THERE’S NO SUBJECT ON EARTH, with the possible exception of sex, that human beings find more inherently fascinating than money. Yet somehow most of the movies about the 2008 financial collapse have been as enticing and zesty as a raw potato.
That’s finally changed with The Big Short, based on the book by Michael Lewis about a small assortment of “outsiders and weirdos” who made hundreds of millions of dollars betting that the housing bubble of the 2000s would collapse. Near the end of the film one of them, played by Steve Carell, declares, “We live in an era of fraud” — not just fraud on Wall Street, he says, but sports fraud, corporate fraud, and government fraud.
What sets The Big Short apart and makes it truly great is that it portrays this worldwide, straight-faced fraud accurately; that is, as not just dangerous and enraging, but also extremely funny. It calls to mind Monty Python’s famous dead parrot sketch about a pet store salesman who defrauds his customer and then offers an endless stream of preposterous, contradictory obfuscations to conceal the obvious reality. The Big Short demonstrates that we’re now all living in that pet store.
Adam McKay, director of The Big Short, at the AFI Film Festival.
Photo: Alex J. Berliner/ABImages
What this means is that The Big Short is a movie that normal people will actually enjoy and understand, and that will make them as angry as they should be about what’s been done to us. So please grab your friends and family, including the ones who’d be way more excited to meet Tony Stewart than Jon Stewart, and go see it right now. It’s currently in limited release and doesn’t open nationwide until December 23, so you may all have to move. But it’s worth it.
Then after you’ve seen it, please come back here and read the rest of this. As good as The Big Short is, the housing bubble was such a gargantuan crime that no movie can capture more than a tiny corner of it. There’s much more to what happened, and even seven years after the bailout, little of it is widely understood.
Beyond The Big Short
• What happened wasn’t that complicated
The Big Short includes brief segments featuring Margot Robbie, Anthony Bourdain, and Selena Gomez explaining the gobbledygook jargon of the crisis, like mortgage-backed securities, credit default swaps, and synthetic collateralized debt obligations.
But in fact you don’t need to know any of that to understand the overall picture. In all the financial industry’s history it’s invented maybe three scams total, which it cloaks in an infinite number of ever-shifting disguises. And the housing bubble was one of those basic scams: In essence, it was a gigantic counterfeiting operation.
Everyone knows that you can counterfeit money. But money is just a piece of paper that everyone believes has value, and there are other pieces of paper that people believe have value too — government bonds, corporate bonds, stock certificates, etc.
During the 2000s housing bubble, the market “value” of U.S. homes swelled to about $8 trillion more than it would have been if prices had followed historical trends. To give you an idea of how big a bubble that is, the entire U.S. Gross Domestic Product in 2005 — that is, the value of literally everything produced by the United States that year — was only $13 trillion.
Wall Street joyfully issued bonds “backed” by trillions of dollars of that imaginary wealth, and paid ratings agencies to certify that the wealth was real. The effect on the economy was more or less the same as if Lloyd Blankfein had printed trillions in cash in Goldman Sachs’ basement and somehow persuaded everyone it was real and belonged to them. We all felt richer — for a while. The reason financial bubbles are so common is that they feel so good to almost everyone on the way up.
(One small difference was Wall Street’s take: Regular counterfeiters generally want to spend all their bad paper themselves, whereas Wall Street just took a percentage for running the presses. Then they often, though not always, passed their bad paper along to others.)
• The characters in The Big Short weren’t just smart — they were also very, very lucky
There have been insane financial manias for as long as there’s been capitalism, and the housing bubble was preceded by the similarly sized dot com bubble just a few years before. So many, many people understood that the housing bubble existed.
In fact, some big financial players, including Goldman Sachs, Deutsche Bank, and the hedge funds Magnetar and Paulson & Co., made bets on the housing market similar to but far larger than those placed by the main characters in The Big Short.
The bubble was also recognized by Yale economist and housing expert Robert Shiller, who wrote of the “serious risk” of a “possibly worldwide recession.” Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., saw the bubble in 2002, and went so far as to sell his home and rent an apartment until the bubble deflated.
(While I didn’t own a house then, my parents did, and in 2006 I urged them to sell it and rent somewhere for a while. They didn’t, partly because they didn’t want to move, and partly because after I explained the logic to my father, he decided he “wouldn’t want to take advantage of other people like that.” He will never be a Wall Street bond salesman.)
But in order to make big money off a financial bubble, it’s not enough to understand that it will collapse. You also have to guess correctly about the timing of its collapse. While in the long run markets have some connection to reality, in the short run they have little connection to anything. If you guess too early or too late, you’ll be intellectually validated but bankrupt.
Moreover, as The Big Short illustrates, even guessing correctly may not be enough. Christian Bale’s character, a San Jose neurologist who quit medicine to become a money manager, loses investors who don’t trust his strategy of taking small, certain short-term losses for the potential of a huge payday later. If the bubble had taken a few more years to deflate, his company likely would not have survived long enough to get its eventual 400 percent return.
