Subscribe to this BlogWho caused the financial crisis — villains or jerks?
Bloggers are buzzing over what one writer has called "Taibbi's Scream" — that is, Rolling Stone writer Matt Taibbi's muckraking takedown of Goldman Sachs in the latest issue of that magazine.
Well, "muckraking" isn't perhaps the best word for it, for Taibbi doesn't so much rake the muck as fling it. The article starts off, after all, by describing the investment bank as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." In the rest of the article, which is full of such invective, Taibbi argues that Goldman Sachs was at the center of — and a prime beneficiary of — every financial bubble in America from the market crash of 1929, to our millennial Internet madness, through the housing market collapse and the subsequent bailout. Heck, he even blames the firm for a bubble that doesn't yet exist: what he foresees as the cap-and-trade boom and bust.
Goldman's devious formula "is relatively simple," writes Taibbi. "Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again."
Goldman, naturally, has denounced Taibbi's article as "hysterical," a "compilation of just about every conspiracy theory ever dreamed up about Goldman Sachs." Unfortunately, that's not too far from the truth. It's not that Taibbi's article is a collection of lies; it's, that, like most conspiracy theorists, Taibbi dramatically exaggerates Goldman's role in all the bubbles, and, perhaps more importantly, exaggerates the firms supposed omniscience. Like most Wall Street firms, Goldman has done plenty of sleazy stuff over the years, but Goldmanites aren't the diabolical masterminds Taibbi thinks they are, creating and deflating bubbles at will and cackling with glee as they rip off the rest of us.
You can find excerpts of Taibbi's screed on RollingStone.com, but if you're really interested you should probably read the whole thing in the magazine. (Look for the Jonas Brothers on the cover.)
If, however, you're looking for a more sophisticated — and ultimately much more enlightening — look at the financial skullduggery behind our current crisis, you'd do far better to turn to Michael Lewis's take on the AIG collapse in the latest Vanity Fair. (You can find the whole thing here.)
"Nearly a year after perhaps the most sensational corporate collapse in the history of finance, a collapse that, without the intervention of the government, would have led to the bankruptcy of every major American financial institution, plus a lot of foreign ones, too, A.I.G.’s losses and the trades that led to them still haven’t been properly explained," Lewis notes. His article is an attempt to explain just what happened. A onetime bond trader salesman who's been a perceptive writer on the money culture for decades, Lewis talked to those who'd been there at ground zero, at AIG's Financial Products division.
The story that he tells is a complicated one, impossible to easily summarize; even the villain at the center of it all, former AIG FP head Joe Cassano, turns out to be more of an egotistical jerk than a diabolical mastermind — as trapped as anyone else in the bubble he helped create. Though Taibbi may find it hard to believe, that's how it usually is.
Mr. Chris Eagan! Don't bring in religion? Is that what you said? So now we have a non believer in God that wants to take away the right to free speech and expressing our personal thoughts.Boy your a real American aren't you? FACT: When God was the center of families and business(both) in the past, America became great because of it. You look at the statistics/history.You can't deny the FACTS!! So if you don't like God being mentioned in discussion,you leave the forum! Because I'm not going to!!!And I will not allow you to dictated to me what I can say or add to any discussion. Why don't you leave that to the Obama administration? He'll attempt to target freedom of religious expression next. He doesn't need your help to do it.
Looks to me like all the politicians are trying to put the blame on others instead of taking responsibility. Just about 95% of the american population liked to spend and take loans that they could never pay back. Just about everyone that I know at work drives newer cars or big SUVs and trucks that they don’t actually use. Many people that I know go out to eat 2-3 times a week spending $60 a week just on restaurants. Everyone wants to have the newest cells, computers and flat screen TVs and they are surprised that they are in the hole??? On top of that people are not happy with a 2 bedroom apartment or house but they need one with 4 bedrooms if possible. Why is it that foreners have better financial health while earning less? Maybe because they learned to be happy with as little as they have. That’s why foreners pay off a house in 15 years versus americans that have a mortgage for 30 plus years. We all need to wake up and start being more responsibble and stop expecting handouts from the government.
Villian jerk is that not the same thing? Common… we all know that at some point everything comes out in the wash… I read the vanity article of AIG FP's "machine" thought of Pink Floyd's "Welcome to the machine" inparticular the line "… the band is just fantastic, that is really what I think, and by the way which ones pink…" Reminds me of the fact that sometime it is good to be in the trenchs so you know what is really going on… not just assuming the CDO are loaded with 95 % prime mortgage… oops put the word sub infront of prime that is an accurate statement.
