The Great American Bubble Machine

suparni

suparni

human being
I somehow ended up back in Solow after another night of debauchery...

Still, somehow the pigsty crap forum does not represent my recent interests very well - so if there is any form of intelligence out there - I choose to share this article: "The Great American Bubble Machine"

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

Definitely worth a read.

I intimately know someone who was president of a top financial firm in the 90s and who knows some of these people personally.

It was fascinating to hear a true insider explain how he suspected some corruption of this sort while working and dealing with these people... but never really put the pieces together until he read Matt's article. According to this person Rolling Stone is grossly underestimated in their reporting on such matters. "If this was reported in Europe Goldman's windows would be smashed out... riots would happen in the streets... but America just seems to beg for more..."

Anyways hope you enjoy the article.

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine
 
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suparni said:
I somehow ended up back in Solow after another night of debauchery...

Still, somehow the pigsty crap forum does not represent my recent interests very well - so if there is any form of intelligence out there - I choose to share this article: "The Great American Bubble Machine"

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

Definitely worth a read.

I intimately know someone who was president of a top financial firm in the 90s and who knows some of these people personally.

It was fascinating to hear a true insider explain how he suspected some corruption of this sort while working and dealing with these people... but never really put the pieces together until he read Matt's article. According to this person Rolling Stone is grossly underestimated in their reporting on such matters. "If this was reported in Europe Goldman's windows would be smashed out... riots would happen in the streets... but America just seems to beg for more..."

Anyways hope you enjoy the article.

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine
Click to expand...

Thanks for posting this regardless of whether it gets any response on here.

Matt Taibbi is an excellent journalist who doesn't really get the credit he deserves because of the publication he writes for. I've followed his career back from when he wrote for the Buffalo Beast but this recent series on Goldman Sachs has been a genuine revelation of not only how venal Goldman is but how talented he is.

This is his blog if anyone is interested:

http://trueslant.com/matttaibbi/
 
Thanks for the link to his blog! Great. I have been meaning to read his latest RS article on health care. I am going to check out this blog too. I agree with you, he is an excellent journalist and RS has actually had some pretty groundbreaking journalism over the years. One article in particular was about the origin of AIDS over which RS took a lot of shit from the scientific community. They had to retract the article, which traced AIDS back to the polio vaccine that was created in and tested on villages in Africa. It basically blames AIDS on the grinding up of livers on thousands of mistreated, used and abused baboons and primates... its a very fascinating story that makes a lot of sense energetically as well as scientifically. Nobel Prize winners agreed with the article and yet it was silenced. Ever since I heard about the RS expose of the polio AIDS connection, I have been more acutely aware that they are underestimated in the realm of non music journalism quite often. Cheers.
 
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down_in_albion said:
I noticed Worm post it in the healthcare thread but haven't got round to it yet. I'll go through it over the weekend.
Click to expand...

I didn't post it. therightone did. I just said it was excellent. :)

I read Taibbi's piece on Goldman Sachs, too, and that was also very good.

The financial system as it is currently constituted would indeed cause a massive revolt if people understood how it worked.

There's another great article about the subject in the new Vanity Fair. It's called "Good Billions After Bad", written by Donald L. Barlett and James B. Steele.

The article explains how the first batch of TARP money, allocated during the final days of the Bush Administration, went to a variety of banks in ways that were untraceable. The money basically vanished. There's no way to track it. (The authors note that "some measure of scrutiny and control has since been imposed by the Obama administration", but it's too late to trace the money handed out under Bush.)

Some highlights from the article, which is another must-read:

CEOs of the biggest nine banks gathered at a meeting called by Paulson. They were handed sheets of paper and told to write down a dollar amount. It didn't matter if they wanted the TARP money or not. Paulson implied that if they refused, Federal "regulators" would come down on them and cause serious problems. They got the money they requested on the sheets of paper (with Magic Markers or Sharpies, apparently). That was basically the extent of the paperwork the Treasury Department required for companies like Bank of America and Citigroup. Zero oversight, zero accountability.

