Photo: Jacobsohn/Getty
Before I even put up today's post more letters from the York exchange started piling up accusing me of not knowing what I'm talking about – so I'm assuming those same letters will be even more relevant after they see that post. "Nothing quite like a dilettante trying to explain the theory of relativity. Good show!" wrote one.
Okay, first of all, give me a break with the "theory of relativity" nonsense. If all of you Wall Street people actually had the brains of nuclear physicists we wouldn't be in this mess in the first place.
But as far as your general point goes, I plead guilty. I'm not an expert on any of this. Anyone who is, is welcome to write to me and fill me in. And obviously it wasn't just CDOs and CDS and MBS that caused this crash. Everything points to a confluence of many different bad or unsound practices. There are plenty of people out there who actually know what they're talking about who are describing these issues – the predatory lending, those crazy subprime mortgages in which the low teaser rates were like the free drinks that brought borrowers to the blackjack table (hoping they would hit 21 via continually rising real estate prices), the ramping back of one Roosevelt-era regulation after another (culminating in the repeal of the Glass-Steagall Act), the generally high level of speculative home-buying, etc.
But the root cause of all of this is the same thing that has caused
every speculative bubble since the tulip craze. It's a bunch of
assholes who think that because they spent a few days scribbling some
equation on a napkin, the laws of nature have been repealed. You can't
turn a Kingston charcoal briquette into a diamond no matter how hard
you squeeze and you can't conquer the problem of "risk" in investing by
slicing a bunch of mortgages up into itty bitty pieces and then mixing
the good ones up with the bad ones (so that it all looks kosher from a
distance, if you squint).
The reason I thought it necessary to even write about this at all is
that I haven't anywhere seen anyone say what absolutely needs to be
said about this crash. You see finance/media people on TV just kind of
moping around, with this hangdog look on their face that says, aw, man,
this blows, what shitty luck. Like this downturn in housing prices was
some terrible accident, like a hurricane or a flood.
Bullshit! These people on Wall Street – who are often the cream of our
educational crop, the products of our most advantaged families – exist
in society for exactly one reason. Yes they're supposed to create
wealth (and it's great if they can figure out a way to do more with a
dollar than you or I would). But the number one thing they're supposed
to do is not fucking lose wealth. That is the number one justification
for their enormous salaries and astonishingly privileged existences.
These people are not writing Huck Finn, they're not painting Still Life With Apples, they're not inventing the Atlas rocket, they're not designing timeless buildings or making inspiring speeches.
They do exactly one thing, and that is guard our money. Their first,
second, third, fourth, fifth, sixth, seventh, eighth and ninth moves of
every day have to be utterly conservative. They are the people we trust
with the keys to the car. That's why they get to sleep in the grownups'
room. That's why they get to live in palaces and work in eighty-story
obelisks. Because if you just give some dude at a bar nineteen billion
dollars, he's going to spend half of it on beer and the rest betting on
the Phillies. Right? That's why you have to give it to the guy with two
degrees from Yale, the guy who's studied every great book on economics
since The Wealth of Nations, the guy who spent eight years in the
best schools in the world learning the difference between a calculated
risk and a seat-of-the-pants gamble.
Well, apparently not. What we're finding out about this crisis is that
you basically couldn't have found a weather-beaten crack hound on the
streets of the worst ghetto in America who would have taken worse care
of our nation's treasure than this community of risk-addicted
craps-playing blowhards.
Sports fans out there, you know who Travis Henry is? That guy who
played running back for the Bills, Titans and Broncos? Travis Henry
made many millions of dollars playing football over the years, but we
found out this fall that he's broke and deep in debt because a) he
fathered at least ten children by ten different women b) he's got an
apparently incurable drug problem and c) he tried to get out of his
financial problems by dealing coke and ended up getting arrested doing
it. Now those ten kids are really in trouble for about the next 18-25
years.
Well, Travis Henry would have done a better job of things than Wall
Street did with the world's wealth. These guys didn't just bet the
house on their investments. They bet fifty times the house! They bet a
thousand times the house! They were absolute fucking madmen. All those
brilliant ways they thought up to make four hundred different bets with
the same dollar made them infinitely more dangerous to society than
some coke-freak running back pumping his jism into two cookies on every
road date. Think about that. If Travis Henry had been in charge of all
that money, we'd be FINE now! Even Travis Henry couldn't even imagine
the scale of desperate irresponsible greed we're talking about with
these guys. They were like a bunch of rabbits on strychnine. You don't
get to an almost mathematically inexpressible financial collapse
through merely ordinary greed and irresponsibility of the type you
might encounter in your home life, or even on the Buffalo Bills. You
need an advanced education to dig this big a hole.