The reason it’s important to understand this is that the people most responsible for what happened don’t want you to. Take Alan Greenspan, who as chairman of the Federal Reserve during the bubble’s heyday possessed the most economic power of any single human being on earth, and could have punctured it with one strong speech.
In 2010, when Greenspan claimed on Bloomberg TV that “everybody missed it, academia, the Federal Reserve, all regulators,” he was specifically asked about the people featured in the book version of The Big Short who saw it all coming. Greenspan answered: “You have to ask yourself why would they make that judgment. The problem that you’re raising is a statistical illusion. … If you took 1,000 people and you split them into two and you had them toss coins against each other, when you get down to the last two guys, tell them that they don’t know how to toss coins.”
The second part of what Greenspan said was completely true — that is, correctly calling the timing of a bubble’s collapse is largely luck, and it’s unlikely anyone in The Big Short will be able to do it again as well with anything else.
But for Greenspan, that was also completely irrelevant. As Fed chair, he didn’t need to know precisely when the bubble would deflate, something that was essentially impossible. He only needed to know that it existed, something that could be figured out by anyone with a subscription to The Economist.
And this is funny: After Greenspan “missed” the housing bubble and caused the greatest economic catastrophe since the Great Depression, he was hired by John Paulson, a hedge fund manager who personally made over $3 billion off of it. As an additional demonstration of Paulson’s gratitude, he also took a tiny fraction of his winnings and endowed the Alan Greenspan Chair in Economics at New York University. Ha ha.
That said, there certainly were people who genuinely had no idea what was going on. In 2005 I interviewed Greg Mankiw, a schmancy Harvard professor who had just finished two years as chairman of George W. Bush’s Council of Economic Advisers. When I asked whether he believed we were in the middle of a housing bubble, he became extremely agitated by the idea that mere humans could believe they knew more than the all-seeing market.
• The people who shorted the housing market weren’t the good guys
The Big Short does a great job depicting the mixed motives of the characters played by Steve Carell and Christian Bale (and its other stars, Ryan Gosling and Brad Pitt), but it’s impossible not to root for them as they call bullshit on the entire financial industry. Moreover, in theory people who short markets perform a valuable function, making bubbles less likely by forcing prices of financial securities to stick tighter to their actual value.
But in practice, that’s only true in heavily regulated, publicly traded areas like the stock market. The characters of The Big Short were shorting housing via bespoke insurance from largely unregulated insurers like AIG Financial Products, which weren’t required to have enough money to pay out on any significant claims. Instead, AIG FP’s business model assumed that it would mostly just collect premiums. It was like a fire insurance company that was incredibly profitable as long as nothing ever burned down.
We know what happened to AIG when the fire began: Everyone who’d bought insurance from AIG FP showed up to collect their claims, making all of AIG instantly bankrupt — until the Treasury Department and the Fed joined forces to provide a $182 billion bailout. So all the money pocketed by the protagonists of The Big Short came ultimately from us. Without us, all their cleverly engineered credit default swaps would have been worth as much as a pile of Enron stock.
• For regular people, Wall Street’s nonsense was largely an irrelevant sideshow
First Wall Street exploded in late 2008 like a poorly maintained fireworks warehouse. Then everybody you know was laid off and hasn’t been able to find anything that pays as well since. So it certainly seems logical that the first thing caused the second — and that as maddening as the Wall Street bailout was, if things were this bad with it, without it there would have been a second Great Depression.
Except our own great recession actually began in late 2007. And the people telling us Wall Street’s collapse caused the whole economy to fall apart are the same ones who used to tell us that you could never go wrong by investing in real estate. Maybe it would behoove us, like it did the subjects of The Big Short, to look more closely at their story.
Dean Baker, mentioned above, probably got more right about the housing bubble and its effect on the real economy than anyone else. He makes a strong case that what mattered to ordinary people was simply that the housing bubble deflated, not the intricacies of how bankers inflated it in the first place and subsequently destroyed themselves.
As Baker explains it, our economic catastrophe was straightforward: At its peak, the housing bubble added $1.2-1.4 trillion in annual private sector demand to the economy, or around 10 percent of GDP. Part of this was extra homes being built employing extra construction workers, and part was that homeowners believed they were richer than they were and hence were more willing to spend money.
There was no easy way for the private sector to replace that demand, whether Wall Street had gotten a well-designed bailout that punished wrongdoers and cut banks down to size, the horribly designed bailout that we did get, or no bailout at all. (Moreover, the high-pressure sales job on the bailout relied on claims that without it we’d all be murdered by something called the commercial paper market. Even Treasury officials from that period have admitted that was almost certainly a fairytale.)
But there was a solution available: The federal government just had to spend a gigantic amount of money to replace that $1.2-1.4 trillion in annual demand. But Obama was never willing to ask Congress for enough, and Congress might never have provided it even if he had. Instead we got $300 billion of stimulus in 2009 and 2010, and then dribbles afterward. It shouldn’t be any surprise that everyone under 30 is still living in their parents’ spare bedroom.