The money was badly spent:

The Congressional Oversight Panel that later reviewed the 10 largest tarp transactions concluded that Treasury “paid substantially more for the assets it purchased under the tarp than their then-current market value.” For each $100 spent, Treasury received assets worth about $66.​

The article includes the fate of TARP money at smaller institutions around the country. CEO Ray Davis of Umpqua bank in Portland, Oregon, did not want TARP funds. He actually said no to a Treasury official who called him, saying his bank was fine. The official insisted, saying it was his public duty to take the TARP funds. Davis finally agreed and awaited what he assumed would be a 200-page application for the Federal money. The fax finally came in:

Davis recalls that, when the two faxed pages were brought to him, all he could say was “Really?” As soon as Umpqua’s application was approved, Treasury wired $214 million to Umpqua’s account.​

The article also talks about a predatory bank in Santa Barbara which screws poor people. Then there's Capital One. The TARP money was intended to get credit flowing again. Capital One Bank is the fifth-largest credit card issuer in the nation. It got $3.5 billion in TARP funds, presumably intended to help un-stick the credit freeze for consumers. Instead Capital One used the free money to buy Chevy Chase bank. Consumers were not only shut out of the relief money, many saw their APRs rise for no reason, some from 7.9% to 22.9%. The other major credit card companies more or less did the same.

Northern Trust used their money to stage a golf tournament. Citigroup tried to buy a $50 million private plane and settled for a $10 million renovation of their Park Avenue offices. Smaller recipients were equally irresponsible. (The authors note that their investigation was only a "toe in the water".)

A.I.G. was the most galling case. It's not even a bank. Chunks of the TARP money A.I.G. got went to pay a $12 billion debt to Goldman Sachs (Paulson's old company) as well as multi-billion dollar debts to banks in Germany and France. That's right-- banks in Germany and France got billions from U.S. taxpayers.

Even though the article, like Taibbi's work, deals in some eye-opening specifics, it's often hard to reconcile the bigger picture to our little corner of the world. There's another way of looking at the matter which is closer to home. An interview answer J. G. Ballard gave many years ago struck me with its simple but astounding insight into our capitalist economy. Musing about the possibility of a middle-class revolt, Ballard said people would never rise up until they grasped how all the numbers really affected them. He gave this example: "A bank manager in Hong Kong raises the interest rates by a fraction of a point and a white-collar worker in London or New York has his retirement age pushed back by three years". We're all in that boat.
 
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Worm said:
I didn't post it. therightone did. I just said it was excellent. :)

I read Taibbi's piece on Goldman Sachs, too, and that was also very good.

The financial system as it is currently constituted would indeed cause a massive revolt if people understood how it worked.

There's another great article about the subject in the new Vanity Fair. It's called "Good Billions After Bad", written by Donald L. Barlett and James B. Steele.

The article explains how the first batch of TARP money, allocated during the final days of the Bush Administration, went to a variety of banks in ways that were untraceable. The money basically vanished. There's no way to track it. (The authors note that "some measure of scrutiny and control has since been imposed by the Obama administration", but it's too late to trace the money handed out under Bush.)

Some highlights from the article, which is another must-read:

CEOs of the biggest nine banks gathered at a meeting called by Paulson. They were handed sheets of paper and told to write down a dollar amount. It didn't matter if they wanted the TARP money or not. Paulson implied that if they refused, Federal "regulators" would come down on them and cause serious problems. They got the money they requested on the sheets of paper (with Magic Markers or Sharpies, apparently). That was basically the extent of the paperwork the Treasury Department required for companies like Bank of America and Citigroup. Zero oversight, zero accountability.

