Matt Taibbi: Why Isn't Wall Street in Jail?

The latest from Matt Taibbi:

Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.

"Everything's fucked up, and nobody goes to jail," he said. "That's your whole story right there. Hell, you don't even have to write the rest of it. Just write that."

I put down my notebook. "Just that?"

"That's right," he said, signaling to the waitress for the check. "Everything's fucked up, and nobody goes to jail. You can end the piece right there."

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.

Yup.

Ben Bernank's scheme to goose up the stock market is to benefit the top 5% of the population (including all these rich and famous people), while the most important asset (or what once was) for the middle class (or what's left of them) - homes - continues to fall in value.

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Matt Taibbi on Foreclosuregate: MSNBC Interview

"Bernie Madoff went to jail because he ripped off rich people..."

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Matt Taibbi on Foreclosuregate: Ready, Set, Fraud!

Matt Taibbi, who made Goldman Sachs almost a household name by comparing it to a "vampire squid", writes about what MSMs continue to ignore: 'Foreclosuregate'.

In the article for Rolling Stone Magazine, Taibbi reports on a day in a foreclosure "rocket docket" in Florida (judicial state, where foreclosures have to go through the court) where the presiding judge is determined to resolve 25 foreclosure cases PER HOUR, and shows us what other researchers (like William Black and Karl Denninger) have also shown us: The whole thing has been a one, gigantic FRAUD by the banks, from creating mortgage loans to securitization to foreclosures. All of it.

Worse, the court system is set up to assist the banks over and over again until they present the judge with a decent enough set of fraudulent papers. Then, good riddance, the judge decides in favor of the banks and they can take the house. Those judges in New York, who side with the homeowners, are rare exceptions.

And he also agrees with me, that we are conditioned to blame the "deadbeats", not the Wall Street banks.

From Rolling Stone Magazine:

The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This "rocket docket," as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and laby­rinthine derivative deals of a type that didn't even exist when most of them were active members of the bench. Their stated mission isn't to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments. Selling lead as gold, shit as Chanel No. 5, was the essence of the booming international fraud scheme that created most all of these now-failing home mortgages.

The rocket docket wasn't created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.

Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren't exactly public. "The judges might give you a hard time about watching," one lawyer warned. "They're not exactly anxious for people to know about this stuff." Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn't be that bad. It isn't Indonesia. Right?

Well, not quite. When I went to sit in on Judge Soud's courtroom in downtown Jacksonville, I was treated to an intimate, and at times breathtaking, education in the horror of the foreclosure crisis, which is rapidly emerging as the even scarier sequel to the financial meltdown of 2008: Invasion of the Home Snatchers II. In Las Vegas, one in 25 homes is now in foreclosure. In Fort Myers, Florida, one in 35. In September, lenders nationwide took over a rec­ord 102,134 properties; that same month, more than a third of all home sales were distressed properties. All told, some 820,000 Americans have already lost their homes this year, and another 1 million currently face foreclosure.

Throughout the mounting catastrophe, however, many Americans have been slow to comprehend the true nature of the mortgage disaster. They seemed to have grasped just two things about the crisis: One, a lot of people are getting their houses foreclosed on. Two, some of the banks doing the foreclosing seem to have misplaced their paperwork.

For most people, the former bit about homeowners not paying their damn bills is the important part, while the latter, about the sudden and strange inability of the world's biggest and wealthiest banks to keep proper records, is incidental. Just a little office sloppiness, and who cares? Those deadbeat homeowners still owe the money, right? "They had it coming to them," is how a bartender at the Jacksonville airport put it to me.

But in reality, it's the unpaid bills that are incidental and the lost paperwork that matters. It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets.

You've heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can't admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn't be, but often are, closed.

About loan securitization:

Since these mortgage-backed securities paid much higher returns than other AAA investments like treasury notes or corporate bonds, the banks had no trouble attracting investors, foreign and domestic, from pension funds to insurance companies to trade unions. The demand was so great, in fact, that they often sold mortgages they didn't even have yet, prompting big warehouse lenders like Countrywide and New Century to rush out into the world to find more warm bodies to lend to.

In their extreme haste to get thousands and thousands of mortgages they could resell to the banks, the lenders committed an astonishing variety of fraud, from falsifying income statements to making grossly inflated appraisals to misrepresenting properties to home buyers. Most crucially, they gave tons and tons of credit to people who probably didn't deserve it, and why not? These fly-by-night mortgage companies weren't going to hold on to these loans, not even for 10 minutes. They were issuing this credit specifically to sell the loans off to the big banks right away, in furtherance of the larger scheme to dump fraudulent AAA-rated mortgage-backed securities on investors. If you had a pulse, they had a house to sell you.

