Griftopia Presentation
Griftopia Presentation
Taibbi
Political Economy presentation by Shauna McCaffrey, April Dickinson,
Richard Spence, Louis Chapman, Phuan Jun Hong, Lorenzo Scoglio,
Jacob Wood
Chapter 1: The Grifter Archipelago; or, Why the Tea Party
Doesn’t matter
Sarah Palin
TARP = Troubled Asset Relief Program, supported by Sarah Palin yet shot down by the Tea Party when it
was suggested by Obama
Critiques have called it a “disguised white power uprising” >> emphasis on race and dog-whistle politics
Disenfranchised with what they are seeing going on in the world around them.
Chapter 2 - Alan Greenspan
Background on Greenspan - Before the Federal Reserve:
● Left NYU to pursue a doctorate at Columbia University where he studied under future fed reserve chairman
Arthur Burns who introduced Greenspan to the beltway elite.
● After Columbia, Greenspan spent many years involved with soviet refugee Ayn Rand - a novelist/philosopher
who was the founder of the Collective movement of the 50/60s, Rand and The Collective act as an influential
force on Greenspan's ideology.
● The main philosophy of the Collective was ‘objectivism’ which incompasses pure free-market beliefs, view the
poor as lazy and a drain on society and opposes the state in all forms.
● Rand’s notorious book - Atlas Shrugged, lays the groundwork for objectivism through the character John Galt,
who has a 75 page speech in defence of self-interest and attacking self-sacrifice.
● Ironically the Randian Collective opposed the federal reserve, including Greenspan in the 50s and 60s who was
claimed to have desired a totally free banking system
● 1968 - Greenspan joins the Nixon campaign staff as an advisor on domestic policy
● 1974 - Appointed Chair of the Council of Economic Advisers for the Ford administration.
● 1981 - Reagan appoints Greenspan to head the national commission to social security reform.
Chapter 2: Greenspan becomes Chairman of the Federal
Reserve - 1987
● 1987 - Reagan nominates Greenspan as Fed reserve chief because Reagan wanted someone who can work more
closely with the government. Sworn in August 1987
● One of the most decisive moves of Greenspan's early days as Fed Chairman was reforms to social securities - tax hikes
in social securities to create tax revenue to buy T-bills which effectively funded Reagan's deficit spending - $1.69
trillion in regressive taxes over next 20 years.
● This process dried up physical assets of the Fed to the extent to which that during the George W Bush administration
social security fund had no assets remaining.
● In response, Greenspan suggested in 2004 to cut welfare benefits, medicare allowances and increase pension age -
this social security ploy that played out over the decades has since been described as a classic ponzi scheme.
● Greenspan was also famed for his many false predictions over the years.
Chapter 2: Bubble after Bubble
● Financial services inflated one speculative bubble after another and when
they burst in Greenspan would sweep in and flood Wall Street with more
money by cutting federal reserve rate - “Drinking yourself sober”
● Dec 1996 - Irrational exuberance speech - caused mini panic in wall street
● Green span defended stock price values by saying the lack of actual
physical value of stock was overcome by the inherent value of their ‘ideas’
- author says “this is like saying concrete becomes gold when you paint it
yellow”
● Greenspan and fed temportaily allowed merger to occur with conditions of 3 year period to divest holdings in insurance company - This allowed
time to pass new legislation that allows such capital concentration to be legal - The Gramm-Leach-Bliley Act
● 2000 - The Commodities Futures Modernization Act (CFMA) - Firmly deregulated the derivatives markets.
● Feb 2004 - Greenspan tells Americans that adjustable rate mortgages are a good product and are safer than traditional fixed rate mortgages -
timing of speech near end of rein at federal reserve - he knew that they were about to start increasing interests rates (June 2004 for 17
consecutive time - from 1% to 4.5%) - gifting banks in his final days by screwing the americans he herded into risky flexible mortgages.
● 2003 – 2005: outstanding mortgage debt in US grew by 3.7 trillion dollars – entire value of real estate in America in 1990 = 3.8 trillion –
borrowed equivalent of 200 years of savings in just 2 years
● “Greenspan era a crime story with rigged games that Americans were doomed from the start to lose.”
