Mailbag: AIG, Parking Meters and Being a Crappy Husband
Morning, folks. Feeling very positive today, just days away from a vacation, pitchers and catchers reporting in Ft. Myers, life is good. We have a long feature coming out later this week that probably took a collective ten years off the lives of a pair of Rolling Stone fact-checkers. So thanks to Phoebe and Julie, and readers please watch out for “Why Isn’t Wall Street In Jail?” later this week, so their work wasn’t all for nothing.
On the Supreme Court, the first ruling will be coming out either today or tomorrow – we just have one rogue Justice who is taking his time with his ruling. Once that opinion comes in, we’ll be good to go. So on to this week’s mailbag. Questions this week seemed to me to have an unusually high humor factor, so well done, readers – without further ado:
Matt,
Lately I’ve been lying awake thinking about the statement, “This sentence is false.” It seems to undermine any claim humans can make to having knowledge. While that’s disturbing enough, the insomnia is killing me at work. Do you have any advice how not to think about this?
Thanks,
John
John,
I think you need a girlfriend.
Hey Matt,
I’m on my third reading of your “Hot Potato” chapter from Griftopia and I want to thank you for it, because I never would have even attempted to understand this stuff had you not made it seem as understandable as you did in your book. However, I keep stumbling over one point, which may turn out to be trivial, in regards to the collateral that Goldman was demanding from AIG. How were they allowed to demand collateral? The credit default swap was insurance right? You can’t demand money from your insurance company if you aren’t making a claim. What is this collateral against? Also, feel free to address this question by suggesting further reading to me, or simply suggesting that I read the chapter again. I may well have missed it. Regardless, I am now determined to figure this shit out.
Tom
Tom,
Coincidentally, I have a story that covers this in some detail coming out in a few days. The collateral calls that AIG faced from Goldman and other companies actually had nothing, or very little, to do with the credit default swaps in the actual deals. What happened was this: the subsidiary of AIG that wrote those contacts, a company called AIG Financial Products (AIGFP), wrote them in such a way that their customers could demand cash collateral in the event that the parent company, AIG, suffered a downgrade in its credit rating. At the time the contracts were written, primarily before 2006, the idea that AIG would suffer a downgrade was almost unthinkable; it was the world’s largest insurance company and considered one of the strongest firms in the world.
However, in 2006, AIG got wrapped up in a major securities fraud scandal in which the company was caught using sham transactions to hide losses. AIG ended up having to pay $800 million in fines and the scandal led to a downgrade of AIG’s credit rating, which in turn led to Goldman making the first of its collateral calls in the summer of 2007. Collateral calls happen when an investor or customer is sufficiently worried about your long-term liquidity that it demands cash to make itself feel better about having tons of money tied up in your future. AIGFP’s contracts allowed customers to make such calls in the event of a downgrade, and that’s why the firm became vulnerable so shortly after the 2006 scandal.
Matt –
Political campaigns are so long and expensive because the people who profit the most — pollsters, operatives, ad agencies, etc. – pump up interest in the “next” campaign before the previous one was finished.
It is like the nuclear weapons test industry, which made a great living convincing Congress they had to spent billions testing weapons . . . not to improve weapons but to keep their careers.
How do we find out who profits from the constant political campaigns?
Cheers –
Brian Pete
Brian,
I don’t think it’s any secret who benefits the most from the extended political campaigns – it’s the news media, particularly the TV news media, which gets a long-running highly profitable reality program to fill multiple time slots without having to pay any of the performers. I think there are others who benefit as well, politically, from the absurd length and overexposure of the candidates (among other things, it’s an extremely effective distraction from real problems and from these same politicians’ continual failure to govern effectively), but the primary financial benefit definitely goes to the TV networks.
It would be one thing if this were an 18-month barnstorming tour that high-profile politicians used to educate the public about how the appropriations process works, how the Fed operates, what the Ex-Im bank is or how the Pentagon budget is audited. But they don’t: instead, the spend the entire 18 months pandering and playing to the cameras, frantically trying to out-stupid each other. The candidates always insist that they have no choice, that once they get into the weeds too much on policy issues they start to lose votes (and reporters almost always take the same line: campaign-trail types love to hammer candidates for being too “professorial” or “boring” or “dry”), but the reality is that this is nonsense, that voters are actually far smarter than either candidates or the news media give them credit for, and actually have a huge appetite for serious debate. The myth that the public is too stupid for serious debate is something that is perpetuated by politicians and media figures as a way of keeping the public away from meaningful policy discussion. And even if it happened to be true that the public preferred dumb stunts and Palinesque one-liners to serious discussion, the whole point of leadership is that you have to change that dynamic, you have to convince the public to stop being drooling morons and to start taking their responsibilities as citizens seriously. I mean, that’s what a politician’s job is: They actually know how government works from experience and it’s their job to explain all of this to the public. To some extent that goes for us reporters, too, incidentally.
But almost nobody in this whole tableau bothers with any of that: Politician after politician and pundit after pundit enthusiastically dumbs the whole show down to the point of utter meaninglessness, for 18 straight months. And those same people almost always also have the balls to blame the public for doing it afterward, saying they’ve only given voters/readers/viewers what they want.