As bad as Countrywide and all those lenders were, the banks that had sent them out to collect these crap loans were a hundred times worse. To sell the loans, the banks often dumped them into big tax-exempt buckets called REMICs, or Real Estate Mortgage Investment Conduits. Each one of these Enron-ish, offshore-like real estate trusts spelled out exactly what kinds of loans were supposed to be in the pool, when they were to be collected, and how they were to be managed. In order to both preserve their tax-exempt status and deserve their AAA ratings, each of the loans in the pool had to have certain characteristics. The loans couldn't already be in default or foreclosure at the time they were sold to investors. If they were advertised as nice, safe, fixed-rate mortgages, they couldn't turn out to be high-interest junk loans. And, on the most basic level, the loans had to actually exist. In other words, if the trust stipulated that all the loans had to be collected by August 2005, the bank couldn't still be sticking in mortgages months later.

Yet that's exactly what the banks did. In one case handled by Jacksonville Area Legal Aid, a homeowner refinanced her house in 2005 but almost immediately got into trouble, going into default in December of that year. Yet somehow, this woman's loan was placed into a trust called Home Equity Loan Trust Series AE 2005-HE5 in January 2006 — five months after the deadline for that particular trust. The loan was not only late, it was already in foreclosure — which means that, by definition, whoever the investors were in AE 2005-HE5 were getting shafted.

Why does stuff like this matter? Because when the banks put these pools together, they were telling their investors that they were putting their money into tidy collections of real, performing home loans. But frequently, the loans in the trust were complete shit. Or sometimes, the banks didn't even have all the loans they said they had. But the banks sold the securities based on these pools of mortgages as AAA-rated gold anyway.

In short, all of this was a scam — and that's why so many of these mortgages lack a true paper trail. Had these transfers been done legally, the actual mortgage note and detailed information about all of these transactions would have been passed from entity to entity each time the mortgage was sold. But in actual practice, the banks were often committing securities fraud (because many of the mortgages did not match the information in the prospectuses given to investors) and tax fraud (because the way the mortgages were collected and serviced often violated the strict procedures governing such investments). Having unloaded this diseased cargo onto their unsuspecting customers, the banks had no incentive to waste money keeping "proper" documentation of all these dubious transactions.

Please go to his Rolling Stone Magazine article, and read it. It is not the matter of 'deadbeat' homeowners who 'didn't deserve' it. It is the matter of Wall Street banks getting away again with probably the biggest fraud and ponzi, with the help of the government and the court system, again.

And for the unlucky homeowners in non-judicial states, there's no help. Not that I know of, short of declaring bankruptcy. Banks send them conflicting, fraudulent foreclosure papers, there is no public venue for the homeowners to contest them, and banks win by obtaining the houses that they LACK legit title to.

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Matt Taibbi Still Does't Get It.

I stand corrected. Matt Taibbi is nowhere near swallowing the red pill of the reality-based world.

I've read his entire article "Obama's Big Sellout" which I linked in my last post, and my conclusion is that he still doesn't get it, or I should say he refuses to get it for one reason or another. (One good reason could be that his career as a widely-read liberal journalist would be in jeopardy.)

There are some curious omissions and unconnected dots in the article.

In discussing the financial reform, Taibbi mentions the Federal Reserve only once. And when he does, it is to say the Federal Reserve is left exposed to future Citi losses, as if the Federal Reserve is one of the victims of Citi. The Federal Reserve has been the enabler of its member banks who took on huge risks with the secure knowledge that the Fed would be there to backstop them anyway. Taibbi completely ignores this aspect of the financial crisis that we have had.

He doesn't even mention the name Ben Bernanke at all, while he names everybody else - Bush, Obama, McCain, Greenspan, Geithner, Paulson, Rubin, Summers, etc. No reference to the architect of the unprecedented rescue of the nation's (and the world's) biggest banks at the expense of the U.S. taxpayers.

He is also completely silent about the Audit the Fed amendment that was attached to the financial reform bill. The amendment's (and the original bill's) author, Ron Paul, is not mentioned at all.

Toward the end of the piece, Taibbi takes a swipe at "Republican teabaggers" he snicker at and disparages, as "idiots". For one, I am not so sure they are all "Republicans" with a capital R. Taibbi despises those who descended on Washington D.C in September to protest against a wide array of Obama's policies - from Af-Pak war and Gitmo, gun control, immigration, health care "reform", to bankster bailout and Chrysler/GM bailout.

But no matter. He chooses to box it as anti-health care reform demonstration. And one of the reason why he thinks these "teabaggers" are stupid is really stupid on its own, showing his complete inability to connect the dots.

He says, "They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed."

Hey Matt, why do you think the bloodsucking capitalist interest group like Big Pharma spent mega bucks like that? Because they stand to benefit greatly from the passage of this so-called reform! Duh. Haven't you read about a secret White House meeting between the administration and Big Pharma? It was reported on Huffington Post. Or is that another thing you can't admit you've read?

The financial reform bill which just past the House is very likely to have been written by outside interests, and Taibbi seems to admit as much. But so is this government's health care bill, so is the climate bill. And those outside interests are not the U.S. taxpayers, Democrat or Republican, or Independent.

