The Holy Trinity of lying, cheating, and stealing are at the core of our current economic misery.
In his blistering critique of the present economic and political mess, Rolling Stone journalist, Matt Taibbi, lays it all out in ugly detail:
We are "being bled dry by a relatively tiny oligarchy of extremely clever financial criminals and their castrato henchmen in government, whose main job is to be good actors on TV...this invisible hive of high-class thieves stays in business because" ...we have not been paying attention and because it is "fiendishly" complicated.[i]
We are "being bled dry by a relatively tiny oligarchy of extremely clever financial criminals and their castrato henchmen in government, whose main job is to be good actors on TV...this invisible hive of high-class thieves stays in business because" ...we have not been paying attention and because it is "fiendishly" complicated.[i]
We should take responsibility for our own part in this mess. While all this lying, cheating, and stealing has been going on, the American public has been sitting around listening to drug addicted entertainers (posing as news sources) make up bizarre stories about how everything is the fault of food stamps and cruel government regulators crushing small business with burdensome requirements such as OSHA, food safety, and clean air laws. We have been shopping at the mall (protected by pepper spray, of course) and fretting about Paris Hilton, Charlie Sheen, Lindsay Lohan, and the Kardashians while a gang of thieves has been making like Bernie Made-Off with everything we own or ever will own, including our children's futures. Like looters during a flood.
To keep the scam going, this gang of theives has managed to convince Joe the plumber and other gullible rubes that our financial crisis is the fault of big government and poor people in the ghetto.
To keep the scam going, this gang of theives has managed to convince Joe the plumber and other gullible rubes that our financial crisis is the fault of big government and poor people in the ghetto.
The most illogical tale we have been suckered into believing is that the heavy hand of too much government regulation is the root problem. This story turns everything inside out and upside down.
After gutting financial regulatory systems that have worked since the great depression to protect us from bank fraud, big banks and corporations are now actually trying to convince the victims of their grand larceny that excessive regulation is the problem. Enron? Madoff? AIG? The devastating real estate bubble? The bank bailout? All this unabated thievery was caused by too much regulation?
It takes a very gullible person to swallow that storyline.
But, of course, we are gullible. We have trusted gurus to believe in, such as the once respected head of the Federal Reserve, Alan Greenspan. Alan was known for encouraging new home owners to buy exotic mortgages because rates were going to go down for the forseeable future.As soon as everybody bought into the rotten scam, Greenspan started raising rates and did not quit until, after 17 consecutive interest rate hikes, the housing bubble popped, taking millions of American’s home equity and the world economy down with it. [ii]
Then, in 1999, Greenspan encouraged everyone in America not to worry about the risk of widespread gambling on unregulated derivatives, saying with a straight face: "the value-added of derivatives derives from their ability to enhance the process of wealth creation".[iii]
Then, in 1999, Greenspan encouraged everyone in America not to worry about the risk of widespread gambling on unregulated derivatives, saying with a straight face: "the value-added of derivatives derives from their ability to enhance the process of wealth creation".[iii]
Greenspan’s don’t-worry-be-happy advice proved catastrophic. Soon after he made these false prophecies, we fell headlong into the banking crisis based on the failure of derivatives (referred to by Warren Buffet as "financial time bombs"). The derivatives were all tied to Wall Street banks and their insurance allies (e.g. AIG) who were creating and peddling leveraged CDOs to suckers throughout the world backed by worthless liar loans.
First came the shocking collapse of Lehman Brothers, one of the world’s largest investment banks. Lehman Brothers went under because it got caught holding too many worthless mortgage backed securities that it could not unload in time. Its failure triggered a worldwide economic crisis requiring unprecedented government intervention to stave off a new depression.[iv]
Believing as PT Barnum (allegedly) did that there is a sucker born every day, some of our leaders are now trying to convince us to blame the financial crisis on poor people who the government encouraged to buy houses they could not afford. Presidential candidate, the Herminator, a.k.a. Pizza Dude, knows where to place the blame: "Don't blame Wall Street. Don't blame the big banks. If you don't have a job and you are not rich, blame yourself".[v]
What really caused the financial/housing/banking crisis was a little bit different.
There were several stages. It took a village of liars, cheaters, and theives to make this all work.
What really caused the financial/housing/banking crisis was a little bit different.
There were several stages. It took a village of liars, cheaters, and theives to make this all work.
First, teams of lying, cheating, and stealing mortgage brokers and mortgage issuers (Countrywide Finance, WaMu etc.) scammed people into taking out insane cheater subprime mortgages. They joked on their emails about issuing expenive mortgages to anyone and everyone and then selling them off to mortgage buyers on the same day.
The mortgages were referred to as "liar loans", because the mortgage brokers encouraged prospective home buyers to use false data in the loan application. Another name was "NINJA loans," so called because the loan applicant had no income, no job, and no assets.
