Friday, March 27, 2009

What really caused the credit crisis

This is a must-read. I've been frustrated by the nagging feeling that the problems that caused the world's economy to melt down aren't as complicated or as unpredictable as the people responsible would like to have us believe. But we keep being told that it "just happened" and that no one could have foreseen the catastrophe it has become.

That's just bull. And in "The Big Takeover" on, written by Matt Taibbi, we get a sobering look at the real story of what happened and what is continuing to happen. The truth is not unexpected. People with power and influence figured out a way to skirt the regulations and make enormous amounts of money. But what is particularly galling is that we find out that now that their schemes have unravelled, these same people have been able to game the system yet again and are continuing to milk the crisis for their own benefit.

It's a story that will make you very angry. But it's also an exceptional bit of investigative reporting. Taibbi has his own unique writing style and not everyone will appreciate it:
It's over — we're officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream.
It's strong stuff, but Taibbi has the facts to back up his statements. It's a good read.

Link to the story

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