The ability of its citizens to lose focus so quickly and be distracted by everything from Lebronamania to the immigration debate is part of what makes America so ripe for this particular type of corporate crime. We have voters who don’t pay attention, a news media that either ignores key subjects or willfully misunderstands them, and a regulatory environment that bends easily to lobbying and campaign financing efforts. And we’ve got a superpower’s worth of accumulated wealth that is still there for the taking. You put all that together, and what you get is a thieves’ paradise—a Griftopia.
This book should be read in conjunction with Michael Lewis’ The Big Short. Griftopia examines the culture that created the 2008 financial crisis from a bird’s-eye-view. From the Ayn Randian Objectivist sense of self-entitlement emboldening Alan Greenspan and bankers on Wall Street to pursue profit and self-interest at the expense of everyone else to how our political system divides us and kicks the proverbial can down the road without solving anything. The subject is upsetting, but Taibbi approaches the subject with wicked humor and a far-reaching perspective.
There were so many quotes in this book that shocked and amused me. Here are a couple of the most flabbergasting:
Here’s the real punch line. After playing an intimate role in three historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ in the early part of the 2000s, after pawning off thousands of toxic mortgages on pensioners and cities, after helping drive the price of gas up above $4.60 a gallon for half a year, and helping 100 million new people around the world join the ranks of the hungry, and securing tens of billions of taxpayer dollars through a series of bailouts, what did Goldman Sachs give back to the people of the United States in 2008?
Fourteen million dollars.
That is what the firm paid in taxes in 2008: an effective tax rate of exactly 1, read it, one percent.
Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions up front on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to pay no taxes at all. A Government Accountability Office report, in fact, found that between 1998 and 2005,two-thirds of all corporations operating in the United States paid no taxes at all.
Being in the building with Palin that night is a transformative and oddly unsettling experience. It’s a little like having live cave-level access for the ripping-the-heart-out-with-the-bare-hands scene in Indiana Jones and the Temple of Doom. A scary-as-hell situation: thousands of pudgy Midwestern conservatives worshiping at the Altar of the Economic Produce, led by a charismatic arch-priestess letting loose a grade-A war cry. The clear subtext of Palin’s speech is this: other politicians only talk about fighting these assholes, I actually will.
The presidential election is a drama that we Americans have learned to wholly consume as entertainment, divorced completely from any expectations about concrete changes in our own lives. For the vast majority of people who follow national elections in this country, the payoff they’re looking for when they campaign for this or that political figure is that warm and fuzzy feeling you get when the home team wins the big game. Or, more important, when a hated rival loses. Their stake in the electoral game isn’t a citizen’s interest, but a rooting interest.
Our world isn’t about ideology anymore. It’s about complexity. We live in a complex bureaucratic state with complex laws and complex business practices, and the few organizations with the corporate willpower to master these complexities will inevitably own the political power. On the other hand, movements like the Tea Party more than anything else reflect a widespread longing for simpler times and simple solutions—just throw the U.S. Constitution at the whole mess and the whole thing will be jake. For immigration, build a big fence. Abolish the Federal Reserve, the Department of Commerce, the Department of Education. At times the overt longing for simple answers that get you from Tea Party leaders is so earnest and touching, it almost makes you forget how insane most of them are.
The fact that Michele Bachmann has a few dumb ideas doesn’t mean much, in the scheme of things. What is meaningful is the fact that this belief in total deregulation and pure capitalism is still the political mainstream not just in the Tea Party, not even just among Republicans, but pretty much everywhere on the American political spectrum to the right of Bernie Sanders.
The Tea Party movement is not without some very legitimate grievances. But its origins—going back to Santelli’s rant—are steeped in a gigantic exercise in delusional self-worship.
It would be a lot easier to listen to what these people have to say if they would just stop whining about how underappreciated they are and insisting that they’re the only people left in America who’ve read the Constitution. In fact, if you listen to them long enough, you almost want to strap them into chairs and make them watch as you redistribute their tax money directly into the arms of illegal immigrant dope addicts.
This is how you get middle-class Americans pushing deregulation for rich bankers. Your average working American looks around and sees evidence of government power over his life everywhere. He pays high taxes and can’t sell a house or buy a car without paying all sorts of fees. If he owns a business, inspectors come to his workplace once a year to gouge him for something whether he’s in compliance or not. If he wants to build a shed in his backyard, he needs a permit from some local thief in the city clerk’s office.
There are a lot of well-meaning laws that can be manipulated, or go wrong over time, or become captive to corrupt lawyers and bureaucrats who might not to fix the targeted social problems, but to retain their budgetary turf. Tea Party grievances against these issues are entirely legitimate and shouldn’t be dismissed. The problem is that they think the same dynamic they see locally or in their own lives—an overbearing, interventionist government that seeks to control, tax, and regulate everything it can get its hands on—operates the same everywhere.
