The American Economy: a Byzantine Scheme.

Home Brooklyn Life The American Economy: a Byzantine Scheme.

GriftopiaMatt Taibbi, Griftopia (Random House 2010)

By Stephen Witt.

For many years, Matt Taibbi was the heir apparent to the gonzo tradition of Hunter S. Thompson. He called people names, took vicious potshots at his fellow members of the press corps, snuck into a Promise Keepers convention under a false identity, and dropped acid on the John Kerry campaign bus. His 2005 “New York Press” article entitled “The 52 Funniest Things About the Upcoming Death of the Pope” got both him and his editor fired. Taibbi’s audacious, belligerent tone drew opprobrium from the mainstream commentariat while earning him a loyal following among the young, the angry and the disenfranchised. The ascendancy seemed complete in 2006, when he was name was placed on the masthead of Rolling Stone magazine, replacing the spot long held by the late Thompson himself.

But Taibbi always denied the link to Thompson, instead claiming his role model was the Jazz Age journalist H.L. Mencken, whose decades of poison penmanship in the pages of the Baltimore Sun defined for an earlier generation the role of the rock-throwing outsider. Both sought continuously to deflate the egos of the pompous, and to present the American public as an unwashed collection of ill-bred half-wits. Both relied on the ad hominem attack as a tool of the trade. Both were name-callers par excellence. Mencken famously called Williams Jennings Bryan “one of the most tragic asses in American history”; Taibbi famously called Dick Cheney a “bloodless, vicious cocksucker.”

While both influences are clear in his body of work, for a long time it seemed that Taibbi would never equal work of his predecessors. In his prose he could never quite match the savage erudition of Mencken, and in his antics he could never out-gonzo Dr. Gonzo himself. While certainly capable of some vicious zingers, and while at times capable of truly penetrating insight, it seemed that Taibbi would be a historical place-marker, the man slotted to play the part of America’s designated newsprint jester for a while until someone funnier or zanier came along to take his place.

But then something strange happened, a transition that neither Mencken nor Thompson was ever able to credibly effect: somewhere in the last couple of years, Taibbi grew up. The man who in 2005 joked about bouncing a marble off of the head of the papal corpse is in 2010 the country’s best financial reporter.

The evidence is collected in his latest book “Griftopia,” a collection of articles that ran in Rolling Stone magazine over the last couple of years, supplemented by a large amount of new reporting and material. In it, Taibbi describes the structure of the contemporary American economy, a Byzantine scheme of financial chicanery branded with a Federal Seal of Approval, designed to funnel money away from any conceivable productive economic activity and direct it toward the grabby hands of a select few stationed at the very top.

The scam is breathtaking in its scope and practically indescribable in its complexity. Its primary engine, as Taibbi describes, is the Federal Reserve Bank of the United States and their never-ending spigot of cash, whose first responsibility is to safeguard the continued prosperity of the wealthiest one per cent while leaving the rest of the country to fight off the brutal discipline of market forces. Taibbi lays bare the details of the mortgage crisis, the banking crisis, and the subsequent reflation of the economy, and presents a credible case for the American financial system being a massive, overwhelming fraud.

And let’s be precise what is meant by the word “fraud” here.

If I were to show up to housing court with a doctored bill of sale for a house I claimed to own, I would certainly go to prison for forgery. But, as Taibbi demonstrates in his book, Chase and other banks did this thousands of times, in foreclosure hearings across the country, submitting robo-signed mortgage documents that were almost laughably counterfeit. They faced only the flimsiest of reprimands, and no criminal charges were ever filed.

If I were to insure your house against fire, with no collateral backed against it, collecting premiums with no intention of ever paying you off if it burned down, I would certainly go to prison for insurance fraud. But, as Taibbi demonstrates in his book, Joe Cassano of AIG did this for a decade, ensuring not against fire, but against a spate of bankruptcies, collecting premiums against an economic downturn while posting less than 1% of the collateral they would need to cover their losses if ever an adverse event were to occur. And inevitably, one did. The chief executives resigned in disgrace of course, but got to keep their millions in bonuses, while the company was bailed out by the Fed, and no one ever faced criminal charges.

If I were the President of a bank, tasked with safeholding the hard-earned money of my depositors, and I took this money and went to a casino, and bet it all on black, not once, but dozens of times, I would certainly go to prison for breach of fiduciary duty. But, as Taibbi demonstrates in his book, corporate executives from nearly every major US bank engineered this scheme almost literally, repeatedly pushing their chips all-in on in a frenzied display of home price speculation during the credit bubble. The companies all went bust, and the American depositors’ money was saved only by an unprecedented bailout. No CEO of a major United States bank ever faced criminal charges.

As Taibbi demonstrates, the legal out in every case presented above was layers upon layers of financial complexity. Regulators were often a full decade behind, and often the CEOs of the companies themselves had little understanding of the risks they actually ran. While the cash flows from these activities, viewed with forensic hindsight, clearly indicate the nature of the grift, the complicated financial derivatives in which all these activities were cloaked made the scheme invisible until it was far too late.

The enabler of these behaviors, for a solid two decades, was Alan Greenspan. In Taibbi’s book, Greenspan earns the title of the “Biggest Asshole in the Universe.” Taibbi makes a convincing case. For decades, Greenspan bailed out his buddies in the banking world from their own criminal stupidity, while simultaneously arguing before Congress for the elimination of the minimum wage. He pushed for the deregulation of financial markets and strove tirelessly to remove any “inefficient” (read prudent) safeguards on the flow of capital. He ignored, against dire warnings from even the financial community itself, mounting evidence of a “moral hazard” in his continuous bailouts, creating by implication the so-called “Greenspan put” on which the great volume of scams would later rely.

Citing evidence from Greenspan’s own autobiography, Taibbi presents him as a deluded conspirator, in thrall to the boneheaded “libertarian” ideology of his personal mentor Ayn Rand, and star-struck by his own half-imagined celebrity. (Having read Greenspan’s autobiography as well, I’m inclined to agree.)

The stuff on Greenspan is good, but Taibbi’s at his best in the final chapter, a vicious but wholly deserved takedown of investment banking giant Goldman Sachs. For decades Goldman had a reputation as an unimpeachable capital steward, and as a brilliant economic innovator whose business activities helped spread prosperity through the entire land. In his famous “Vampire Squid” article, Taibbi upended the narrative, providing a mountain of evidence that these “innovators,” while undeniably brilliant, were nothing more than a self-serving gang of thieves.

With a single flick of the poison pen, Taibbi popped the Goldman balloon. In a short twelve months, abetted by the SEC’s prosecution of the company for misleading its own investors during the mortgage bubble, the company’s reputation flipped almost 180 degrees. Now it is rightfully seen by many as a dead weight on the American economy, a company whose executives’ inflated bonuses broke all records in 2009 while nationwide unemployment spiked to a 10-year high.

The book touches on other topics: sales of US infrastructure assets to Gulf State Sovereign Wealth Funds, the (now seemingly-forgotten) commodity bubble that coincided with the mortgage meltdown, the subtly regressive nature of the US tax code, the Tea Party movement. In each chapter he deftly blends a narrative of startling facts with a healthy dose of journalistic outrage. The book is a fantastic read, and surprisingly informative as well.

So Taibbi’s matured, basically. He’s not throwing any marbles. He’s not dropping acid on the campaign bus. He still uses the word “cocksucker,” but only when quoting someone else. His prose will never touch Mencken’s and his stunts will never touch Thompson’s, but he’s found an even better way to achieve the journalistic immortality he plainly craves: reporting true facts.

Leave a Reply

Your email address will not be published.