points in every story.

I am tired of dry apologist articles pretending that these financial crises were impossible to predict.

So glad to have Matt's exposition.

[NorthCarolina]

38. WOW - This truly was and excellent article and a very enlightening read. n/t

[pberq]

39. See Matt Taibbi interview on Democracy Now!

http://www.democracynow.org/2009/3/25/aig_and_the_big_takeover_matt

[pberq]

40. Bipartisan problem

http://www.democracynow.org/2009/3/25/aig_and_the_big_takeover_matt

. . .

AMY GOODMAN: You write in your piece, “In 1997 and 1998”—so like ten years ago—“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 five years. The law passed”—not close—“90-8,” you say, “in the Senate, with the support of 38 Democrats, including some names that might surprise you:”—you write—“Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.”

MATT TAIBBI: Right, right. I think one of the things that people don’t understand about this crisis is they—we always have this instinct in America to blame one side or the other for any political problem. You know, people on the left want to say, “Oh, George Bush did it,” and on the right they always want to say, “It was Clinton.” Well, this is as purely a bipartisan problem as we’ve ever had in this country. This was absolute unity on the part of both parties. They both were absolutely complicit in passing these deregulatory moves.

You know, in the instance of the Gramm-Leach-Bliley Act, that was sponsored by Phil Gramm and by the Republicans, but it was very, very enthusiastically supported by Robert Rubin and Larry Summers, and it was signed into law by Bill Clinton and passed with the support of all those very powerful Democratic senators. And this continued to be the case throughout late ’90s and throughout this whole decade, and that’s why we’re in the situation that we are right now, because nobody is really, you know, representing the other side.