The criteria for these loans, one mortgage broker said, was “could the borrower fog a windshield?”[vi] In some cases, if the buyer could not qualify under any stretch of imagination, the originators merely altered and forged the loan applications themselves.
Next, the originators transferred the worthless mortgage debt in nano seconds to Fannie, Freddie, and giant Wall Street middlemen (Goldman Sachs, Lehman Brothers, etc.). They, in turn, got the rating agencies to put the Good Housekeeping Seal of Approval on the junk to make it look good to the outside world. Then AIG insured everything.
The mortgages were referred to as "liar loans", because the mortgage brokers encouraged prospective home buyers to use false data in the loan application. Another name was "NINJA loans," so called because the loan applicant had no income, no job, and no assets.
The criteria for these loans, one mortgage broker said, was “could the borrower fog a windshield?”[vi] In some cases, if the buyer could not qualify under any stretch of imagination, the originators merely altered and forged the loan applications themselves.
Next, the originators transferred the worthless mortgage debt in nano seconds to Fannie, Freddie, and giant Wall Street middlemen (Goldman Sachs, Lehman Brothers, etc.). They, in turn, got the rating agencies to put the Good Housekeeping Seal of Approval on the junk to make it look good to the outside world. Then AIG insured everything.
Finally the stinking mess was dumped on buyers across the world. The rest is history.
Too much government regulation?
What about AIG? AIG was issuing insurance for these securities. There is no Federal regulation of insurance. None. Zero. AIG was a huge international Federally-UNregulated insurance company. When they insured anything, they were gambling pure and simple, making bundles of money.
The banks? Their activities during the build up of the bubble were completely unregulated according to the nation’s leading bank fraud investigator. [iv] In 1999, the banks got Congress to repeal the Glass-Steagall law that prevented conflictfs of interest in the financial services industry.[vii] The wreckage that was inevitably going to result from that repeal was written on the billboard in Congress in day-glow paint by Congressman John Dingel who predicted almost every detail of the crash to come on the House floor during the debate about that issue. The speech by Congressman Dingel is still available on Youtube.
Only now, years later are the big banks, including Bank of America, Citigroup, JP Morgan, Chasse, Wells Fargo, and Ally Financial facing a possible criminal charges under State laws.[viii]
Blame this mess that ensued on burdensome regulations?
The thinking about too much regulation is backwards, upside down, and inside out. Even the regulators (Greenspan at the Fed and Chris Cox at the SEC) who had at least some authority to stem the tide of lying, cheating, and stealing by banks were philosophically opposed to regulation of banks, arguing that the banking system would “cleanse itself” of misbehavior.[iv]
Their excuse now? "We didn't have enough staff".
The thinking about too much regulation is backwards, upside down, and inside out. Even the regulators (Greenspan at the Fed and Chris Cox at the SEC) who had at least some authority to stem the tide of lying, cheating, and stealing by banks were philosophically opposed to regulation of banks, arguing that the banking system would “cleanse itself” of misbehavior.[iv]
Their excuse now? "We didn't have enough staff".
The real reason we are in this mess is that lying, cheating, and stealing have become a pandemic in our society, our politics, and our economy, and no one has any idea what to do about it.
One thing seems clear, however. As a leading authority on the criminal activities of Wall Street banks during the housing scandal put it, "If we don't uncover the facts and put them out there, it will happen again."[ix]
One thing seems clear, however. As a leading authority on the criminal activities of Wall Street banks during the housing scandal put it, "If we don't uncover the facts and put them out there, it will happen again."[ix]
[i] Matt Taibbi, Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America, (2010). Taibbi says that it is extremely difficult to understand the crimes of the modern financial elite because of the “complexity and day-to-day invisibility” (My Advice to the Occupy Wall Street Protesters, Rolling Stone Oct. 27, 2011)
[v] Herman Cain, Oct 5 interview with Wall Street Journal.
[vi] James Theckston, former regional vice president for Chase Home Finance in southern Florida, told the New York Times on November 1, 2011, that he and his team shoveled money out the door as home mortgages to anyone and everyone. According to Theckston, if you found a bag lady in the street, she was a target for a mortgage, and the more subprime it was, the bigger the profit he made. All this, he said, was driven by pressure from the top. Theckston is still bothered that the banks were bailed out, but the homeowners who were victimized are still underwater. Nicholas Kristoff, A Banker Speaks with Regret, NY Times Nov 30, 2011.
[vii] This repeal was part of the Gramm-Leach-Bliley Act.
[viii] Harold Meyerson in "Holding the Banks Accountable," Washington Post, Feb 1, p.A17.
[ix] N.Y. Attorney General Eric Schneiderman quoted by Harold Meyerson in "Holding the Banks Accountable," Washington Post, Feb 1, p.A17.