I have to admire Goldman for playing the system. I think what they've done is scummy and immoral, but you have to appreciate the intelligence of their execution.
Capitalists tax things. Communists ban or cap things. Bans and caps never work because there's always a way around them.
The way to stop this is to drastically increase the personal income tax rate on the wealthy, while, simultaneously, drastically lowering the business tax rate. This will discourage the "personal jackpot" mentality and encourage the wealthy to keep their wealth in their business.
If I'm investing money, I always keep it in industries close to me that I understand.
You have to discourage the wealthy from withdrawing money for wanton personal consumption. If you drastically lower the exceedingly high US business tax rate and hike the personal income tax bracket back up to the 50%-70% rate it was 25 years ago, these bonus babies will go away.
Once the wealthy realize they have to invest for the long term, not for short term bonuses to buy that mansion in the Hamptons. These short term plays will die off.
The way many companies are run these days reminds me of the business simulation game you play in business school. At the end of the semester, when you're about to be graded, you cut your R&D and marketing to zero and put all of your money into stock buybacks and dividends. The "company" is in big trouble if you were to play the game past the time you're graded, but who cares about the company since you have your "A" and you've moved on to the next victim.
In the real world, managers manage their companies for a big bonus check, then leave very soon after they collect their Lotto check.
If an executive had to pay 70% of that Lotto bonus check to the US Government and nothing if they left it invested in the company, don't you think they would manage it differently?
Ok, this is true there is in fact plenty of blame to go around. No one in their right mind can abjectively argue this point. However, not every person in America participated in this buying and selling frenzy. I know this for a fact because I am one American who still owns the same house and did not sell, remortgage, or trade up into a new home. However, I am still effected by bail outs to only the super rich with hopes that some of it will trickle down. I am in fact a part of jobs going over seas.
My point is, while everyone is busy pointing fingers there is no true solution on the table. That is the problem and the question of the day. Jobs are non existant, health care is only for those who can afford it, and public education is losing ground fast.
Americans read the constitution, "That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness."
Change can only be done by the people for the people.
Are you guys so desperate for news that you print this rubbish?!?
It does not matter if people like Goldman are idiots or evil. They helped to blow up the world financial system. Period. Bad
I myself am very suspicious and this causes me to generate another conspiracy theory of my own.
The Treasury lets small banks get away with buying back the warrants cheaper then what they're worth.
That's as per the oversight board.
It's kind of odd that GS seems to never make a mistep and the Treasury is full of their alumni. Someone trying to feather a nest before going back to the mother ship? Would explain a lot.
It's also odd how all of these analysists seem to of under estimated GS earnings about the same amount and they had the same projections.
Is this more of the banks feeding rubbish to "independent" analysists who print the junk.
The writers at CNN.Money should be embarassed about printing such rubbish w/o doing any reporting work.
Why are you not trying to investigate just why GS seems to be all knowing and omnipaant about trading.
You guys get a kick back for not being very inquisitive?
As I was always taught, bad manners, bad judgment, bad actions ALWAYS start at the top. So who was at the top?
Lehman, Morgan, Goldman (all owners of sub-prime conduits) and hedge fund in the country led the charge to create and implement the mortgage programs now bringing us down. Fannie, Freddie and even Golden West (World Savings- Wachovia) participated in creating the top down debacle.
As a small broker/banker I along with hundreds of thousands were nothing more than pawns positioned to distribute the poison. If I was told to collect W-2's, paystubs, bank statements (as I did in the 80's) in order to sell the paper to my wholesalers or correspondent banks, I DID! If I was told not to collect anything I DID NOT! Very simple but obviously too simple for many to understand or perhaps not want to.
These rules came from Fannie and Freddie who received their marching orders from the securities markets. No different than me getting my orders from my money suppliers.
Today nothing has changed. I collect what I am told to collect. I do not make the rules, the guidelines or the regulations. I do not analyze or run models for the “what ifs”. Like thousands of others I only do what is necessary to originate and close a loan for people who need it.
It should have been obvious when Barney Frank and Chris Dodd started in on the brokers as the ones responsible that was only a smoke screen to cover up their own blatant mistakes and as well to keep the heat off the true culprits. When Barney went after yield spread it was the first shot over the bow to brokers and bankers that your days are limited. Now we can see that with the recent release of new regulations, their ultimate goal is to limit he players and reduce the competition.