I know I’ve gone off on a tangent here, but the whole thing grosses me out… Getting back to the question, yes, there’s a whole industry that’s grown up around these protracted campaigns, and it would be a great thing to somehow get rid of these financial incentives. The reality is that most people could learn everything they need to know to make an informed decision about who to vote for through an intense, well-covered campaign of just a few weeks’ length – a few days’ length. If the state gave each candidate a few hours of free national air time before each vote, that would be more than enough for most voters. It would save hundreds of millions in taxpayer-supported matching funds and it would also level the playing field – as it stands, the only candidates with a chance are the ones who’ve secured the patronage of the finance, defense and health care industries. The system sucks and it should be changed.
Matt,
I have to disagree with your last response about Mexican Americans. Our economy bottoms out because of the billionaire bankers and everyone gangs up on the lowest rung of society: the janitors and fruit pickers. How sad is that? And about Mexican Americans bring[ing] the economy down, I think just the opposite. They may [be] the only salvation for America. Look at where we [are] at as a society. We seem to have reached a state where we are so bitter and cynical that even something like children [having] health care has become controversial. But I will grant the writer one thing: He does represent a large cross section of America. Nations that are uni-race (Sweden) or de facto uni-race (Depression-era America that sponsored programs that largely benefited the majority race) are more apt to have large and beatifically [sic] social programs.
Arthur
Arthur,
My editor gave me a lot of grief for my answer to the immigration question last week. “You totally punted that question,” he said. “I was going through it, enjoying reading it, and then it struck me that I had no idea what you were saying, what side you were on.”
“You’re absolutely right,” I said. “I’m not answering that goddamn question honestly, are you crazy?”
Anyway, great question!
Aloha Matt,
I have a suggestion for the Asshole Supreme Court – franchise it out to local writers for our own local assholes. We have buffoons o’ plenty that my readers might be interested in tagging as a true a-hole but aren’t really appropriate for a national audience since no one knows who they are except for here.
I live on Kaua’i (in Hawai’i) and write a daily column on local (county) government and politics but just for the island or sometimes the state. After all, you can’t really have a supreme court without district and circuit courts. Perhaps really iffy cases could have some sort of appellate system and float to the top based on whether they’d be of interest to a national audience. If nothing else, it makes your concept much more participatory.
Andy
Andy,
I think a system of district and circuit courts is an outstanding one and I would love to see them organized. Again, the key thing here is to build up a library of legal precedents. I also think there should be a whole court devoted to traffic/highway assholedom. If you do end up making such a court, we’ll be happy to link it to our database of cases, if and when we actually do get that up and running. You’ll be responsible for your own track suits.
Hi Matt,
Who used Twitter more effectively, the Egyptian protesters or the Jay Cutler critics?
Cheers,
Mark
Mark,
That’s a tough one, and I think it’s a good subject for people like the good folks at the Poynter Institute to investigate. Going by the objective data, Cutler is still the Bears quarterback, while Mubarak had to resign… I would love to see the two of them switch jobs, actually. How much would you pay to see Mubarak rolling out and trying to avoid taking a sack from Jared Allen?
Matt,
So, in the midst of this AP article describing the Republican’s proposed spending cuts, including the elimination of the CPB (PBS), AmeriCorps, Head Start, and other programs, I see this infuriatingly simple-minded tidbit:
House Democratic leader Nancy Pelosi issued a statement calling the bill irresponsible, adding that it would “target critical education programs like Head Start, halt innovation and disease research, end construction projects to rebuild America and take cops off the beat.”
But first-term Republican conservatives claimed victory after forcing their own leadership to expand the measure after rejecting an earlier draft as too timid.
“$100 billion is $100 billion is $100 billion,” said Rep. Tim Scott R-S.C., referring to amount the revised package would cut from President Barack Obama’s budget request of a year ago.
Really? Is it Tim? Is one $100 billion item in the budget the same as any other? Then I propose we eliminate spending on wounded troops, and let them hobble out or have their beds wheeled out to the sidewalk while Walter Reed is turned into a hotel for lobbyists; we can also stop spending on food for overseas soldiers, because surely they can just buy from local restaurants and grocery stores with their salaries. In addition, since spending cuts aren’t the only way to reduce the deficit by $100 billion, let’s raise federal income taxes on the lowest 20% of earners to, say, 48% of gross income. There, that’s another $100 billion or so dollars, no morally different than any $100 billion in the budget…
Seriously, Tim Scott, restrain yourself from speaking in public, you stupid, stupid little man.
Thoughts?
Christopher Narkun
Christopher,
I wrote this in to Scott’s office today:
Congressman Scott,
My name is Matt Taibbi. I’m a reporter from Rolling Stone magazine.
I saw your quote about potential spending cuts: “$100 billion is $100 billion is $100 billion.”
I take from that quote that you mean that all government spending is and should be equally targeted for elimination. So my question to you is: how about the $174,000 we spend on your salary?
I’m being serious, I’d love to see a response on this. And so would my readers, who are seeing this question published online as of today.
