Perdido 03

Perdido 03

Thursday, February 18, 2010

The Wall Street Con

Matt Taibbi's piece on the Biggest Con In History is essential reading:

There's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?

The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.

The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they're back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.

That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn't call the cops is known as the "Cool Off."

Read the rest to see how they pulled it off and continue to pull it off with the help of the Fed, the Bush administration, and the Obama administration.

These people belong in jail.

Instead, the "socialist" president calls Blankfein of Goldman and Dimon of JP Morgan Chase "very savvy businessmen" and says he "doesn't begrudge" their taxpayer-provided bonuses.

Instead he puts the very people who facilitated this mess - Bernanke, Summers and Geithner - in charge of cleaning up the mess (and surprise, surprise! The only thing getting cleaned up is the taxpayer...)

Instead he offers no real meaningful reform to the financial system and continues the era of the Yummy Yummy Punchbowl for Wall Street and the banksters.

Instead he offers them even more punchbowls - "reforming" health care with a very insurance industry- and Big Pharma-friendly plan and "reforming" education by opening up all that yummy yummy public education money to for-profit education entrepreneurs.

And what we're left with just a little less than two years after the financial system collapsed is more of the same, only worse. Here's Taibbi again:

To sum up, this is what Lloyd Blankfein meant by "performance": Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn't deserve billions in bonuses for doing all that?

Con artists have a word for the inability of their victims to accept that they've been scammed. They call it the "True Believer Syndrome." That's sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn't so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn't matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn't going to work, no matter what we do. Sure, mugging old ladies is against the law, but it's also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.

That's why the biggest gift the bankers got in the bailout was not fiscal but psychological. "The most valuable part of the bailout," says Rep. Sherman, "was the implicit guarantee that they're Too Big to Fail." Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. "It's evidence," says Rep. Kanjorski, "that they still don't get it."

More to the point, the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.

The hucksters on Wall Street and in Washington like to blame public education and teachers for all the ills of the American economy.

But one need look no further than the con men in Washington and on Wall Street (often interchangeable) to see who is really to blame.

1 comment:

  1. That's a great analogy - the foxes to keep the chickens safe from the wolves.

    And yes, while the deregulation fetish started under Reagan, the "liberal" Clinton brought us the current mess and Dubya's admin doubled down on it - the market is always right, regulation stifles innovation and competition, blah, blah, blah...

    Ugh...I don't know whether to hope things get better despite all the crooks or hope for a double dip that gets people so fed up they throw these fuckers in jail and set up some regulations that ensure true competition instead of the monopolized crap we have now.