I will predict that sooner than later, there will be no competition for loan products. The same banks who began this mess and who rec'd the TARP funds are now the same lenders who are putting a stranglehold on America while they spend the bailout funds on everything but.
The greed and evil began at the top and it continues to survive no matter what you or I say. A sad statement considering we’re a Democracy.
Who really needs this much money? You don't need a 9-digit gross income to enjoy a simple life. The great equalizer will never come to American shores with these guys running the show.
More government is needed, true, but not by those who are just as corrupt as the crooks in skyscrapers who do all this. KISS, Wall St! Learn to live a simple life and everyone will benefit. You might be able to even rehire all those underlings you downsized last year.
There is plenty of blame to go around on this one. The government increasing the quota of home loans that had to be be processed by the quasi federal agencies, FREDDY and FANNY; the people that applied for and received liar loans, the real estate people that sold the liar loans, the mortgage people that processed the liar loans, the Wall Street firms that repackaged the liar loans into AAA securities and again back to government that was not watching what was going on. New York and California need to be especially proud of the level of integrity demonstrated by their mortgage and financial industries.
The two people who quoted the Bible and Mentioned greed are exactly right. There is always a temptation to say," It's the government's fault or it's the investment firms fault." But at the end of the day one should ask themselves a question, "If I were given the chance of making millions of dollars and no one would know how I did it, and eventhough it's technically not illegal, but I know it will hurt other people, who I do it?" This is what happend, somehow has to sell homes and put prices out of wack with reality, folks deciding to gamble believing that the housing prices would continue to go up and thus taking riskier loans, lenders and mortagage agents pushing numbers up to get higher commissions, and so on. There are too many folks to blame, therefore, we are all part of the problem. We need to be honest with ourselves and forget about Political, Social, or Economic positions.
While Americans are partly at fault having lived beyond their means, the main reason for the mess is the combination of ALL the evil empires.
When you think of it objectively, you need to remember how many Americans have lost their well-paying jobs to those in overseas countries. The result–the companies get richer. The domestic work force gets squeezed.
Take those same folks, put them in part-time jobs in [other] evil empires, making half or less, and you have a recipe for disaster. More homes for sale and less folks buying them.
But the shareholders are happy, since their staff costs are down, and the profits stay up.
If Americans kept their jobs, the 'evil empires make less money (those poor guys.)
But if that happened, would there have been a housing collapse?
The GREEDY oil speculators, oil investors, and oil traders coupled with oil companies and Wall Street,, in other words high oil prices and high gas prices have ruined our economy. Take oil off of Wall Street and let prices be dictated by supply and demand.
When is the world going to realize that capitalism only allows for the transfer of money from one person to another. It is an illusion that we have created for ourselves to allow a minority to feel that they are superior and a majority to have dreams to work for. Do we really believe that our shares can only keep going up and that inflation will stay down? The people with the most money are always going to have the upper hand in this game. If the world does not like the effect that capitalism causes, then maybe we should change the game.
Corporate America, and indeed Global Corporations, have become totally corrupt.
Their management is totally corrupt, and self-serving, and their goal is not to make a corporate profit, but rather to line the pockets of top management, and the devil with who gets hurt in the process.
This situation started in the 1970's, and has deteriorated ever since, as management became devoted to themselves, rather than to good business practices.
If the government doesn't pass legislation to rein in these abuses, and cap corporate salaries and compensation, and to SEVERELY LIMIT stock options, then the government can only be considered to be part of the problem.
I see that the author has not taken the time to DENY any of Taibbi's reporting. Nor, please note, has Goldman Sacks. You wouldn't DARE, as answering the charges with any pretense of truth telling would belie the total dishonesty of their business model.
I think you’d hard pressed to find anyone with a solid understanding of economics and market behavior ready to say we’ve seen the bottom. As it was pointed out, nobody wants to get involved with acquiring a bank and finding themselves under the restrictions that trap money brings. Not to mention the new capital and holding time requirements being proposed.
Although a lot of things have contributed such as baby boomers aging and the gradual scarcity of energy there is one overriding reality that rarely gets discussed.
