Feeding the giant squid

MANY HAVE remarked on the sad state of the mainstream media, citing as evidence the fact that the most incisive political commentary can be found on satirical news shows on Comedy Central. We can now add that some of the best investigative journalism these days is wedged between interviews with Eminem and Taylor Swift.

While most mainstream economic analysis remains mystified as to the causes of the 2008 crash, and content to lap up Wall Street's reassurances that a recovery is underway, Matt Taibbi's reporting in Rolling Stone has been one of the few sources to actually investigate what's going on. And what he reveals is about as far from reassuring as you can get.

His new book Griftopia: Bubble Machines, Vampire Squids and the Long Con That Is Breaking America is a culmination of this reporting, and makes essential reading for all those who want to understand what is really going on in the American economy--and why we should be mad as hell about it.

Coming to terms with the elaborate financial apparatus which brought us such things as credit derivative swaps and collateralized debt obligations is no easy task, and Taibbi does an admirable job making sense of it all in layman's terms, with help from industry insiders willing to spill the dirt about how things really went down.

What becomes clear once you get past all the fancy mathematical gymnastics is that it was all really an elaborate con game, and we're all the patsies. As Taibbi writes:

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. They don't feed us, we feed them.

SOME PARTS of the scheme will be familiar to readers, such as the ways that ordinary homeowners were fraudulently pushed into the ticking time bomb of adjustable-rate mortgages, and institutional investors like state pension funds were sold this same crap repackaged as AAA gold.

An aspect of the story you aren't likely to hear anywhere else is the evidence Taibbi offers that Goldman Sachs single-handedly manufactured a crisis at AIG in order to secure bailout funds.

In fact, despite its monumental importance, much of the story has barely seen the light of day--like the role of speculation in the commodities bubble that sent gas and food prices skyrocketing, an indirect tax of sorts that redistributed wealth from ordinary people to billionaires, while pushing pushed millions more into starvation.

The crisis had the added bonus of squeezing the tax base of municipalities to such an extent that states and cities across the country are literally selling off large chunks of infrastructure, from turnpikes to parking meters, to shadowy sovereign wealth funds.

And of course, scratch the surface of any of these frauds, and it doesn't take long to find Goldman Sachs. The road to Griftopia is paved with many financial casualties, but somehow, Goldman always seems to come out on top. In the final chapter, Taibbi reprints an expanded version of his famous "vampire squid" article and recounts the uproar that greeted it.

What was interesting to him was why people were so angry about it, which basically came down to "whether or not it was appropriate for a reputable mainstream media organization to publicly call Lloyd Blankfein a motherfucker." Taibbi writes:

Overwhelmingly, the theme of the criticism was not that my reporting was factually wrong, but that I'd missed the meta-Randian truth, which is that while Goldman might be corrupt and might have used government influence to bail itself out, this was necessary for the country, because our best and our brightest must be saved at all costs.

Taibbi takes apart this false narrative earlier in a chapter about the dubious career of Alan Greenspan titled "The Biggest Asshole in the Universe." It is easily the most hilarious part of the book, documenting Greenspan's utter economic ineptitude, shameless social climbing and embrace of the strange and self-serving philosophy of Ayn Rand. Yet in many ways, Greenspan is the key figure in this whole saga, having laid both the regulatory and ideological basis for the bubble era to take off. Explains Taibbi:

Greenspan's rise to the top is one of the great scams of our time. His career is the perfect prism through which one can see the twofold basic deception of American politics: a system that preaches sink-or-swim laissez-fair capitalism to most, but acts as a highly interventionist, bureaucratic welfare state for a select few.

Greenspan pompously preached ruthless free market orthodoxy every chance he got while simultaneously using all the powers of the state to protect his wealthy patrons from those same market forces. A perfectly two-faced man, serving a perfectly two-faced state. If you can see through him, the rest is easy."

Unfortunately, the scam is far from over, as we witness the rise of yet another commodities bubble, and--with the recent news of Goldman's $450 million investment in Facebook--probably a second Internet bubble, too. Wall Street continues to rake in lavish bonuses, while the rest of us face a continuous onslaught of budget cuts and worsening unemployment. Meanwhile, Obama just appointed a former JPMorgan Chase executive his new chief of staff.

U.S. politics has become little more than a media circus, with both major parties firmly in Wall Street's pocket while the likes of the Tea Party try to divert anger toward all the wrong culprits. Taibbi writes:

Instead of talking about what to do about the fact that, after all the mergers in the crisis, just four banks now account for half of the country's mortgages and two-thirds of its credit card accounts, we'll be debating whether or not we should still automatically grant citizenship to the American-born children of illegal immigrants, or should let Arizona institute a pass-law regime, or some such thing.

All things considered, it's hard not to share Taibbi's despairing conclusion that even widespread public knowledge and outrage about the banksters' criminal dealings doesn't seem to have made a bit of difference to their bottom line.

"But at least the mystique is gone," he finishes, hopefully. "The drivers of the Great American Bubble Machine aren't producers, but takers, and we know that now--the only question is, what do we do about it?"