Things like the CDO and the CDS are just the tools these idiots used to
dig that hole. There were plenty more. But the basic concept is the
same across the board. They were supposed to safeguard our money and
instead they gambled with it like a bunch of coke addicts. You know how
a coke addict goes from having money to buy his own coke, to selling
the shit in his house to buy coke, to stealing items from his mother's
place to buy coke, and then finally ends up in Jayson Blair/Maureen
McCormick territory, sucking cocks to get the money to buy the coke?
Well, these guys in Wall Street were about fifty stages past that. They
were promising to promise to suck a cock to get the money to buy the
coke. This crash happened when the dealer finally decided they weren't
good for it.
Just don't let anyone tell you this was all bad luck. If they'd been
doing their jobs, the possibility of bad luck would have been figured
into the equation.
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RockyRacoon | April 11, 2009 1:09 AM
Capitalism is prone to crises of over-production, just like Karl Marx said. What Keynes and all tried to do is avert those catastrophe's through government spending but it really was the destruction of old "values" during WW2 so that new "values" could be created that pulled us out of depression. That is why this whole system needs to be replaced by a rationally planned democratically administered system managed by the direct producers. This includes engineers, chemists, biologists, bookkeepers, accountants and the whole infrastructure that keeps a corporation humming today. Now do you get it?
Jason | November 6, 2008 4:00 PM
Dennis, if you think Matt got "schooled" by David Ray Griffin, then you're not as smart as you think you are.
Clippership | November 5, 2008 8:02 PM
"When (not if) you want to steal a LOT of money you shouldn't get a gun, but a briefcase."
Anonymous | October 24, 2008 3:50 PM
Dennis, you're an idiot. You know nothing about Matt's past. Get over yourself and read his other writings. I'm sure you didn't know that Matt lived in Mongolia and played professional basketball.
Christopher | October 23, 2008 2:09 PM
I Love Matt Taibbi!
To those that don't
Fuck You!
Joe | October 23, 2008 1:51 PM
Hey, once again, Matt... you're the man. This blog is two posts long and it's already better journalism than 95% of the stuff out there.
By the way, for those of you calling Mr. Taibbi, basically, a left-wing nut, please note that he has done plenty of articles calling into question the policies and practices of many left-wing personas.
One that comes immediately to mind is the article where he wrote that both Mccain and Obama are indebted to special interest donors.
Dennis Paul Hastings | October 23, 2008 1:19 PM
Wow. Glad to see you using the 'equation on a napkin' phrase again after getting schooled by David Ray Griffin. It worked so well the first time, why not use it again?
RS staff, why don't we let Matt work at Mickey D's? I know controversy sells magazines, but this guy is not very smart. He's snarky, as they say, and he has an odd last name, but enough already. Let him go negotiate with those pirates near Somalia... when he comes back maybe he'll have enough life experiences to make him a thoughtful and provocative 'journalist'. Annoying, at best.
Macmanius | October 23, 2008 12:31 PM
Mr. Taibbi,
Just a quick note to say how glad many of us were to see you find a home at Rolling Stone after the New York Press so foolishly dropped you. You were the highlight of that publication, and often are of this one as well. Keep up the good work.
Potted Meat | October 23, 2008 1:53 AM
git a rope.
free markets | October 22, 2008 4:58 PM
John Brown, please cite one example that you mentioned.
JPP | October 22, 2008 3:20 PM
This whole situation goes beyond stupidity, it makes the crimes committed by the Enron and WorldCom look like nothing, yet because of the colosal scale of these crimes we do not have the capacity to penalize these fuckers, take their money and throw them in jail. The current justice system cannot handle this. Now to add insult to injury it is highly possible that people will vote the fucking Republican's back into office who shredded what regulatory/legal controls had been in place to prevent this type of thing back into office under the guise that people like John McCain actually give a shit about "fixing this" and preventing it from happening again.