If the government decided to stop enforcing laws against murder I'd be willing to bet that the murder rate would skyrocket. And I'd be willing to bet that the government (and even much of the public) would blame the new murder epidemic on all of those evil murderers out there. Certainly the murderers are responsible for their actions but, realistically, there are people out there who are always going to do evil given the opportunity.
The government has been on a huge anti-regulation kick in recent years (it is now reversing, of course). It was inevitable that the government's not enforcing ethical standards in finance would lead to an increase in unscrupulous and irresponsible behavior which is exactly what happened.
Regardless of anything else this is why the bubble got so bad on so many fronts.
Hey John Seet & others – Can we leave religion and this "mystical god being" off of this topic. Don't get me started on the flaws of religion next.
Thank you sir.
What surprises me is that even as Goldman announces huge profits, people still think they made a mistake, that they somehow miscalculated. A lot of people made a lot of money from mortgage securitization and the resulting housing bubble and many of them have retained that wealth. It was not a miscalculation on their part. They understood the risks and positioned themselves to avoid exposure to them.
Per usual it was the usual "Blood/money sucking vampires". If you don't know these people who have done this for hundreds of years, go back to sleep!
There are three main culprits in this crisis. Demographics, the government and the Federal Reserve. The demographics were inevitable and easily predicted. Baby boomers reached peak earnings in the 80's and 90's and now they want their money. Uufortunately, about half of it is gone.
The government has been talking about this problem and the impending budgetary problems for decades but have done NOTHING about it except fill their campaign coffers.
And the "independent" Federal Reserve should have stepped in to turn off the flow of free money but did nothing but feed the fire by printing more and more fiat dollars.
Unfortunately, the solution seems to be MORE government, MORE borrowing, MORE deficit spending and MORE worthless dollars from the Fed.
I have lived in Japan for 15 years and its like watching a bad sequel. trust me, the crisis has only just begun!
I have been in the mortgage business all my life and everyone I have read about has missed the real culprit in this mess. When gas prices hit $2.5/gal, one of my customers lost his delivery job and called me for assistance.This was the first of many calls for help. This started the dominos falling. Now, I'm not saying the subprime market was wrong, it wasn't if the economy had remained good. But the real problem is the cost of fuel and remains so today. Exxon, BP,Shell,etc.and the speculators are the ones that should receive some of the blame. Not to mention the lax underwriting regulations on the mortgage products.
"Can we bring up criminal charges against anyone connected to this crap?"
No, for the most part everything they do is perfectly legal.
Taibbi is starting to believe his own press. Greed can no more be regulated than any of the other human weaknesses, Lust, Gluttony, Sloth, Wrath, Envy, and Pride. Be careful of Pride Mr. Taibbi as it may be the most deadly.
I just love how everyone wants to blame business people. While some are definitely "evil jerks," the root of the problem was, and is, congress!!! Our government has become masterful at keeping the population sniping at each other and deferring the focus of where the blame really lies.
those that ranked the financial instruments based on shaky mortgages as AAA rating. they are chiefs or idiots, but i see nobody talks about this.
Making Goldman Sachs out as the villian overstimates the intelligence of the men involved. Greedy, egotistical jerks is more like it. Having the Hubris to think they could hire techies to model all the possible scenarios is nothing but hubris. The models are only good when the boundary conditions and assumptions remain in place, and these guys didn 't have big enough brains to even get that right.
The crash was caused by GREEDY JERKS.I don't understand how all of these finacial wiz kids and their bosses didn't see this whole thing coming, some friends and I did and were not even in finace. I believe they all saw it coming, how high can the price of a house go?, but wanted to ride the wave and suck as many commisions out as they could before the entire house of cards fell!!
We've all heard "it's corporate greed and lavish compensation packages" that are to blame for the financial crisis. I believe there are two other culprits that no one is talking about, and unless we correct them, we'll see another financial crisis in 10 or 15 years that will dwarf this one. What are they?
Not too long ago, the President and members of Congress ordered Fannie Mae and Freddie Mac into the sub-prime market. At that time, I screamed to the top of my lungs "in 5 or 10 years when the real estate market corrects (it always does) the taxpayers will pay through the nose for it." (Coincidence? Read on.)
What was my rationale? Banks and mortgage companies create loans to you and me so we can buy houses. To help keep interest rates down and credit available, government sponsored entities (Fannie and Freddie) purchase those mortgages and sell them to investors as mortgage backed securities. For decades, Fannie and Freddie dealt only in the PRIME market – loans that are low return/ low risk. Then, Washington politicians decided to order Fannie and Freddie into the sub-prime market…loans that carry a high risk of default over the long haul…especially when the economy goes south.
