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Thursday, March 20, 2008

Dispatches From Libertopia: Make the Criminals Rich and Make the Victims Pay

Here is a truncated excerpt of an exchange between Amy Goodman and Juan Gonzalez with economist and professor Max Wolff, part of a larger interview that also included the journalist and former investment banker Nomi Prins. For the whole enormously illuminating and enraging discussion follow the link.

JUAN GONZALEZ: [P]eople forget now that it was back in the Clinton -- in the latter part of the Clinton years that Glass-Steagall was eliminated, and I think Rubin’s last act as -- and also a former Goldman Sachs person, right? -- his last act before he left the Clinton administration was achieving the end of the Glass-Steagall Act. To what degree did that have an effect on how these kinds of risky investment practices are jumping over into the regular banking system?

MAX FRAAD WOLFF: That’s a great question. I mean, there’s also a debate about whether that was his last act at the Department of Treasury or his first act at Citigroup, because it was Citigroup’s merger that would have been illegal had Glass-Steagall not been repealed.

AMY GOODMAN: Explain Glass-Steagall.

MAX FRAAD WOLFF: Glass-Steagall was a law put in place after the Great Depression that created what they call a firewall or a separation between investment banking and commercial retail banking, the idea being that you want to contain the potential breakout of problems in the financial system so that it can’t spread like wildfire and roughshod across different segments of the industry, more or less like it has across the different segments of the US financial industry in the last, say, ten to twelve months with absolutely devastating results, which is still ongoing.

So, we can’t sum up the damage done, because each day there’s more damage, a little bit like the war in Iraq. Getting a tally on the damage or cost of Iraq is impossible because it goes up while you’re trying to measure how much it went up the day before, the week before, the month before, the year before….

So, Glass-Steagall is part of an old regulatory framework that has been systematically torn down. The tearing down of that framework has allowed global financial markets to integrate, which has allowed vast savings to pour into the United States, new financial products to be innovated by Wall Street and all kinds of different financial firms, without regulation outside the core of the banking system, which built up and built up and built up and was celebrated and celebrated and celebrated as the efficiency and the genius of the free market, until, of course, with no brakes and no skid marks at the scene of the accident, it hit a brick wall.

That last bit of emphasis was mine… Please, please, please observe the endlessly reiterated pattern there, learn to recognize it, and never fall for it again, whether it is falling from the mouths of neoliberals, libertopians, dynamists, Long Boomers, Randroids, or any of the other assorted irrational exuberants of "free marketeer" flim flam artistry. One last bit from the interview:
MAX FRAAD WOLFF: The only thing I might add to that is I take a bit of an issue with the description that Bear Stearns was bailed out. Everybody Bear Stearns does business with was bailed out. Bear Stearns was taken out by the Federal Reserve and J. P. Morgan, which then served Bear Stearns’s still-warm remains to J. P. Morgan Chase. And they are now devouring them, and it’s being celebrated as a rescue. And for the 30 percent of all shares held by its employees, it is a devastating blow that has taken away retirement plans, hopes for the future, etc., etc. So they bailed out Wall Street --

JUAN GONZALEZ: Very similar to the Enron crisis for the employees --

Indeed.

1 comment:

smartypants said...

Very similar to the Enron crisis for the employees --

Indeed.


Please. The employees who owned 30% of Bear Stearns weren't Marys in the office pool. They were the dipshit executives and stripper-tipping multi-millionaire traders who drove home in their Porsches with vanity plates bearing pithy in-jokes like 'VLTLTY' -- a parliament of technocratic clerks for the leveraged global Ponzi scheme which they themselves built on Black-Scholes quicksand out of sub-prime mortgage-backed debt and collateralized debt obligations (i.e., vapor), a structure which they hoped wouldn't topple before they all cashed-out.

Fuck 'em.