There is no accountability anymore for this, so this will absolutely happen again, it's just a matter of how long it will take.
Mr_AK | October 22, 2008 3:13 PM
The real culprits are the guys behind the curtain who manipulate the game and allow these kinds of things to happen - they KNEW exactly what would happen and positioned themselves to cash in, and let the blame go everywhere else.
Eric | October 21, 2008 10:15 PM
Brilliant. Absolutely brilliant. Finally, someone who can better express what is on my mind than I can. Couldnt have put it better myself. People need to be hauled off to jail for what these idiots have wrought....this is only gonna get worse. I cant wait to hear the excuses in 6 months when we're talking about it on the bread lines
John Brown | October 21, 2008 2:47 PM
I have worked for a Wall Street firm for over 25 years and what Matt says is true, to a point. He fails to consider that Wall Street has never been a particularly rational, benign or prudent place. It's a place where even highly intelligent people are blinded by greed, whose IQ's drop just above moron in order to compete and who concentrate upon doing the next deal and not its consequences. That is the nature of the beast and it probably always will be. To think otherwise is naive.
Which brings me to the real culprits for this financial meltdown; George W and his pals. The idea that Wall Street will regulate itself and that oversight by
Washington stifles competition, is not just naive but absurd.
Unregulated markets ultimately self-destruct. How do I know? Because they have done so consistently throughout our history for the same reasons they are today. The torch that carries the flame is "now things are different" but they are not. Wall Street has been inherently suicidal since it's inception. What changed was our government and it's attitude towards regulation.
Matt should not blame a rattlesnake for being a rattlesnake.
middlemen | October 21, 2008 2:22 PM
patmac25, your claim about CRA lenders defaulting less than non CRA ones is missing two things:
First, that is immaterial. Bad/immoral policy is bad/immoral policy. Who cares if it didn't harm people as much as some say. It still resulted in millions of defaults.
Second, actually was worse. See, there are middlemen in this equation that went through cra-regulated banks. So, even if ostentatiously they were not forced to abide by CRA, they actually were.
Here's my source:
mises.org/story/2963
through the FUD | October 21, 2008 2:12 PM
Thanks Taibbi. It's worthwhile to step back sometimes and look at just what is certain. Through all this deception, lies and fearmongering, trying to drown the signal in the noise, your point is obviously certain.
If only we had tried that approach on other recent catastrophes. Notice how the minute some cataclysm shakes americans awake, our government immediately points at what just shook them as the cure for the shaking? The war on terror is a perfect example of what I mean. We spend over half a century assassinating, installing dictators, coercing with economic sanctions, and just generally being the worst kind of evil imperialists we declared independence from and when these people are driven into the arms of extremism and start finally fighting back, what did our government do? "They hate us for our freedoms, we have to invade to save you from them".
Can you believe it that they actually pulled that off? They convinced us that our problems could be solved by the very thing that caused the problem: interventionism, oppression, imperialism whatever name you want to give it.
Now they're at it again: Government collusion with investment banks(and the rest of our economy really) and artificial manipulation of the market. Everything they tell us will fix the problem is exactly what caused it. Read up on the difference between Keynesian and Austrian schools of economic thought. Read up on the Feds insane manipulation of our wealth. Read up on Peter Schiff's(economic adviser to Ron Paul) dead on assessment of this situation years before it happened.
Oh, and watch for oil prices to start dropping now that the IMF/world bank cant leech off of us. That will be the biggest indicator of potential trouble, worldwide.
Matt Taibbi's | October 21, 2008 2:09 PM
Taibbi's a hack!!! This is Rolling Stone attempt at having a "rebel" in their magazine. I don't buy his lame opinion. Being a Hunter S. Thompson fan for most of my adult life, I see Matt trying to ride his coattails with his take at Gonzo journalism! If Hunter were here he would laugh at your blogs, books, and at your face!
Anonymous | October 21, 2008 10:19 AM
Hilarious to see that Taibbi has his own blog now.
"Bush/McCain sucks!!! Robble, robble!"
"Republicans are evil! Robble, robble!"
"The ObamaMessiah is the cure for all of my ills! Robble, robble!"
Oh yeah, this will be an entertaining (and mindless) blog to follow.
Travis Henry's Agent | October 20, 2008 10:55 PM
Please do not mention my client's name in the same context as these Wall Street Assholes. He's got enough problems.