What happened next? You guessed it – Fannie and Freddie sold those loans to investors as mortage backed securities, pumping trillions and trillions of high return/high risk investments into the markets. Everything was fine, but when the economic bubble popped, everyone suffered.
So who do I blame? Two Presidents and Congress…in 1998, Clinton and Congress ordered Fannie and Freddie into the sub-prime market, and Bush & co. had 8 years to overturn this decision but didn't.
Please, please: if you want to avoid another financial disaster in 10 or 15 years, please tell President Obama and your members of Congress to order Fannie and Freddie out of the sub-prime market TODAY.
Thank you.
You totally forgot the third answer…blatant government interference, mismanagement and apparently deliberate non-existent oversight.
Oh the old Greed and Love of money straw man argument again.
Investing for your retirement is not Greed but simply common sense. In order to do that you have to love money or building an assets base just a little bit.
Now if we could just get the financial creative geniuses to stop building houses of cards we just might not need the next generation to pay for the retirement of the one before although its not looking good so far.
I am in agreement with the posts extolling responsibility of the individual. These people in the Wall Street institutions did not get us into this mess by mismanaging IRAs and 401k's, they did it through exploiting our own greed to own a large house with a new car and an outrageously sized television. It is indeed a large net that is needed to catch the culprits.
This is all crazy, we always have to figure out a place or a person to lay blame. I am not saying that the financial institutions aren't part of the fault however WE ARE ALL TO BLAME!
We were all living outside of our means.
While there are circumstances where this won't apply (buying a house)
my grandfather who lived through the depression lived by a creed, "pay as you go and you never owe."
Maybe its time to start living this way?
Michael Lewis was a bond SALESMAN, not TRADER, at Saloman Bros. when he wrote Liar's Poker.
Get your facts straight….
Once again you are letting the real culprits off free.
1. Clinton admin forced Fannie and Freedie to have a minimum 50% of Mortagages Sub Prime
2. Barney Frank head a congressional bill that disallow Fin Inst to reject people mortgage requests due to past credit history
3. Congress with heavy lobbying by Robert Rubin Clinton's ex Sec Of Treasury (Goldman and Citi guy) to repeal Glass Stegal act and allow Fin Institutions to merge and leverage Fannie and Freddie back mortgages upwards of 30 to 1 ratio,
BTW , Barney's lover was running mkting programs for Fannie when he was heading the Cong Banking Com.
The love of money is the root cause. The plain truth is that so long as humans lust after money, the tightest rules and regulations cannot prevent financial earthquakes from erupting from time to time.
The Holy Bible is right after all.
I think everyone of us could be blamed thanks to our GREED. The coporations, unions and the people behind the desks. Being greedy with easy credit and then play dumb that you did not know what you signed for and then mismanaging your finances by letting Bernie run wild with his great flawless returns…GREED. Let's get it right going forward.
For the past 20 years or more, as more and more people save money for their retirement through IRAs and 401Ks which money is usually invested in the markets, the people controlling the markets have taken greater gambles with the money of others. The market leaders are playing with the savings of individuals, mostly 'donated' by the middle class, as if it were Monopoly Money. Wall Street and the rest of the financial markets have in essence become a Ponzi Scheme and the only people truly making any money are the people who run the Ponzi Scheme, such as those who work at Goldman and almost every other financial firm.
It really is pathetic and I hope 'we the people' wake up and see all the government authorized scams to separate us from our hard earned money.
What I find funny is that the children of the 60s who swore off materialism and chanted "make love not war" are the ones who today are caught up in the excesses of personal greed.
We can't trust the baby boomers. It's because of them that we are in this mess today. We should lock them all up so they can't do anymore harm to the rest of us who are going to have to bail the country out because of their selfish me-first attitude about things.
Can we bring up criminal charges against anyone connected to this crap?
You are fundamentally incorrect. Taibi is correct. While not everyone at Goldman Sachs is a villian, the top people certainly seem to be conspiring with a select group of other firms, like JP Morgan Chase (who they also conspired with back in 1928) to manipulate markets for their personal gain.
To make matters worse, unlike back in the 1920s, they now have virtual control of all economic functions of our government including, especially, the Federal Reserve, which is used as a slush fund for the conspiracy.