The insurmountable hurdle for so-called populist movements is having the nerve to attack the rich instead of the poor. Even after the rich almost destroyed the entire global economy through their sheer unrestrained greed and stupidity, we can’t shake the peasant mentality that says we should go easy on them, because the best hope for our collective prosperity is in them creating wealth for us all. That’s the idea at the core of trickle-down economics and the basis for American economic policy for a generation. The entire premise—that the way society works is for the productive rich to feed the needy poor and that any attempt by the latter ot punish the former for their excesses might inspire Atlas to shrug his way out of town and leave the rest of us on our own to starve—should be insulting to people so proud to call themselves the “water carriers.” But in a country where every Joe the Plumber has been hoodwinked into thinking he’s one clogged toilet away from being rich himself, we’re all invested in rigging the system for the rich.
What has taken place over the last generation is a highly complicated merger of crime and policy, of stealing and government. Far from taking care of the rest of us, the financial leaders of America and their political servants have seemingly reached the cynical conclusion that our society is not worth saving and have taken on a new mission that involves not creating wealth for all, but simply absconding with whatever wealth remains in our hollowed-out economy.
The new America, instead, is fast becoming a vast ghetto in which all of us, conservatives and progressives, 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 and put on a good show. This invisible hive of high-class thieves stays in business because when we’re not completely distracted and exhausted by our work and entertainments, we prefer not to ponder the dilemma of why gasoline went over four dollars a gallon, why our pension funds just lost 20 percent of their value, or why when we do the right thing by saving money, we keep being punished by interest rates that hover near zero, while banks that have been the opposite of prudent get rewarded with free billions. In reality political power is simply taken from most of us by a grubby kind of fiat, in little fractions of a percent here and there each and every day, through a thousand separate transactions that take place in fine print and in the margins of a vast social mechanism that most of us are simply not conscious of.
Rand’s belief system is typically broken down into four parts: metaphysics (objective reality), epistemology (reason), ethics (self-interest), and politics (capitalism). The first two parts are basically pure bullshit and fluff. According to objectivists, the belief in “objective reality” means that “facts are facts” and “wishing” won’t make facts change. What it actually means is “When I’m right, I’m right” and “My facts are facts and your facts are not facts.”
This belief in objectivity is what gives objectivists their characteristic dickish attitude: since they don’t really believe that facts look different from different points of view, they don’t feel the need to question themselves or look at things through the eyes of others.
Among other things, Alan Greenspan was one of the first Americans to really understand the nature of celebrity in the mass-media age. Thirty years before Paris Hilton, Greenspan managed to become famous for being famous—and levered that skill into one of the most powerful jobs on earth.
Greenspan’s frantic deregulation of the financial markets in the late nineties had led directly to the housing bubble; in particular, the deregulation of the derivatives market had allowed Wall Street to create a vast infrastructure for chopping up mortgage debt, disguising bad loans as AAA-rated investments, and selling the whole mess off on a secondary market as securities. Once Wall Street perfected this mechanism, it was suddenly able to create hundreds of billions of dollars in crap mortgages and sell them off to unsuspecting pension funds, insurance companies, unions, and other suckers as grade-A investments.
The amount of new lending was mind-boggling: between 2003 and 2005, outstanding mortgage debt in America grew by $3.7 trillion, which was roughly equal to the entire value of all American real estate in the year 1990 ($3.8 trillion). In other words, Americans in just two years had borrowed the equivalent of two hundred years’ worth of savings.
In fact, what made the bubbles possible was that the people who ran banks like Goldman Sachs and Morgan Stanley and Citigroup during the Greenspan era were possessed by this cultist fervor, making them genuinely blind to the destructive social consequences of their actions and infuriatingly immune to self-doubt. The Randian mindset was so widespread in the finance world that even after the horrific 2008 crash, executives from Goldman Sachs could be seen insisting in public that Jesus himself would have approved of their devotion to personal profit (“The injunction of Jesus to love others as ourselves is an endorsement of self-interest,” Goldman international adviser Brian Griffiths told parishioners of London’s St. Paul’s Cathedral). That sort of moral blindness turbocharged the greed on the private banking side, but it was Greenspan’s cynical construction of a vast and unaccountable welfare state that made the theft scheme virtually unstoppable.
In the end all the printed wealth disappeared and only the debts remained. He probably did this just because he wanted to see his face on magazine covers and be popular at certain Upper East Side cocktail parties. His private hang-ups in this way shaped the entire scam of modern American politics: a pure free market for the suckers, golden parachutes for the Atlases.
Two other things are striking about the mortgage-scam era. One was that nobody in this vast rogues’ gallery of characters was really engaged in building anything. If Wall Street makes its profits by moving money around from place to place and taking a cut here and there, in a sense this whole mess was a kind of giant welfare program the financial services industry simply willed into being for itself. It invented a mountain of money in the form of a few trillion dollars’ worth of bogus mortgages and rolled it forward for a few years, until reality intervened—and suddenly it was announced that We the Taxpayer had to buy it from them, at what they called face value, for the good of the country.