The money was badly spent:

The Congressional Oversight Panel that later reviewed the 10 largest tarp transactions concluded that Treasury “paid substantially more for the assets it purchased under the tarp than their then-current market value.” For each $100 spent, Treasury received assets worth about $66.​

The article includes the fate of TARP money at smaller institutions around the country. CEO Ray Davis of Umpqua bank in Portland, Oregon, did not want TARP funds. He actually said no to a Treasury official who called him, saying his bank was fine. The official insisted, saying it was his public duty to take the TARP funds. Davis finally agreed and awaited what he assumed would be a 200-page application for the Federal money. The fax finally came in:

Davis recalls that, when the two faxed pages were brought to him, all he could say was “Really?” As soon as Umpqua’s application was approved, Treasury wired $214 million to Umpqua’s account.​

The article also talks about a predatory bank in Santa Barbara which screws poor people. Then there's Capital One. The TARP money was intended to get credit flowing again. Capital One Bank is the fifth-largest credit card issuer in the nation. It got $3.5 billion in TARP funds, presumably intended to help un-stick the credit freeze for consumers. Instead Capital One used the free money to buy Chevy Chase bank. Consumers were not only shut out of the relief money, many saw their APRs rise for no reason, some from 7.9% to 22.9%. The other major credit card companies more or less did the same.

Northern Trust used their money to stage a golf tournament. Citigroup tried to buy a $50 million private plane and settled for a $10 million renovation of their Park Avenue offices. Smaller recipients were equally irresponsible. (The authors note that their investigation was only a "toe in the water".)

A.I.G. was the most galling case. It's not even a bank. Chunks of the TARP money A.I.G. got went to pay a $12 billion debt to Goldman Sachs (Paulson's old company) as well as multi-billion dollar debts to banks in Germany and France. That's right-- banks in Germany and France got billions from U.S. taxpayers.

Even though the article, like Taibbi's work, deals in some eye-opening specifics, it's often hard to reconcile the bigger picture to our little corner of the world. There's another way of looking at the matter which is closer to home. An interview answer J. G. Ballard gave many years ago struck me with its simple but astounding insight into our capitalist economy. Musing about the possibility of a middle-class revolt, Ballard said people would never rise up until they grasped how all the numbers really affected them. He gave this example: "A bank manager in Hong Kong raises the interest rates by a fraction of a point and a white-collar worker in London or New York has his retirement age pushed back by three years". We're all in that boat.
Click to expand...

My apologies to therightone :)

If I may use the old analogy of the Blind Men and the Elephant. As casual observers, which is all even the best of us can manage, we can see bits of the puzzle but never the grand scope. Everyone knows Madoff is a crook, but it's less easy to explain why and what he actually did that is different to a thousand other hedge fund managers.

Thank you for the Vanity Fair link also Worm :)
 
PregnantForTheLastTime said:
*Rushing to my attorney to incorporate as a bank.*
Click to expand...

An excellent idea. You get all the benefits of legal personhood, without the bad bits, like having to actually pay back money you splurged on grotesque status symbols and roulette wheel betting.

If I may stake my claim early for Head of Overseas Operations (Honalulu) I promise to work hard and only piss away as much as the government will cover ;)
 
Worm said:
Some highlights from the article, which is another must-read:

CEOs of the biggest nine banks gathered at a meeting called by Paulson. They were handed sheets of paper and told to write down a dollar amount. It didn't matter if they wanted the TARP money or not. Paulson implied that if they refused, Federal "regulators" would come down on them and cause serious problems. They got the money they requested on the sheets of paper (with Magic Markers or Sharpies, apparently). That was basically the extent of the paperwork the Treasury Department required for companies like Bank of America and Citigroup. Zero oversight, zero accountability.
Click to expand...

I believe the reason this happened is because a few banks not taking money would leave them with the opportunity to destroy the competition and make them collapse leaving only a few banks left. I do not know if that's how they got the banks to take money they didn't want but they did something.

Just more government protection for people who were happy to be capitalists on the way up and socialists on the way down.

The lack of accountability and what not is an exaggeration. The money didn't vanish. Much of the money was said to be used to have capital on hand so lending could continue.

Banks actually have to get approval to repay the government. If they don't repay then they are subject to compensation restrictions for execs. In June, 10 banks paid back the TARP money with interest.

http://tinyurl.com/nokovg

In fact, banks cannot just pay it back. They have to get approval from the US Government before they can do so.

This is why Vanity Fair is the last place I look for useful information on the economy. They should stick to what they do best.
 