Sincerely,
Matt Taibbi
Rolling Stone Magazine
I’ll let you know if I get a response. What a nitwit.
Matt,
Apologies if you have already seen this, but it’s a pretty good piece that touches on the privatization of the Chicago parking meters, among other aspects of the practice that I have not yet heard about. My favorite part being the 2 paragraphs after the “Analysis After the Sale” header.
Keep up the good work!
J.R.
J.R.,
I didn’t see that, and it’s crazy. The relevant section I think is worth quoting for amazingness:
Analysis After the Sale
Morgan Stanley eventually took majority ownership of the city’s parking meters for 75 years, in exchange for a one-time payment to Chicago of just under $1.2 billion. According to Chicago Sun Times political columnist Carol Marin, almost immediately the cost of using a parking meter inside the Loop jumped to 28 quarters ($7) for a two-hour period.But quickly increasing the cost of parking wasn’t the only pain inflicted by the new owners. Many parking meters couldn’t handle that much loose change in one day, and once full the meters would accept no more change; anyone who parked by one was doing so illegally. Yes, the number of parking tickets jumped so much they had to stop writing them while new meters that would accept credit cards were installed. Even more interesting is that LAZ Parking – also owned by Morgan Stanley – was responsible for collecting the coins out of the meters and issuing the parking tickets.
The meters were set to demand payment 24 hours a day and seven days a week, ending the free parking that enticed many families to downtown Chicago on Sundays.
Chicago’s Inspector General analyzed the deal only after it was done; and on June 1, 2009, his report on the sale said officially that Chicago had gotten the short end of the stick. The report faulted William Blair’s calculations of the 36,000 parking meters’ present and future value: they were worth not a mere $1.2 billion, but more in the neighborhood of $2 billion. Seems Blair wrote the entire report from the investors’ perspective, not from that of the real owners, the people of Chicago. The Inspector General concluded that the entire deal was “dubious.”
Matt,
you could become an asshole husband easily. don’t. you are at that crossroads stage, a key juncture.
do about twice what you think half the home & family work is, that will be closer to the one-third your wife would probably settle for. your estimate of half is about 20%. do much more. include repairmen, keeping in touch with family, pet care, book-keeping & taxes, vaca planning, doctor & dds & rx. stuff, errands, shopping of all kinds, car maintenance, home maintenance, housework, cooking, kitchen k.p., grocery shopping, holiday prep & breakdown, planning & hosting & cleaning up after entertaining, major purchase vetting and extended family contact & gifts & b-day cards. oh, and the social part of each career, philanthropy, legal matters, computer network acquisition & upgrades, tracking warranties, keeping orderly home files and paperwork, tracking photos & videos, calling banks, insurance companies and so on (and sitting on hold.) and laundry, dry cleaning, clothes & shoe maintenance also – time sucks.
praise her in public, to her family, co-workers, everyone. be annoying in your role as her booster. be relentlessly positive and grateful for her, out loud. settle any disputes in private, quietly. never (ever) “tease” her mistakes in public, say a negative word about her or ignore her (or roll your eyes) at her. esp. where people can see. don’t get restless when she tells a boring story, snicker when she muffs a joke or look annoyed when she is teary for an hour. don’t talk with your eyes on a screen or phone of some kind. face her with your shoulders, not a cocked head. your heart should (literally) face her when you talk. be a massage genius just for its own sake, no agenda. become a maestro with her favorite drink, her favorite coffee order and her fav b’fast and dinner. make her fav dessert on a regular basis. insist, and serve it with a flourish.
be rock solid about her, have her back. make it seem a sure thing that you would push her out of the way of a bus and get hit yourself, if need be. always back her up in a dispute with your family, even a mild one. always. repeat: always.
make her believe she is treated, behind closed doors, better than any woman she knows.
she will believe this, if true.
Nan Connolly
Nan,
My favorite parts of this letter, in order:
- The bit about splitting “shoe maintenance” equally. What is “shoe maintenance”? And are there really households where the cumulative time spent on it becomes a marital issue?
- The part about how I should “face her with my shoulders, not a cocked head.” This brought me back instantly to some of the coaching I had in my basketball career. I get the idea about keeping my shoulders square, but can I overplay her to one side when she’s out on the perimeter? My wife doesn’t have much of a left hand when she drives the lane.
- On the “make it seem a sure thing that you would push her out of the way of a bus and get hit yourself” part, I’m absolutely with you, and I’m pretty sure my wife knows I would, but here’s my question to you. Do I myself have to get hit by the bus to make this work? I mean, is it okay for me to push her out of the way of the bus and jump out of the way myself? Or does that ruin it somehow? The way you wrote that sentence, I feel like you sort of lingered on the “and get hit yourself” part, almost like you wanted to write it twice.
I’m sorry, I don’t mean to make light of this, it’s a sweet letter in some ways, and I’m sure my wife will appreciate the thought. But we’ve been married less than a year, so I’m hoping I’m a little short of the crossroads yet… come to think of it, what made you decide to send this letter to me in particular?
Email your questions to asktaibbi@rollingstone.com, or leave them in the comments below.