Remember the words of the U.S. Attorney in the case involving the theft of Goldman Sachs trading software. He argued that the former employee should not be granted bail, because release of the software into the open market was a risk to national security. It could, he said, "be used in unfair ways to manipulate markets." If it can be done it will be done, and I am sure that GS is already using the software in "unfair ways" to manipulate markets in their own favor and against the rest of us.
When a person's wealth is built on lies, I reckon it's naive for any of us to believe honesty will triumph. Self-regulation of our financial industries cannot work because of human nature being what it is. How many of us as children didn't take an extra cookie out of the cookie jar when we knew Mamma wasn't looking?
By and large, we are still children, but in adult bodies. A few of us matured to the point of having the character to do right even in the absence of watchful eyes. Most, however, are getting what they can for themselves – everyone else be damned.
I hope we come out of this with strict regulations and a truly independent oversight board that is allowed to investigate the self-serving security and investment houses. Absent strict and effective regulation, I doubt we'll find a solution short of regulation and limits on personal income — particularly at the higher levels.
Think this is so far fetched? Let's put an item on a ballot that reads "Do you favor legislation that caps the earning potential of American citizens at $120,000 annually?" and just see how that vote swings….
Those who control the economy's puppet strings better start behaving better or we may see an uprising from the little guy that we've never witnessed before.
A "bust out" is a common tactic in the organized crime world where a business's assets and lines of credit are exploited and exhausted to the point of bankruptcy. America is being "busted out" by the Banksters. Goldman Sachs is one of the five families of banking.
If there is a way to screw things up the Banks, investment Banks, the Snake oil salesmen’s/brokers on Wall Street and elsewhere were will find a way with some additional help from government.
The timing of this repetitive event is the only variable except to them of course. At the turning point puts and other derivatives are bought to ensure profit is made on falls.
The media then feeds in more panic creating more downside and greater profits for some.
At the end of this orgy of deceit the pubic is encouraged to believe it’s their entire fault caused by their Greed so the hold process can start again after generally the people who cause it have pilfered the pockets of those that have suffered the most from it.
They is no question this time whoever that the combination of stupid and deceitful business practises and politically manipulated high energy prices has outdone most previous such events by a good margin.
Why anyone would have anything but complete contempt for these over paid charade building conman is beyond me unless your one of them.
A great vampire squid wrapped around the face of humanity sure sounds apt to me.
For his next project, Matt Taibbi should investigate Goldman's manipulation of oil prices; they are the largest oil speculator, and Citi is probably number 2. The actual producers of the oil have lost control of the pricing of their products.
So, the next time oil and gasoline prices spike, they have a very big hand in it, and you can thank them.
Let's hope that Matt calls them on it.
Your article is pure BS. There is no doubt that you spin a more favorable view of GS as your boss told you to do so.
Matt Taibbi has done his homework, and he gets an A+.
Very well put and indeed the painful truth. Although, Goldman is not the only culprit of this detrimental financial crisis. But it sure is a MAJOR cause of it!
I take exception to the notion that "we are ALL guilty." Some of us live safely within our means, tell the truth on credit applications, don't take on debt we cannot comfortably pay off, etc.
There has NEVER been ANY valid excuse for "liar's loans," buying houses one cannot keep up with, rating junk loans as AAA just because they are packaged with other junk, leveraging an insurance company at 30-1, or many other reckless actions that NO financial institution should never have allowed.
Truth creates wealth — lies destroy it. It is the liars — villains who lied to others and jerks who lied to themselves, that are way more culpable than those who were honest and prudent.
Just like the S&L scandal of the 1990's, the siren song of "we don't need no stinkin' regulations" has come back to bite us.
"Amen, D. Virginia, Amen, “people” aren’t smart about finances and look to “experts” to tell them what is or is not OK. The blame for this mess doesn’t belong at the feet of the home-buyer that couldn’t afford the loan, but at the feet of the mortgage “expert” that was selling him the loan with no docs or salary checks."
So why were these mortgage "experts" writing those loans? Because they knew damm well they could sell the loan to Fannie Mae in the secondary market and then shift the exposure off of their books to the government. If fact the government outright encouraged Fannie Mae and Freddie Mac to buy up these loans made to people with marginal credit in order to encourage banks and mortgage companies to provide a means of home ownership to the "less fortunate folk". After all the government feels home ownership is an entightlement that should be extended to everyone regardless of income or social status……….right?