Worm said:
We're all banks already. Blood banks. :)
Click to expand...

I can't even do that. :(

down_in_albion said:
An excellent idea. You get all the benefits of legal personhood, without the bad bits, like having to actually pay back money you splurged on grotesque status symbols and roulette wheel betting.

If I may stake my claim early for Head of Overseas Operations (Honalulu) I promise to work hard and only piss away as much as the government will cover ;)
Click to expand...

Actually I know a man who does this. He gathers investors, opens a bank, and then sells it a few years later at massive profit. I'm unemployed, so I have lots of time on my hands. Maybe I should call him up and have him tell me how to get started.
 
bored said:
The lack of accountability and what not is an exaggeration. The money didn't vanish. Much of the money was said to be used to have capital on hand so lending could continue.
Click to expand...

In effect the money vanished if there's no way anyone can track where it went, which is the article's basic finding.

Continued lending was the ostensible purpose, but consider what happened with Capital One (above).

bored said:
In fact, banks cannot just pay it back. They have to get approval from the US Government before they can do so.
Click to expand...

Can you clarify what you mean here? Are you saying that we shouldn't worry, that the recipients of TARP money will pay back their money, with interest, once they are back on their feet or the U.S. government lets them? You may be right, but I find that idea to be naive at best.

Let's say you're right, though, but due to the usual amount of corruption and fraud about 2% of the TARP money (I'm low-balling) gets used up for CEO bonuses, private jets, office renovations, and other bad purchases that do nothing for the economy. 2% would be billions of dollars. Billions. That amount is immoral when some Americans are being thrown out of their homes.

Also, I object to the idea that we shouldn't care how the money was used so long as a bank pays back their TARP money. It's outrageous that a bank can take taxpayer money and use it as capital to increase its own profits without helping the taxpayer.

Let's say I own a lemonade stand. The taxpayers give me a loan for the purpose of providing more, and cheaper, lemonade to customers. Instead of buying more water, sugar, lemonade mix, etc, I use it to buy two other troubled lemonade stands. My prices stay the same and on some hot days I even charge more! Eventually I can probably pay back the loan, with interest, but at the end of the day the only real result is that I now have three lemonade stands and the taxpayers have gotten no relief. The taxpayers got their money back but that doesn't really seem to be quite above board, does it?

I know it's an oversimpflication, but that's basically what's going on here in many cases. And the other main point of the article is this: we don't really know what's going on.

bored said:
This is why Vanity Fair is the last place I look for useful information on the economy. They should stick to what they do best.
Click to expand...

From their website:

Donald L. Barlett and James B. Steele are one of the most widely acclaimed investigative reporting teams in American journalism. They have worked together for more than three decades, first at The Philadelphia Inquirer, (1971-1997) where they won two Pulitzer Prizes and scores of other national journalism awards, then at Time magazine, (1997-2006) where they earned two National Magazine Awards, becoming the first journalists in history to win both the Pulitzer Prize for newspaper work and its magazine equivalent for magazine reporting, and now at Vanity Fair as contributing editors. They also have written seven books.​
 
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Worm said:
In effect the money vanished if there's no way anyone can track where it went, which is the article's basic finding.

Continued lending was the ostensible purpose, but consider what happened with Capital One (above).
Click to expand...

They know where the money went from when the US government sent it to the banks. They know what banks got how much. The government didn't do a good job of enforcing what the money got used for. They still know who owes them money. I don't know how long TARP banks will face compensation restrictions but it is in the best interest of the CEO's to pay it back.

Can you clarify what you mean here? Are you saying that we shouldn't worry, that the recipients of TARP money will pay back their money, with interest, once they are back on their feet or the U.S. government lets them? You may be right, but I find that idea to be naive at best.
Click to expand...

No, I wouldn't be that optimistic. Some of the banks as you pointed out did a terrible job with the spending. If a bank goes under that TARP money is gone. I don't know the details of how they will handle banks that haven't paid it back in 10 years. Their could be something in writing but I don't know what it is.