The formula was the same formula we see in every election: Republicans demonize government, sixties-style-activism, and foreigners. Democrats demonize corporations, greed, and the right-wing rabble.
The Prudent Investor Act was something of a financial version of the Clear Skies Act or the Healthy Forests Restoration Act, a sweeping deregulatory action with a cheerily Orwellian name that actually meant close to the opposite of what it sounded like.
When you have a system with an electorate divided up into two fiercely warring tribes, each determined to blame the country’s problems on the other, it will often be next to impossible to get anyone to even pay attention to a problem that is not the fault of one or the other group. Moreover it is incredibly easy to shift blame for the problem to one of those groups, or to both of them, if you know how to play things right.
America is no longer a country that cares about experts. In fact, it hates experts. If you can’t fit a story into the culture-war storyline in ten seconds or less, it dies.
The epic struggle to pass health care reform was at once a shameless betrayal of the public trust of historic proportions and proof that a nation that perceives itself as being divided into red and blue should start paying attention to a third color that rules the day in Washington—a sort of puke-colored politics that puts together deals like this one and succeeds largely through its mastery of the capital city’s bureaucracy. The defining characteristic of puke politics is that if it must have government at all, the government should be purposely ineffectual almost across the board in terms of the functions we usually ascribe to the state and really only competent in one area, and that’s giving away taxpayer money in return for campaign contributions.
“If a bunch of construction contractors got together and decided to set the prices of bricks and mortar, they’d all go to prison,” says Robert Hunter of the Consumer Federation of America, who served as a federal insurance administrator under President Ford. “But in insurance, it’s all legal.”
Any industry that basically has government license to (a) fix prices and (b) refuse to uphold legal contracts is going to make money almost without regard to the economic climate.
That helps explain why in 2005, despite the fact that it was blindsided by Katrina, one of the biggest natural disasters in American history, the property/casualty industry made an after-tax profit of $48.8 billion—a new record, beating out the previous year’s record of $40.5 billion.
The reason the Democrats pursued the strategy they did was based almost entirely on their perception of the political playing field. This was a party leadership that was not really interested in actually fixing the health care problem; what they were much more concerned with was passing something they could call “health care reform” while at the same time doing it in a way that kept campaign contributions from the insurance and pharmaceutical industries away from the Republicans.
This was Rahm Emanuel’s political unified theory: score a monster political win with the electorate and a massive takeaway of campaign funds at the same time, a great interconnected loop of deals that would keep them in office for two terms in the least. And to achieve this, all they had to do was sell out just enough to buy the acquiescence of the relevant businesses.
In America, every political issue, no matter how complicated, ultimately takes the same silly ride down the same rhetorical water slide. Complex social and economic phenomena are chopped up into pairs of easy-to-digest sound bites, with one T-shirt slogan for the Fox News crowd and one for the Democrats.
They want half the country lined up like Tea Partiers against overweening government power, and the other half, the Huffington Post crowd, railing against corporate excess. But don’t let the two sides start thinking about the bigger picture and wondering if the real problem might be a combination of the two.
This is how America works. Our real government is mostly kept hidden from view, and the truly weighty decisions about where our society is going and what rules it is going to live by are made mostly in private, by groups of anonymous lawyers and bureaucrats and lobbyists, government officials and industry reps alike.
The law is a fungible thing: no matter what is actually written on the books, people in positions of responsibility have to at least generally agree as to what the laws are in order for them to have any practical effect. And if a big enough group of influential people collectively decides that there’s nothing illegal per se about hiding billions in debts from investors, or defrauding homeowners with predatory mortgages, or making born-to-lose derivative deals and selling them to foreign banks as AAA-rated investments, then that consensus affects everyone.
The culture of take-for-yourself-now, let-someone-else-pay-later wasn’t completely restricted to Wall Street. It penetrated all the way down to the individual consumer, who in some cases was a knowing accomplice in the bubble mess.
When you meet people who are losing their homes in this foreclosure crisis, they almost all have the same look of deep shame and anguish. Nowhere else on the planet is it such as crime to be down on your luck, even if you were put there by some of the world’s richest banks, which continue to rake in record profits purely because they got a big fat handout from the government. That’s why one banker CEO after another keeps going on TV to explain that despite their own deceptive loans and fraudulent paperwork, the real problem is these deadbeat homeowners who won’t pay their fucking bills. And that’s why most people in this country are so ready to buy that explanation. Because in America, it’s for more shameful to owe money than it is to steal it.
The issues in Griftopia are really law-enforcement issues, and these stories are cops-and-robbers stories. Describing them as anything else actually clouds the issue.