He then describes a chat he had with one of the "teabaggers" who, according to him, knew nothing about financial reform (I'm not so sure about that). But do his fellow Democratic supporters of health care reform by the government know anything about financial reform? Does he himself know about health care reform, by the way? Did he talk to people who carried the placard condemning the government bailout of Wall Street? If he did, he chose not to tell us, because that would negate his whole thesis that "teabaggers" are ignorant and idiotic.

He depicts "teabaggers" as Republicans, middle-aged whites who can't stand a black guy in the White House. Excuse me, Matt, but did you not know, or did you choose to ignore, exactly whose votes were instrumental in electing your idol? It was whites, more likely to be middle-age, middle-class (i.e. taxpayers) and seniors, who thought voting for Obama would redress the past injuries and injustice done to African Americans in the past.

Now who's the idiot here? I don't think it's the "teabaggers".

It gets worse toward the end of the article. Instead of placing the blame squarely on Obama, he, like many left-leaning pundits (like her, but at least she gets the health care "reform" issues right), makes excuse for Obama by saying "Oh it's his advisers who are to blame, and Obama should fire them as soon as possible." Ummm, Obama specifically put "sniveling, low-rent shitheads" (as Taibbi describes them in the article) in their respective positions, because he wants them there. And he keeps them there because he likes the results he's getting. Then, Taibbi comes up with the ultimate blame. He blames "us": "Maybe it's our fault, for thinking he was different".

Don't blame more than half the country who didn't even vote for your idol, Matt. They are not your "we".

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Matt Taibbi: Obama's Big Sellout (Or Bait and Switch)

Matt Taibbi is slowly waking up from kool-aid he drank...

Obama's Big Sellout (Matt Taibbi, 12/9/09 Rolling Stones)

"Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.

"Then he got elected.

"What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.

"How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?

Taibbi's naïveté is almost painful to see. He tries his best to forget that Obama was a strong supporter of the $700 billion bank bailout bill of 2008. He doesn't mention that Wall Street bankers, including those at Vampire Squid (aka Goldman Sachs), were big campaign contributors for Obama. He even calls Candidate Obama a "genuine outsider". Obama was a first-term U.S. Senator when he was nominated as the Democratic candidate. Before that, he was an Illinois state senator. I wouldn't call him a "genuine outsider". Obama has been immersed in left liberal politics all his adult life, from community organizing level all the way to the presidency. Taibbi fails to mention also that this "outsider" is a multi-millionaire for having written, supposedly, an autobiographical memoir before the age of 34. That's one "man of the people". What kind of people Taibbi is talking about, I haven't a clue.

The article continues:

"Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.

"How did we get here? It started just moments after the election — and almost nobody noticed."

Well, I think I can guess what it was without further reading the article. I noticed. Many traders noticed. It's the special bailout of Citigroup, announced on November 23, 2008. The rumor of it must have leaked on November 21 Friday, because that's the day another collapse of the stock market since Obama's election (more than 2000 points slide on Dow Jones Industrial Average in 12 trading days) was finally arrested. Now am I right?

"'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."

"Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency."

Yup. I was right. It is very telling, isn't it? Equally telling as the first major act of his presidency after the inauguration, which was to bomb Pakistan with killer drones. (And he was awarded Nobel Peace Prize.)

The entire article is about 10 pages long, and available as a convenient printer-friendly version by following the link above.

Welcome, Matt, to the real world. Take your red pill. Better late than never.

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Matt Taibbi: Health Care "Public Option" Was Just for the Show

Matt Taibbi, a Rolling Stones magazine editor who has gained notoriety by attacking Goldman Sachs as "great American bubble machine", says Obama's "public option" was meant to be ditched from the beginning, a dog and pony show to placate the supporters. He thinks that there was a hand-shake deal from the beginning with the insurance industry and the pharmaceutical industry that the administration would initially push for "public option" but that the option would be quickly ditched ("so don't worry"?).

He suspects this (dropping the public option) is what they wanted to do all along. If they want to placate Republicans, dropping the public option wouldn't do the job, he argues, and shakes his head saying "it doesn't make sense...", that the White House and Democrats are kowtowing to Republicans for nothing.

Well, if he thinks the opposition is Republicans only, he's mistaken. At least he doesn't use the words like "evil-mongers", "un-American" or "right-wing wackos", as lots of left-leaning blogs like to call them.

He still allows a possibility that the White House says the public option will be dropped, but Republicans don't seem to change their minds, then the White House and Democrats can say "OK if that's the case we'll go it alone" and the public option will be on again.

Here's a clip from Rachel Maddow's show on MSNBC.

(She gets her news from Daily Kos?? Oh boy.)

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Goldman Sachs - The Great American Bubble Machine

(Update: 7/13/09 Here's the link to the article at Rolling Stones magazine. Finally.)

This is a much talked-about article by Matt Taibbi that appeared in Rolling Stones magazine. As Rolling Stones magazine didn't post it online, someone OCR'ed it and now it's all over the net. I saw the article on Lewrockwell.com, which had a link pointed to Correntewire.com. In case you haven't read it, here it is:

The Great American Bubble Machine (by Matt Taibbi)

"From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again."

The article is LONG. If you want to read it, I suggest you print it out.

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