Let's say you're right, though, but due to the usual amount of corruption and fraud about 2% of the TARP money (I'm low-balling) gets used up for CEO bonuses, private jets, office renovations, and other bad purchases that do nothing for the economy. 2% would be billions of dollars. Billions. That amount is immoral when some Americans are being thrown out of their homes.
Click to expand...

I agree 100%. I think it was also immoral to put a $700B burned on the American people to save companies that were run so poorly. There really is nothing I like about the bailout.

Also, I object to the idea that we shouldn't care how the money was used so long as a bank pays back their TARP money. It's outrageous that a bank can take taxpayer money and use it as capital to increase its own profits without helping the taxpayer.
Click to expand...

I hope that people will bank with institutions that did use the money wisely and/or appropriately. Banks that had parties and spent on themselves should be punished by the consumer. Sadly, the average American is too lazy to care.

Let's say I own a lemonade stand. The taxpayers give me a loan for the purpose of providing more, and cheaper, lemonade to customers. Instead of buying more water, sugar, lemonade mix, etc, I use it to buy two other troubled lemonade stands. My prices stay the same and on some hot days I even charge more! Eventually I can probably pay back the loan, with interest, but at the end of the day the only real result is that I now have three lemonade stands and the taxpayers have gotten no relief. The taxpayers got their money back but that doesn't really seem to be quite above board, does it?
Click to expand...

It isn't, but if you had the market on lemonade stands cornered you could expect people to be glad to have access to your lemonade. American people are gluttonous consumers; mindless gluttons even.

I know it's an oversimpflication, but that's basically what's going on here in many cases. And the other main point of the article is this: we don't really know what's going on.
Click to expand...

It's a pretty fair analogy actually.

From their website:

Donald L. Barlett and James B. Steele are one of the most widely acclaimed investigative reporting teams in American journalism. They have worked together for more than three decades, first at The Philadelphia Inquirer, (1971-1997) where they won two Pulitzer Prizes and scores of other national journalism awards, then at Time magazine, (1997-2006) where they earned two National Magazine Awards, becoming the first journalists in history to win both the Pulitzer Prize for newspaper work and its magazine equivalent for magazine reporting, and now at Vanity Fair as contributing editors. They also have written seven books.​
Click to expand...

These are good credentials but that doesn't make this article very good. I find it to be misleading that they want us to all believe that the banks are doing terrible things because a bank with a bad reputation got $100M while other banks that got $25B have already paid it back. It's misleading, incomplete and deceptive and like almost all news these days it's sensationalized.
 
bored said:
These are good credentials but that doesn't make this article very good. I find it to be misleading that they want us to all believe that the banks are doing terrible things because a bank with a bad reputation got $100M while other banks that got $25B have already paid it back. It's misleading, incomplete and deceptive and like almost all news these days it's sensationalized.
Click to expand...

Can you point me to any articles that talk about the "good banks" repaying their TARP money? I'm being serious, I honestly don't know about them. I would like to know the whole story.

Your points are all valid. The only other thing I'll say is that I think the article didn't just highlight bad banks. The main streak of anger is directed at Paulson and the U.S. Treasury for dumping the money without sufficient ways of tracking how it was spent, or for that matter caring about who got the relief money. (The story about Santa Barbara Savings & Trust is just appalling-- they should have gotten nothing.)

While it may be true the article is one-sided, as you say, it seems like they're on solid ground regarding the lack of Federal oversight of the money distributions. Their credentials mean they have good sources and methods, and thus I'm willing to believe that Paulson convened the top nine CEOs and gave them a marker and a piece of paper and said "Name a figure". Were we in Paris in 1789, that alone would put Paulson at the front of the line for the guillotine. Actually, it damn near argues for all of us to recreate Paris in 1789.
 
bored said:
Banks actually have to get approval to repay the government. If they don't repay then they are subject to compensation restrictions for execs. In June, 10 banks paid back the TARP money with interest.

http://tinyurl.com/nokovg
Click to expand...

Here is the link that I referenced for 10 banks paying back TARP money in June.
 
bored said:
Here is the link that I referenced for 10 banks paying back TARP money in June.
Click to expand...

