Just finished reading Matt Taibbi's most recent piece for Rolling Stone. His name has been mentioned here before. And I have said on many occasions that he is, in my opinion, the best fucking journalist in the game right now.
The story is entitled, "Wall Street's Bailout Hustle."
It just took my breath away.
Turns out, the extent of my knowledge on how this nightmare occurred was laughably ignorant. I mean, I understood credit-defaults and borrowing against mortgages, but that was just the tip of the iceberg.
Taibbi has written extensively on the financial crisis and how it happened.
But this. I'm going to pull a few quotes from the article...
"AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to 'selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.'"
"Goldman often 'insured' some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn't required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat."
"Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped."
Holy fucking shit. And it gets worse. A lot worse...
"... the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve."
"'You're borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way,' says the manager of one prominent hedge fund. 'It's free money.' Which goes a long way to explaining Goldman's enormous profits last year."
Read it immediately.
I had to put the magazine down three separate times because I was getting physically ill. My heart was racing, my stomach was churning, and my hands were shaking.
If you aren't pissed off, then you are clearly not paying attention.
The banks are handing out $14 Billion in bonuses right now.
And it's your fucking money.