This is the true cost of the housing bubble and Wall Street’s looting of our country. You often hear that the financial crisis destroyed, say, $14 trillion in housing and stock market wealth. This is wrong. By itself, the financial crisis destroyed little wealth. The $8 trillion in extra housing bubble “wealth” never existed in the first place; the crisis simply revealed that reality. And the stock market recovered fairly quickly, because that wealth was (mostly) real.
The actual price we’ve paid is that the U.S. economy has been operating far under capacity for eight years. The total value of the goods and services we could have produced but have not is over $7 trillion. That’s more than enough — about $90,000 for every family of four in the country — and as long as the economy remains depressed, it will keep accumulating, along with millions of broken lives.
Thus the real criminals are exactly who you think they are: Wall Street, plus the Republicans and Democrats who execute their orders. But the biggest crime they committed isn’t their spectacularly creative financial fraud. It’s been their absolute refusal afterward to allow us to use our own government to fix the disaster they created.
So now that you’ve seen The Big Short and read this, go see it again. Hopefully you’ll enjoy it even more the second time, and see its message even more clearly: The U.S. is run by an indistinguishable horde of Michael Palins, all nervously telling us that despite what it looks like, American democracy is just pining for the fjords.
And nothing will change even after the elections if we dont as a people take a stand,get organized and make the criminals stop manipulating our lives.
Congress,judges,elected officials government regulatory,and the such have been bought and paid for by the Banks and Corporations and who would walk from that unless forced.Lawyers are the next batch of swindlers in collusion with their owners,judges who only rule in favor of their pension fund holdings,also another reason they let as many people come in to our country that will fit because they are so happy to be outa the craphole they came from they will follow big gov anywhere.
It aint getting any better any time soon ,talk about mutiny.
“that is, correctly calling the timing of a bubble’s collapse is largely luck, …”
I think Dr. Burry would disagree with that statement. He actually read the bond document and knew what was in them. He said the market would blow up at a precise time (summer 2007? – can’t remember exactly), because that’s when the rates would reset. He was correct.
Even though Dr. Burry knew when the rates would reset and the foreclosure rates would begin to rise, there was still an uncomfortable period of weeks or perhaps months where the bond prices did not reflect that new reality. Many of his investors were upset and tried to get out of their investment. It was a very uncomfortable time for Scion Capital, as Mr. Lewis writes in the book.
Great article! Thank you Jon. My question as a concerned citizen and mother what does one do? What’s the solution? There are many people exposing the reality we are living in but nothing is changing!
Wait Jon, what are the other two scams?
Ultimately, “The Big Short,” is an hard-to-swallow lesson on the pratfalls of illegality and “stupidity.” I reviewed the film: http://bit.ly/1k5A9EI
more importantly read those with greater authority on this specific topic (Yves comments as well)…
http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html
And who plays Soro’s role in this movie?
“Mr. Soros has been worrying about the fragile state of the markets for years. But last summer, at a luncheon at his home in Southampton with 20 prominent financiers, he struck an unusually bearish note.
“The mood of the group was generally gloomy, but George said we were going into a serious recession,” said Byron Wien, the chief investment strategist of Pequot Capital, a hedge fund.
Mr. Soros was one of only two people there who predicted the American economy was headed for a recession, he said.
Shortly after that luncheon Mr. Soros began meeting with hedge fund managers like John Paulson, who was early to predict a crisis in the housing market. He interrogated his portfolio managers and external hedge funds that manage his fund’s money, and he took on new positions to hedge where they might have gone wrong. His last-minute strategies contributed to a 32 percent return — or roughly $4 billion for the year.”
http://www.nytimes.com/2008/04/11/business/11soros.html
I just wanted to say how well-written this article is. I was getting lost in some of the technical descriptions, but analogies always help and I have to appreciate your extension of the Monty Python reference. Not the first time I’ve been impressed by the writing skills of someone from The Intercept. I expect you all to be excellent at reporting, but writing well is a skill that is often undervalued in journalism. Thanks for not only writing pieces like this, but making them stick.
or, you know… read the book. it’s well written, accessible and intriguing .
http://www.nakedcapitalism.com/2015/12/debunking-the-big-short-how-michael-lewis-turned-the-real-villains-of-the-crisis-into-heros.html
The easiest way to understand the term “short” is to go into a furniture store, then buy a table with a view of receiving delivery in 6 to 8 weeks!
The furniture shop has therefore just sold you a “short position” on the table, where it sells it today for future delivery, with a view that it buys the table for you (orders it from the manufacturer because of course there is none in “stock”) at a cheaper price than it sold it for,!with payment promised at a future date… That’s free market economy, and as such we will always have the possibility of “selling short” items unless the trade trends of the world changes… Don’t blame the people who use this technique in finance – which is ostensibly a “market”, since they do get it wrong most of the time, but blame the governments for bailing them out. A “free market” by definition should allow a firm to fail if it trades badly in any commodity, because on the other side of any Loosing trade there is a winner! With, of course, the exception of theft/fraud/ponzi schemes.
Absolute rubbish.
A real analogy is
if you ordered the table and then someone involved
in the delivery of that table
began betting that the table would arrive damaged
or wouldn’t arrive at all.