During this process Fannie Mae cooked the books to look like they were solvent as the regulators cried for an investigation only to be barbecued by those members of Congress who were on Fannie Mae and Freddie Mac's campaign lobbying money list. That was pretty much everybody. All of these crooks should be in jail.
That's right, we had two GSE's that were lobbying themselves to a government that had a huge interest in both of them. Hows that for a conflict of interest!!
If I was a mortgage broker/banker operating under that kind of a sweet arrangement I would write as many loans as possible. So they did, without having to worry if people would ever repay them.
Our government created the environment for massive abuse. Then turned its head when regulators warned them of the coming storm. Let's get the facts straight. Now we the taxpayers are footing the bill. They are never going to admit it, for politicians the truth exists as something to be manipulated.
Its pretty obvious that Goldman Sachs was at the center of the securitization of mortgages that caused the current financial meltdown. It was the investment banks demand for mortgages to securitize that caused the housing bubble.
It was their trading in credit default swaps that allowed them to unload the risk from those securities. And it was their patronage of politicians that allowed them to ultimately have that risk assumed by the taxpayers.
No conspiracy required, this is just business as usual. They simply sought to maximize their profits while shifting the risk to others. They made enormous profits from the entire process.
Goldman Sachs was a prime beneficiary of the bailout of AIG. In fact, they would likely be out of business if the government had not stepped in to cover the credit default swaps Goldman Sachs held from AIG. And it is no coincidence that bailout was orchestrated by their former CEO who was the US Treasury Secretary.
We are not "all guilty". A lot of people miscalculated. They believed the market would go up forever. They believed housing prices would go up forever. Goldman Sachs didn't believe anything of the kind. They knew at some point, someone was going to have to pay a price. They simply made sure it wasn't them.
Evil bloodsuckers? I think instead they are simply smart business people who have been able to manipulate the system to their own benefit. The rest of us have paid the price.
Liberal Republcans who deregulated the investment market are more responsible than their Democratic counterparts, yet both are guilty.
Thank Republican Senator Phil Gramm who who "bought off' and received millions from his Wall Street buddies while his wife was given a cushy position on the Board of Directors for Enron.
Without the Gramm/Leach act derivatives could not have caused the widespread "meltdown' that they actually caused globally. There is still "junk" investments to the tune of over $100 Trillion globally that has not been fully meshed out.
Obama has done an admirable job building moderate economic confidence based on "smoke, mirrors' and the printing of greenbacks. No one has called out the emperor due to lack of clothes as yet. When or if it happens, everyone loses.
Amen, D. Virginia, Amen, "people" aren't smart about finances and look to "experts" to tell them what is or is not OK. The blame for this mess doesn't belong at the feet of the home-buyer that couldn't afford the loan, but at the feet of the mortgage "expert" that was selling him the loan with no docs or salary checks.
We are all guilty. Wanting something for nothing. Trying to buy things we cant afford to impress people we dont like. The only scary part is that we now borrow from China to support our way of life with no industry that affords us the ability to repay. Our poor poor children. This will by far be Americas biggest challenge and there is no quick easy fix. We have sold ourselves short for years and now its our children who will be cleaning up the mess. Change doesnt happen over night and our trend of spend now repay later leaves us with debt and no jobs in which to repay.
Today in this once great nation, personal responsibility is all but dead, and greed rules the roost.
Millions of people up to their eyebrows in credit card debt and morgage debt have caused this recession, which may soon be a real depression.
And the banks, with their advertizing propaganda sold everyone a bill of goods. They deserve to fail, at least the ones which sold fake mortgages. Why should we, the taxpaters, bail the fools out?
A nice long jail term for every easy-credit lender might bring about real change in our way of doing business.
Goldminites are the modern Knights Templar.. they embed themselves everywhere and scheme.. eventually, they will enjoy their own version of friday 13th…
The main problem is that there is a lot of idealism around. As usual idealists will try to control everything capitailizing on the failure of existing quite good but not perfect system.
Goldman is composed from highly professional and sophisticated people. They are much more professional than most of members of government. Their personal profit is just certain percentage of investors profit. If you decide to give your wealth to government instead of Goldman to make investments you will fail permanently but you will never know about it.
Lets the system evolves. Lets allow someone to fail. Stop producing conspiracy theories. But we always should remember every system sometimes should fail. The only system never fails is communist ot totolitarian system.