Thanks
THA
patmac25 | October 20, 2008 2:48 PM
Jermaine, I hope you have the receipt for that MBA in policy, bcause you might as well return it since it hasn't taught you much.
Fannie and Freddie didn't write sub-prime mortgages. That's the whole point of labeling a borrower "sub-prime". Fannie and Freddie wouldn't approve a loan for that type of borrower and they had to go outside lenders (banks like WaMu / brokers like Countrywide, etc.) to get a mortgage.
Fannie and Freddie were encouraged to buy up pools of securitized mortgages (true, but much different than what you are saying) and that f'd them because the underlying securities, many of which were AAA-rated by the rating agencies were in fact, garbage.
Now don't get me wrong, Fannie and Freddie sucked (new info about how much came out yesterday) and played a huge role in this mess for a variety of reasons, just not the ones you cite.
Not sure which of AmericanMary's mistakes to correct first. Her initial premise that the sub-prime funds entering the market were the impetus for the crisis sounds good, but its "intellectually dishonest".
#1 - Democrats didn't control either House of Congress in 2003.
#2 - Mortgages issued by banks participating in the Community Reinvestment Act (which has been around since Jimmy Carter in the 1970's), many of which operate in lower-income urban areas, have a much lower rate of mortgage default than of the non-regulated brokers (again..Countrywide, etc.) because they didn't write mortgages with terms that couldn't be achieved. Perhaps because they are local banks and see their customers on a regular basis versus originating loans for the mortgage fee and selling it off asap?
#3 - The money people stood to make (as long as housing prices went up and people paid their mortgages) encouraged crazy speculation and there weren't any grown-ups (aka regulators) saying, "no...you can't make that loan" or "no, one-third of the loans in the security will default because the people paying them have no money." But to Mary's initial premise, these agressive financial devices were in place before they sought out the sub-prime cash...not the other way around.
There are a 1000 villains here (including those dumbasses that signed bad loans or thought housing prices could only go up and are now only too happy to walk away from their property) but the underlying problem was greed and an over-reliance on the idea that the "market is always right." It is...in a laboratory.
Not to be a total prick, but do some research besides the Hannity talking points before you spout off on how Matt's wrong.
Jermaine | October 20, 2008 12:29 PM
I don't fully disagree or agree with this piece. The fact is, you are partially correct. Yes, "Wall Street" is partly to blame. HOWEVER, these types of loans were being awarded to borrowers by Fannie Mae and Freddie Mac PRIOR to that. In fact, they were handing out sub prime and irresponsible loans to people who could not afford them at the urging of the Clinton administration (I know this because I have both a BA AND MA in policy).
So, "Wall Street" followed suit and began lending out the same awful mortgages that the govt had pressed for. Now, that said, it was ethically screwed up and definitely greedy. But, it's hardly fair to place the blame squarely and solely on their shoulders.
Moreover, let's not pretend that either the Democrats NOR the Republicans were the saviors or the villains alone. The bottom line, and it's sad more people aren't saying this, is that the government needs to keep its nose out of the private sector. Had the govt not been leading the charge to hand out mortgages to anyone with an ID, we wouldn't be in this mess.
AmericanMary | October 20, 2008 11:11 AM
Matt, my friend, you are being intellectually dishonest if you don't concede that it was the infusion of those subprime funds into the market that was the impetus for this crisis.
You have the Clinton Administration, the Community Reinvestment Act, and the Democrats' torpedoing of reform measures in 2003 to blame.
Don't let facts get in the way of a good narrative, my friend.
name | October 20, 2008 4:31 AM
makes me want to stop paying taxes. I got college to pay for
kt | October 20, 2008 3:25 AM
these are the same twats/corporations who were handing out $50 million paychecks to the ceos last year.why should i care what happens to them.i dont have insurance,stocks,a home.i dont even want to live in that shit hole called america....epat lovin life.
Clarity | October 20, 2008 12:33 AM
Love you, Taibbi. Glad you're blogging. But what happened to "The Low Post" and "Road Rage"? Just curious.
sugarloaffrankiej | October 19, 2008 3:37 PM
BRAVO! I've emailed the link to this to everyone I know, and we're all in agreement. The truth, colorfully illustrated :-)
Cook Torrence | October 19, 2008 3:05 PM
That sucking sound you hear is all the traffic leaving Tim Dickinson's shitty politics blog and coming here.