There is no such thing as a “free market” with human beings
because there is no equality in economics and the devious ways
people use economics to dominate over each other.
It is an impossibility and that is why regulations/safeguards
must be in place and enforced.
De-regulation is a delight for predators.
Jon, a great article as always. Let me suggest that you not get caught writing retrospective pieces, though, and start reporting in earnest on the bubble in higher education we’re currently in. The basic facts are very, very clear. There’s lots of money flowing into higher education through Federal student loan guarantees. Tuition at universities far outpaces inflation. The market value of a college education is dwindling, as the great many unemployed and underemployed can tell you. So, we have subsidies (to educate), price gouging by the suppliers (universities), over-supply of a commodity (the educated), and price depression (wages of the educated); a pretty typical kind of not-free-at-all market bubble. But I also can’t shake the smell of the whole thing. It stinks of corruption, but I can’t locate it. I think you could.
Contrary to your suggestion, the federal government did indeed go into “stimulus” mode. In one year, between 2008 and 2009, federal spending increased by over 18%, driving the deficit from $458 billion to more than $1.4 trillion. Here are the numbers, straight from whitehouse.gov
https://www.whitehouse.gov/omb/budget/Historicals
If you look, you’ll notice that the federal deficit remained over $1 trillion for the following 3 years as well, and it still hasn’t been reduced back to the 2008 level. All of this borrowing and spending is “stimulus”. Every federal deficit dollar contributes directly to GDP. That’s why the so-called “recovery” is an illusion that hasn’t helped Main St. There has been no substantial growth in the underlying economy, just an ongoing recession being papered over by government debt.
We didn’t need “stimulus”, we needed the government to enforce black letter law! The FDIC has the legal mandate to take insolvent banks into receivership and liquidate the assets. The only bailout should have gone to the FDIC to make depositors whole. By liquidating inflated assets at market value, the “bubble” disappears and the only people that get hurt in the process are the banks (executives and shareholders) who created and profited from the bubble. Had the banks’ assets been liquidated, as per the LAW, all of the underwater mortgages would have been gone; sold off at market value, and millions of foreclosures could have been avoided. Instead, the law was ignored and we got the great bailout.
2008 should have been a wake-up call. Not only was the housing bubble an enormous fraud, it revealed that the whole “demand driven” U.S. economy is also a fraud. We can’t have a sustainable economy which requires ever increasing amounts of debt. The 2008 crash was what happened when the consumer had reached the debt saturation point. Government can take over the borrowing and spending for a time, but even that game must come to an end.
I’m grateful for your mentioning the law under which our government is mandated to take banks into receivership. There is a process to unravel in an orderly fashion which would not have destroyed the entire global financial system like they kept threatening (Obama and team). Many knowledgeable people like Simon Johnson described how it’s done. It would have purged bad debt, wiped out shareholders and caused bondholders to take a partial loss. That’s real capitalism, risk and reward playing out. Anyway….thanks. I never forgave Obama because he should have put the pain where it belonged. A watered down version might have been a shared loss where taxpayers pay for a partial bailout. But no, he bailed out banks 100 cents on the dollar. Shame on him.
The fourth- and third-to-the-last paragraphs, the general acknowledgement of a bubble, and Greenspan’s (willful?) ignorance, and the acknowledgement of financial industry and government collusion come close to describing the Austrian perspective.
Two suggestions for anyone not completely sold on Marx, Keynes, or Friedman:
1) Murray Rothbard’s “Economic Depressions: their cause and cure” article from 1969
2) Peter Schiff’s Mortgage Bankers Speech from 2006
Meanwhile, the Dead Parrot Monument, in London. It was just resting.
http://www.standard.co.uk/news/london/giant-dead-parrot-from-monty-python-sketch-unveiled-on-the-southbank-9605453.html
What is the real purpose of this article?
Clearly it is not an article which condemns fraud.
If it was, we would not be subjected to the stupidity of,
“People who short markets perform a valuable function”
and the ever-reliable-deceit of, “our own government.”
As if there is some separation between the schemes of Wall Street
predators and the fake government which they own.
The real “Big Short” is still flourishing.
It is the perverse motivation of the so-called “Free Market”
in which the democrat and republican branches of Wall street
are devoted to betting that the people who vote for them
are short on integrity and are as craven as
the democrats and republicans in their worship of capital.
So far, based on recent election results, approximately 98 to 99%
of the voters agree and are ready to sell themselves short.
“Our government,” my ass.
This doesn’t touch on, really, the Golden Calf, The Arc of The Covenant, The Holy Grail – the Trifecta big win – of the triple dip, the collecting three times if not more on the BailoutX3+++… First, Banksters loan money to anyone with a pulse, based on amazing appraisals; collecting points, fees, principal, interest. Next, debtor is foreclosed upon at original or note’s face value, most often WAY higher than homes’ then values, and sold for significantly below said face value of debt, (well below what could have been worked out with debtor) Banksters collecting that reduced amount in cash from whatever buyer. Next, Banksters collect PUBLICLY FUNDED INSURANCE on FULL FACE VALUE of original debt or note, regardless of how inflated that was or what property actually subsequently sold for… Oh, and then get “Bailed-Out” by the entire debtor class nation because, well… this time the sky really, really, really is falling and if y’all don’t Bail-Us-Out it’ll really, really, really fall on everyone – and then what would money be worth…? Touching on MERS in reference to the article might be interesting… Speaking of perfecting a trifecta…
Actually, you missed one of the most important points: fractional lending.