Oh, right, but that was just paying back the money-- I agree with you that it was an important part of the story not discussed in VF but, at the same time, as I said above, merely paying back the money isn't really enough. The writers did not scream about the money not coming back, but rather how it was used.

This is the description of the article:

As the Bush administration waned, the Treasury shoveled more than a quarter of a trillion dollars in tarp funds into the financial system—without restrictions, accountability, or even common sense. The authors reveal how much of it ended up in the wrong hands, doing the opposite of what was needed.​

The heart of the piece, in my reading, is this:

Adopted as a plan to buy up toxic assets—one that was quickly deemed impractical even by those who first proposed it—[TARP] evolved into something more closely resembling an all-purpose slush fund flowing out to hundreds of institutions with their own interests and goals, and no incentive to deploy the money toward any clearly defined public purpose.​

Key word emphasized.

You're right, it would have been good to say "Several recipients have already paid the money back". That wasn't the scope of the article, though. The question was, what did they do with the money? We can't answer this question, which is a huge problem in my view. In that sense I think VF has done a service publishing the article. There is a bit of rabble-rousing about the piece, but you know what? Why shouldn't there be? Anyone who has ever gotten an IRS audit or had to fill out exhaustive loan applications should be mad as hell reading about the CEO of Goldman Sachs applying for OUR money by scribbling how many billions he wanted on a piece of paper. It's obscene.
 
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after reading sick and wrong I was disheartened but felt that at least now I could get my mind around what was going on. I sat back and reflected - then I saw a big picture of millions of people addicted to prescription drugs that make it very easy to sign mortgages and take loans and not consider consequences. This addiction probably keeps quite a few people on healthcare that is completely outrageous.

Now, I know some people consider healthcare a necessary expense. I am not saying they are wrong, but really eating and living a healthy lifestyle... and getting off of these mind numbing anti depressants that many people (not all) do not need... well... that seems like a good start and step toward a broader revolt that I personally support:

I feel that everyone who can do it (cancel your ski trip and put your motorcycle in the garage for a while) should pretty much boycott healthcare and just live carefully for a while.

After one month of a widespread boycott - govt and big business (now one in the same) - would finally realize that they are not the master... but a servant. But nobody even realizes just how powerful the people actually are when they are awake and alert... instead we are numbed and drugged and living in lala land - and suggesting a boycott on a totally screwed up system makes me sound like a nutter...
we are all going to die... and there is such HUGE fear around this inescapable fact.
 
suparni said:
after reading sick and wrong I was disheartened but felt that at least now I could get my mind around what was going on. I sat back and reflected - then I saw a big picture of millions of people addicted to prescription drugs that make it very easy to sign mortgages and take loans and not consider consequences. This addiction probably keeps quite a few people on healthcare that is completely outrageous.

Now, I know some people consider healthcare a necessary expense. I am not saying they are wrong, but really eating and living a healthy lifestyle... and getting off of these mind numbing anti depressants that many people (not all) do not need... well... that seems like a good start and step toward a broader revolt that I personally support:

I feel that everyone who can do it (cancel your ski trip and put your motorcycle in the garage for a while) should pretty much boycott healthcare and just live carefully for a while.

After one month of a widespread boycott - govt and big business (now one in the same) - would finally realize that they are not the master... but a servant. But nobody even realizes just how powerful the people actually are when they are awake and alert... instead we are numbed and drugged and living in lala land - and suggesting a boycott on a totally screwed up system makes me sound like a nutter...
we are all going to die... and there is such HUGE fear around this inescapable fact.
Click to expand...

Oh. I agree wholeheartedly with your final point. I find your linking of the two issues (financial collapse fueled by unwise mortgages and healthcare reform) intriguing. Yes, you sound like a bit of a crackpot. :) But you're on to something. I think both problems are caused by an underlying emotional immaturity that's endemic to American culture. It's a head-in-the-sand denial of the possibility of bad luck and failure, and a complete denial of death. It's both fascinating and horrifying to contemplate.
 
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