BradV | October 19, 2008 8:18 AM
After reading Taibbi's IM conversation with Byron York, I'm amazed/horrified when I think about all these idiots that buy into the crap that the National Review prints. But I guess that crowd has never really been big on facts or reasonable excuses.
beatnik1209 | October 19, 2008 12:05 AM
Amazing, brilliant - I'm in lock step with Matt Taibbi and I didn't even read the thing, but LOVED it!!!!
RobTheStudent | October 18, 2008 6:18 PM
I'm no financial expert..or even close..and I'm assuming Tabbi and everyone who posted isn't either. I do agree these guy are fuck'n idoits. They screwed alot of ppl over because I they ignored one of the basic rules of running a business: You don't just plain for today and find ways to make money today but you do so to make money tomorrow and next year. YOu don't fuck everything up...and i really think Wallstreet knew what was coming they were just in denial until it did happen..to make a buck today. I learned that in 8th grade..its actually an easy concept.
Now that I got my disclaimer out of the way I want to say this: Tabbi you wrong when you say all those Yale and Harvard hot shots should play it safe with money. Being "utterly conservative" with money is what fucks us just as much as being utterly stupid. Being utterly conservative means growth and no change. Being utterly conservative means no risk taking...yes that got us in trouble but I'm not talking about reckless risk taking I'm talking about the risk taking required to move forward. There was a day when a conservative would have never bet their money on the success of the personal computer, or combustion cars, or even an AC power grid. They people take risks and they succeed and that is what has made America what she is. Nothing is a sure bet, but that is what makes life an adventure. I don't think Tabbi can come out and say Wall-Street should be "utterly conservative" because that is going too far. There is a fine line- i'm not the one to define that I'm not a money expert- but I really do think that kind of attitude is not the correct one to take.
One more thing...why do people want to blame all the "privleged' people in their luxury apartments on Wall Street for all this. There were a lot of people who had no business taking huge loans who did. My sister, for example, took out a loan a couple years ago for 65,000 dollars. The banks wanted to give her a 250,000 loan. Her and my brother in law sat down and did the math and realized they could have never been able to afford such a loan. People were ignorant of the loans they took. Banks have an obligation not to decieve and screw ppl out of there money but I don't think consumers have a responsibility not to screw themselves.
For all i'm concerned all these banks handed out blind folds and the American people tied them around their heads. So who's do blame?
RickD | October 18, 2008 4:35 PM
The best explanation of Wall Street's toxic self-delusions I've read is James Galbraith's recent "The Predator State." The Mafia looks good by comparison.
Chuck | October 18, 2008 9:23 AM
Matt,
Praise Jesus that you are around. I read your recent article in Rolling Stone and not only laughed outloud, but was angry - truly angry that our Country is being run not by insane people, but by criminals smart enough to get away with everything they are doing. It makes me sick.
I love your blog, but if you don't want to be called a blogger, then call it your DIARY. haha
Anyway, please please please keep up the good work - and keep telling the truth!
Cresttwo | October 18, 2008 5:51 AM
Has anyone seen York's male equipment by the way?
He says he left it around here somewhere.
Bottom line; we probably won't be seeing Taibbi on any of those dueling gasbag cable shows anytime soon. He's just not polite.
Robert Smith | October 18, 2008 3:18 AM
These Wall Street CEO's are not the only ones that need to be hung from the nearest tree. Their partners in crime in Washington need to be swinging right along with them. People say this isn't a political thing, bullshit wake up dumb-asses the dumb fuck you voted for was right there with his/her hand in on it.
JoeB | October 18, 2008 1:53 AM
You really thought they were "guarding our money"? Never have been- those attracted to this sector first stand for making a dollar from your dollar. When things explode they run away- a few will do time, but many will live to speculate using your money another day.
HonestAmericanTaxpayer | October 17, 2008 10:39 PM
Saying they gambled is being too lenient. They were negligent... criminally negligent, and I'm waiting for a special prosecutor to be named. I want justice.
EMoMo!!! | October 17, 2008 9:43 PM
FUCKING A RIGHT, MR TAIBBI!!!!
PURE FUCKING STUPIDITY, PLAIN AND SIMPLE. NUFF SAID.