This is a mechanism by which any institution with a “banking license” is permitted to lend *more* that it has on deposit, *and then be permitted to charge interest on that debt*. This is done on the basis of probability – i.e. that it is statistically unlikely that everyone who borrows money will go into their bank and ask for it in cash. The mechanism became possible when we replaced actual gold and silver with promissory notes [paper money] and became even easier when money went digital.
So what happens is that I go into my bank and deposit 10,000. You go in tomorrow and ask to borrow 100,000. Using fractional lending, the bank can lend you that 100,000, but they only need my 10,000 to under-write that debt. Hence fractional lending. Now fast-forward. You fail to make payments on the home you purchased with that 100,000, so the bank forecloses on you. You had 25,000 in the property, which you paid a total of 125,000 for.
They dispose of the property at a fire-sale auction for 85,000. You’re out in the cold – and you lose the entirety of your 25,000 deposit. The bank then goes to the insurance company and claims back the 15,000 they claim they lost. But the truth of it is, thanks to the miracle of modern banking that is fractional lending, THEY NEVER LOST ONE PENNY OF THEIR ORIGINAL STAKE.
Thank you… Also left out the part about money creation from thin air… quite a magic, especially if you can get vast populations to ascribe special powers with and to any particular “currency” and to sanctify the/your special brand of money creation… Again, thanks.
” Regular counterfeiters generally want to spend all their bad paper themselves, whereas Wall Street just took a percentage for running the presses.”
I speaks well of your background that you don’t know how the practice of counterfeiting usually works: counterfeiters don’t pass the money they made themselves, instead they sell the bills at a steep discount, to people who know they are getting fake bills. This can pass through several iterations, with a cut each time, until someone buys the bills at say 50% face value. They are the ones who pass the bills of as real.
Finance and counterfeiting: compare and contrast.
Still waiting…. for the perp walk of Hank Paulson, Timothy Geithner and Jon Corzine!
“Margin Call” is another very good movie about Wall Street venality and fraud.
I was chatting with a family friend a couple of weeks ago who has worked for over 20 years on various Stock Exchanges around the world, and I asked her how much of what goes on relies on insider trading and she said “All of it.”
There are no genius trend gurus, no prophetic market seers, no whizz-bang programs to differentiate and integrate into tomorrow, and no diviners of futures and fortunes; just fantastic networkers in the know, following orders, working the angles, sweeping the audit trails, sniffing for tidbits and occasionally taking a gamble. Jobs for the Boys – anyone can play, just don’t expect to win unless you are in The Club.
They have, for me, destroyed any credibility America and its brand of Capitalism had and showed the scam I always suspected, but even now since it has come to pass most people remain in denial of its profoundly indecent and disturbing nature.
So many people in the West base their family wealth and social standing on their property and its location that it is unthinkable for them to reassess the game they have entered, to accept that it has always been and will remain skewed and artificial, even when the very banks that underpin it all cheat and lie and commit fraud and steal public monies to bail themselves out and then refuse to take one single ounce of blame or censure.
I had an argument once with a Vancouverite and he was scoffing at the house prices on the large tropical island where I live, saying they should be much cheaper (they are not super-expensive, but the mainland is cheaper). I said why – we have great food, great weather, great amenities, excellent access to international airports, a lower cost of living, foxy strumpets by the score, and a good positioning in Asia for business – it is far more of a desirable place to be than rainy Vancouver, with its crime and drug addicts and strict Canadian laws and big Canadian taxes and shite weather? He wants to live here, but doesn’t want to pay. He is conveniently forgeting the basic rules of economics – demand up, price up. But he said, Thailand is Asia, it’s poor, it’s Second World. Fuck off back to Canada, then, enjoy your bubble till it bursts, then all of a sudden you might find that things have evened out and you are stuck there in your small apartment, paying crazy taxes for nothing much at all.
The whole housing market has been a farce, instigated by Thatcher and her banking and building flunkies in Britain when she sold off the council houses and enslaved Britons by chaining them to 25 year mortgages – no wonder builders make as much as bank managers, they are one and the same. We need to change the “never never never” lyrics in Rule Britannia now.
On the topic of insider trading, and speaking of smoking guns, does anyone think that the facts that Congress, as a body, has more millionaires than any other similar sized group in the US and blocks the SEC’s efforts to investigate insider trading within the body, are related? Could it possibly be?
Thailand beautiful one day, a dogs breakfast the next.
downloads.wikileaks-press.org/file/thailand-crown-prince-dog-birthday/
thailand where you go to jail for 37 years for insulting the kings dog
http://time.com/4148911/thailand-bhumibol-tongdaeng-lese-majeste/
If you are not a weakling call the king a fuck. I dare you to.