Chapter 3 - Hot Potato
- Subprime mortgages
(Credit Score < 660);
- NINJA Loans (No Income, No
Job or Assets);
- There are several cases of
falsified documents,
allowing non suitable
applicants to borrow the
money anyway.
The bottom of the predator chain
- Homeowners: lots of them were buying houses just to speculate on the
increasing prices;
- Lenders and brokers: Constantly falsifying documents and trying to grift the
applicants proposing them the worst deals, such as Subprime Option-ARMs,
which pay higher commissions than common mortgages.
But how do you make a profit from a mortgage that will never be paid back?
The top of the predator chain
Investment banks:
Securitization of
mortgages and
Collateralized Debt
Obligations (CDOs).
1. AIG Financial Products was selling billions worth of Credit Default Swap on Mortgage-bonds, placing a
bet they did not have the money to cover;
2. AIG’s Asset Management Department was lending securities and investing the collaterals in
Mortgage-bonds, to obtain higher returns.
When the price of Mortgage-bonds plummeted AIG had huge losses and risked the bankruptcy.
The Government saved it with more than $200 billion, which are just a small part of the $13 trillion it had
to spend to save the American Economy.
Chapter 4 - Blowout: The
Commodities Bubble
Media attention at the time could not provide a reasonable cause for the price spike due to most of
the media focusing on US politics. The most common cause was thought to be increased demand
from China or oil shortages.
However the actual cause was due to Wall Street in what was known as ‘Commodity Index
Investing’.
Speculators are in the market are there originally to make sure buyers and sellers of commodities
have somewhere that they can buy/sell. Therefore avoiding disruption in the market. In the 1990s,
speculators gained a more active role in the market, as their sole purpose was not to just help
avoid disruption in the market, but to also make money from the market.
With ‘Commodity Index Investing’, speculators purchased massive amounts of commodity future
contracts, betting that commodity prices will rise over time. To carry out this type of Investing, it
had to be done through an Investment Banks.
Chapter 4 - Blowout: The
Commodities Bubble
Taibbi mentions it was strange that these banks thought
commodity prices would fall, as surely technological
improvements over time would lead to falling commodity
prices.
- SWFs began to buy up infrastructure, Taibbi’s examples: A highway in FL; Parking Meters in
Nashville; Port in VIR
- Financial Colonisation of America?
- A SWF supported by Morgan Stanley bid a lease on these parking meters, valued at $1.2 Billion,
this was found to be undervalued and undersold by $974 Million
Chapter 6 - The Trillion Dollar Band
aid
Obamacare
● January 2010
○ Nancy Pelosi
● Design
American Healthcare System
● Hurricane Katrina
○ Mississippi insurance reform
● Obama reforms
● Congressional Committees
○ Louise Slaughter’s reppeal
Obama’s Presidency
● 60 vote majority
● Won liberal states
● Broken promises
○ Drug Imports
○ Cadillac plans
● Final push for democrats
○ $100 million a vote
● Republican’s played a role
Chapter 7 :The Great American Bubble
Machine
Goldman Sachs
● Founded in 1882
● Founder: Marcus Goldman and Samuel Sachs (son-in-law)
Brian Griffiths, Goldman Sachs international adviser (2009):
“the injunction of Jesus to love others as ourselves is an endorsement of self-interest” and “We have to tolerate
inequality as a way to achieving greater prosperity and opportunity for all.”
Summary of GS contribution
● Playing an intimate role in three historic bubble catastrophes
● Helping $5 trillion in wealth disappear from the NASDAQ in the early part
of the 2000s
● Pawning off thousands of toxic mortgages on pensions and cities
● Helping 100 million new people around the world join the ranks of the
hungry
● Securing tens of billions of taxpayer dollars through a series of bailouts
➢ Early Ages….
➢ Pioneer in the use commercial paper, lending out short-term IOUs to small-time
own crappy product, then it turned around and “love” the taxpayer by making
him pay off those same bets
➢ Goldman-engineered scam
● GS help Bear Stearns, Fannie Mae and Freddie Mac, but Paulson elects Lehman Brothers (one
of need.
➢ Supreme privilege--- The government would always save GS.
● Government Accountability Office report, between 1998 and 2005, 2/3 of all corporations