Matt Stoller, citing Barofsky, called bullshit on this narrative in the strongest terms possible. Is he wrong?
Wall St. was on its fucking knees. The new administration had all the political capital in the world, and zero incentive to use it. In fact, one might call it a “teaching moment”. But perhaps the conditions for learning remain deeply impaired.
Add to that the appointment of Eric Holder to head up Justice, and the picture is complete. Mr. Holder, who is now reaping the rewards of his inaction, failed to prosecute a single bankster, a single torturer, a single war criminal, a single murdering policeman. What he was good for, I do not know. I guess the neo-libs have invented and implemented the idea of laissex-faire justice with him and his successor. The neo-cons simply could not possibly have done less.
And before the election, when Congress was debating the issue and the presidential candidates paused the campaign to return to DC (Obama effectively functioning as a whip for the Senate Dems) . . . the Great Equivocator spoke to his fellow Senators (and the rest of us, of course) . . .
OBAMA: Senate Must Pass Bailout, “Do What’s Right for the Country”/strong>
Text here.
I’ll wait till I can pirate it. I ain’t paying shit so f off…and these hollywood whores got paid…while the people get throw under the bus….f these self righteous parasites…
So noble of you
TYLER MATHISON, PBS NIGHTLY BUSINESS REPORT: And what are your stock picks today?
BROKER WE’VE NEVER SEEN BEFORE: Norwegian Blue Capital Mutual, ticker symbol STIFF. Beautiful stock, isn’t it, squire?
SUE HERRERA, NBR: Then why is it nailed to its perch?
There’s a video on YT where Alan Grayson is asking Ben Bernanke where, exactly, the bailout money went. Bernanke hems and haws saying first he doesn’t know, then it’s ‘in the information there’ and finally Grayson gets this little tidbit out of him – that much of the money went out of the country.
The truth may very well be that China, who had bought billions of dollars worth of then crashing mortgage backed securities, took a look at their worthless paper and threatened to ‘come to the U.S. with our people and claim our property’ in half acre lots… which would indeed be a reason for the US population to riot in the streets and for martial law to need to be declared ‘by Monday’ as the congresscritters were indeed told.
Forgive me if I have recurring fantasies about hiring mercenaries, equipping them with FBI jackets and black SUVs, and having them walk into every CEO office on Wall Street, arrest everyone involved and hold them for a People’s Court – indictment, waterboarding and eventually the guillotine. What Wall Street (and Bush and Co. right before they left office) did wasn’t just raiding the Treasury’s coffers, but mass murder. Just the usual, in other words.
quote”Forgive me if I have recurring fantasies about hiring mercenaries, equipping them with FBI jackets and black SUVs, and having them walk into every CEO office on Wall Street, arrest everyone involved and hold them for a People’s Court – indictment, waterboarding and eventually the guillotine. “unquote
Forgive you? I’d submit a good portion of this country would cheer from coast to coast, every time the guillotine’s lunette was released. The only thing I would add is dragging the USG war criminal maggots from their granite palaces and burn them alive in the street as well. After a short exercise in due process of course.
Bush and Cheney in particular will like the “Texas” aspect of it: give ’em a fair trial then hang ’em.
Clinton was never mentioned in the article, but does the movie show how he deregulated Wall Street, and, also, does it show how Obama didn’t prosecute them? By not saying any of this, is this Corporate Hollywood propaganda used to prop up Hillary?
Well, Lewis, who has big, profitable motives for being gentle with Obama, said this, in an interview at the end of an audio version of The Big Short:
That was 2011, IIRC. Still waiting for the second act.
Also from 2011, from a snippet of an interview in the Daily Beast:
It’s also positively nutty to treat ‘political capital’, a highly intuitive calculation, in a zero sum context. If anything, the moment we were in belies the whole fucking narrative. People voted for “Change”. A ‘New’ New Deal was most certainly on the table. Breaking up the banks and bailing out mainstream didn’t preclude the public’s move on health care. It was a moment of crisis and there was massive grass roots support. But Obama’s admin cooled the engines of change. Deliberately.
https://twitter.com/tinyrevolution/status/459396723329089536
Liberals can’t bare the fact that their democratic franchise turned out to be a neoliberal focus test.
mainstreet that is, heh
oops, wrong link..
https://twitter.com/kendmil/status/459456201617842176
“Liberals can’t bare the fact that their democratic franchise turned out to be a neoliberal focus test.”
Exactly. They’re still using us Greens as a scapegoat so as to avoid having to deal with the fact that their “Democratic” Party (quote marks denoting the Orwellian nature of that party name) has been hijacked by neoliberals that are almost or are as authoritarian and plutocratic as many Republican politicians.
Maybe one day enough Democrats will wake up and abandon the two-winged Plutocrat Party in order to support decent people running for office. Or maybe things will get so screwed up in this country that I’ll have to flee to Canada or Iceland. Time will tell; meanwhile, come Spring I’ve got a lot of petitioning to do to try to get Jill Stein on the ballot here in Illinois.
Find out more! Give some money! http://www.gp.org/
I wonder what our financial landscape would look like if the Feds had prosecuted the banksters who committed enormous frauds after the bubble burst. You know when they were allowed to set up robo-signing centers to forge millions of fraudulent mortgages documents and then were allowed by the Federal and State governments to use those forged instruments to foreclose on a couple million homeowners? It was a massive conspiracy that crossed state lines, used the mails and wires, all of which made it federal crimes. But not one grand jury was impaneled to look into that conspiracy and not one banker was prosecuted over it. What if the Feds had said, “Any case in which the bank servicing a mortgage has forged a mortgage document to foreclose on a homeowner, the loan is expunged and the homeowner is thereafter in free and clear possession of his home.” Some of the trillions in home value would have been left with homeowners, instead being stolen by the banks.
Money is a giant fraud but, hey, billions believe they will not die if they believe the right myth. Millions of Americans, many armed, meekly submitted to being evicted from their homes while they were taxed to make the banksters whole. We are a nation of wimps, I can’t say it any other way. I think it would be a reasonable thing to take to the streets, to take up arms even, world wide against the evil of capitalism as practiced by the financial sector; the parasitic financial sector who produce nothing, provide no useful service and live at the top of the heap accumulating more of the wealth daily. It’s even worse in the 3rd world as millions are driven off their lands so hedge fund people conspire and corrupt local leaders and even foment wars.
Free Market Fundamentalists need to read Bernard E. Harcourt’s excellent book, “The Illusion of Free Markets”.
“We live in an era of fraud.” Yep. Two words describe this best: dissemble and prevaricate.
Any bureaucrat, public or private, mid level or high level, will apply those two words on a regular basis.
“You often hear that the financial crisis destroyed, say, $14 trillion in housing and stock market wealth. This is wrong. By itself, the financial crisis destroyed little wealth. The $8 trillion in extra housing bubble “wealth” never existed in the first place; the crisis simply revealed that reality. And the stock market recovered fairly quickly, because that wealth was (mostly) real.”
I liked the article, but I don’t agree that this statement is the bottom line. I would say that the feigned wealth caused the creation of a mountain of private debt, backed by that “wealth”, and when the fake wealth disappeared, the debt associated with it turned out to be all too real. The recession was a classic debt-deflation spiral, in which across-the boards retrenchment to pay huge debts caused lost sales, lost income, and more difficult debt service.
And, the many of the “creditors” of that debt were institutional investors, who traded the real wealth of their depositors for the hallucinated wealth of the bubble. Many pension and retirement funds went “poof”, when the assets on the books turned out to be worth pennies on the dollar.
So no, I wouldn’t say “no wealth was destroyed”. When the fake wealth dematerialized, it took a lot of real wealth with it.
That’s right, and a lot of the destruction was in terms of people evicted, homes left vacant and crumbling, construction workers left idle after the 2005-8 frenzy of tract building and oversupply. There’s also the broken (Obama) promise of bailing out the mortgage holders as well as Wall Street.
Thank you, Carlo. Your comments help connect some dots between the 2008 housing-bubble crash and the general recession which followed and still prevails. My question is how did this “retrenchment” become “across-the-boards”, as you put it? OK, housing-related sectors crashed along w/ the bubble. That’s clear. Homeowners who used their homes as an ATM machine (thanks to inflated equity) now had overblown mortgages to pay off and couldn’t consume/ sped money. Clear. But presumably other economic sectors were still churning along: e.g., computers being made, kids being educated (teachers paid), clothing manufactured, government work-force fairly stable, etc. Did lack of consumption by over-indebted home-owners cause demise of that many businesses? How is it that so many, many people got laid off? Did so many businesses close which were NOT related to the housing sector? These are the dots that never get connected: how did the financial crisis, due to a housing bubble, snowball? I really mean it: HOW? I believe the answer is embedded in your statement about a debt-deflation spiral but would like to know…maybe in an example….how it works. Thanks in advance.
Say, didn’t the current Secretary of the Treasury, Jack Lew, in fact actually run the Citibank group doing exactly what you’re describing (shorting the subprime housing market) from 2006 to 2008? And if I remember that correctly, Jon, I guess I’m less curious about why it might not be in the film – than your article.
Well not much will change in the world until the world’s people start asking the right questions. For example, can “capitalism”, absent a strict regulatory milieu, produce the things that make a society functional. Can it distribute the “wealth” that all people are responsible for creating in a sustainable way that doesn’t leave millions destitute and basically walking working poor?
“Capitalism” should really be accurately named as “neo-feudalism” because that’s basically what it amounts to stripped of its propagandistic rhetoric, ridiculous “expert” opinions, and graphs, charts, models and equations.
Capitalism “produces” precisely what it is designed to produce–a small band of hyper wealthy individuals and billions of wage slaves with no wealth or security beyond that which it takes to sustain their daily existence as “wage slaves”. Nothing more and nothing less. That’s what it is designed to produce. And that’s not withstanding the fundamental logical and environmental conundrum that sustained continuous economic growth is both infeasible if not impossible, and most assuredly unsustainable by almost any conceivable metric or measurement.
Free “clean green” energy, to the degree it is possible, might save capitalism from itself for a few generations. But bottom line, 6+ billion people on the planet are going to have to learn to live a different way other than with the trappings of materialism and “private property” foisted upon them for generations as “the good life” or the only life consistent with the values of “freedom and liberty”.
@rr
This has been a central focus of my study for decades, now.
To truly replace fossil fuels (and/or any non-renewables), renewable energy systems must be able (sooner rather than later), without subsidies (monetary, use of non-renewables in construction, etc.) to produce enough net energy to build its own mechanisms, maintain them and replace them, as needed, as well as pumping enough juice into the grid to keep the lights on and the refrigerators humming.
We aren’t anywhere near that goal and, if we ever reach it, the energy available will be a fraction of that which has driven development and industry since the industrial revolution. Forget about electric can-openers and disposable diapers (and nearly as long a list as you can imagine of other things now taken for granted and seen as “necessary” in modern life).
Exactly right. Global industrial capitalism, entirely devoted to and dependent upon perpetual growth, is simply incompatible with sustainable civilization.
I = P * A * T Our impact on the planet and its systems upon which we depend for human life itself, can be expressed (and perhaps measured) as the product of population times affluence (consumption) times technology (higher levels of technology require more resources and more energy).
We are, without serious doubt, already “beyond the limits.”
@rrheard-why do you and others refuse to discuss the role of the BAR and the consultants the BAR provides to government agencies when said agency is looking to regulate or not regulate? Additionally, every bank, financial institution, insurance provider etc, Main Street to wall street, that participated in the creation and growth of the imaginary wealth (housing bubble) scheme did by passing the revenue generating models through their legal departments or legal consultants and were cleared.
Yes, attorneys, members of the BAR, were responsible to a significant degree.
I myself took the time to read the bullshit contract given when applying for loans. I never took one loan because either I didn’t understand the language, or I found the term “we can change the terms of this contract at anytime for any reason,” or the math was attached to language I didn’t understand etc.. There was a couple that the language appeared to be understandable but I didn’t go through with them because of a gut feeling, something wasn’t right and nobody would try to define certain terms when I asked for clarity.
It’s disingenuous to try and get people to think its Capitalism, the market or what ever when at the heart of the economic crashes were attorneys that allowed the doomed practices take place and or ignored them.
So what has the regulatory body of the legal profession done? Has the BAR disbarred any members for their role(s)?
All of the big firms have legal departments that have to okay what goes on within them. Why are you not concerned, angry confused or any emotion about that fact?
And the government wants you to believe less than 6% of the American population is unemployed – when over 90 million are not even in the work place, and these 90 million people are eligible to work???!!! Do the math!!!
The banking scam started in 1913. Never ended.
I like to pay attention to John Williams’ numbers, which I find much more realistic and trustworthy.
The ShadowStats Alternate Unemployment Rate for November 2015 is 22.9%.
If you are really interested in this stuff and can afford his newsletter, it’s well worth the price.
Why not read the book first, or, better yet, start with Liar’s Poker, which gives plenty of insight into the mentality and conditions that made the crisis possible. Here’s a true story:
After reading Liar’s Poker around 2000, I started looking at the Case-Shiller index ( http://us.spindices.com/indices/real-estate/sp-case-shiller-20-city-composite-home-price-index) for my locality and plotted it against the CPI (http://www.bls.gov/cpi/tables.htm). I started with 1990, the year I built my house, and plotted the year by year figures. Long before 2007 I could see the bubble developing – even The Economist saw it in 2003. The mistake I and many others made was to assume that if we did not get caught up in house flipping, stuck with fixed rate mortgages, and did not invest in anything touching on real estate, we would be safe. We could not have been more wrong.
There are many mistakes that led to the crisis in 2008, and of course repeal of the Glass-Steagal act was one of them. But another, generally ignored, is the failure to remove the stimulus for building houses. It started as a great idea: help convert the wartime economy to a peacetime one after WW2, and reward GIs for their service by giving them an opportunity to buy a home. But by 1950, those missions had been accomplished, and every President and every Congress since has refused to even look at the mortgage interest tax break. Contrary to the fears of the politicians, eliminating that break would not kill the housing industry, but it would rationalize it.
you paint these guys as “smart” – yet the sub-prime crisis would have been much, much smaller if these “smart” guys hadn’t placed shorts and bet against the banks, which in turn, ended up being the american people. Their actions made sure that the banks would be insolvent, knowing full well the fed (aka taxpayers) would bail them out.
its unfortunate that a film with such an opportunity fails to convey that these are not anti-heros or Walter Whites you can sympathize with. They are just as bad if not worse than the “wall street guys” they themselves call out in the film.
You fail to give credit where due; they are smart, smarter than you or I, because unlike us, they do not allow ethics or compassion for their fellow human beings, or even the viability of the entire economy, get in the way of making a profit. It matters not a whit to them who pays, as long as they make as much money as possible. With a get out of jail free card to match.