Hank Paulson became treasury secretary because he knew the economy would collapse and he wanted to be right there to save Goldman.
I find it quite hilarious how uninformed the public is about the root cause of the financial crisis. Our government has done an EXCEPTIONAL sell job to John Q. Public on blaming banks, financial industry, corporate CEO's and everyone else they can vilianize as a convenient way to defray the blame from themselves. It is easy to see how this can be done with the level of intelligence you are dealing with in mainstream America.
After all, Obama got elected by the same people who believed that the government was going to spend our way to prosperity and create jobs. Sorry, the jokes on you. The government can do neither.
The only thing that is certain is that the financial industry is still spending billions of our taxpayer funded bailout dollars to lobby the same government politicians who created this mess in the first place. They replaced a regulatory system that was put into place and worked since the great depression with a trainwreck of a system that allowed banks and financial institutions to get into the brokerage business and create the financial poison that we have today. They then used the GSE's Fannie Mae and Freddie Mac as a conduit to provide loans to people that could never pay them back as a way to promote home ownership to everyone with a heartbeat. Amazingly these two organizations which are now ownned by the taxpayers are STILL being used today to do the same under a government acronym to help refinance forclosed housing loans to people that again will be unable pay.
All of this regulatory relaxation was done during a Republican controlled Congress and a Democratic President. There is plenty of blame to go around. But make no mistake about it, the fiancial crisis was born by the actions of OUR govenment. Until we get campaign finance reform and strict restrictions on lobbying by special interest groups (like the fiancial industry) of our goverment elected officials, we will continue to get the same.
If you think that these people are elected by us to serve us then you are not only misinformed but also an idiot. Just follow the money if you want to know who or what they are working for.
There will be another financial crisis. Because we as the people who elect them continue to allow the "purchasing" of our elected officials by these groups. Just look where all the stimulus money is going if you want to know who is benefitting AGAIN at our expense. With this election we have given the politicians a green light to waste billions of OUR money and they are doing an excellent job of it. Economic Stimulus and Recovery Act. What a great name for something that has nothing to do with stimulating the economy but everything to do with paying back people for their votes. My prediciton is that we will see much more pain before we finally wake up and realize how our government actually works. Eliminate the source of the money and we will take back control of our government.
> when does the person who was sold
> that they could afford a $500,000
> house on $45k/yr salary, no docs
> required, look in the mirror and take
> some responsibilty?
He did already, he got foreclosed on and had his credit wrecked — and appropriately so, no question.
Now it's time for the idiot who brokered what he knew was a bad loan takes some responsibility too.
And the jerks who passed that loan around like a hot potato, each knowingly selling the bad loan like it was gold.
And the jerks who wrapped up that bad loan with a bunch of others and slapped a AAA label on it.
And the jerks who pissed on all the regulations that used to prevent this sort of thing.
And…need I go on?
Hats off to Taibbi for the guts to point out the workings of GS. GS was in a hurry to pay off TARP funds so it could shower huge bonuses to itself. I just read an article that said 25% of the folks who are foreclosed could actually afford their mortgages but walked away as they could not stomach the loss of equity. My property in FL has lost more than 60% of its value but I cannot imagine giving up. Where did our morals go wrong? By the way, I am sick of the Republican/Democrat political blame game.
The Military-Industrial complex in the US has by now been replaced by Politico-Finance complex. The "mighty" dollar is worth only as much as the naive and simple souls of this world are lead to believe by that new "complex".
And when (and nobody knows when it will occur) the world realizes that the AAA rating of the US Government debt obligations (Treasuries) is as overrated as were the ratings of the top tranches of Collateral Debt Obligations issued by Lehman Brothers and the rest of the Wall Street gang, the life style as we like it will end. And most of the US "middle class" will simply sink back down to the level of "the muck".
Central banking under the Federal Reserve practicing Keynesian economics & Nixon closing the gold window in 1971 when the housing bubble started 4 decades ago.
This is American economic slavery, where we surrender our time for a currency that is perpetually devalued. It's theft, it's taxation without representation & the manipulation of our standard of living, our quality of life and our livelihoods.
Proud to be a American, minus the economic slavery & torture.
Mortgages are a very small part of this problem. The big problems are derivatives and junk securities.
Taibbi accurately describes what Goldman does for a living: "positions itself in the middle of a speculative bubble", "to hoover up vast sums", "sell investments that they know are crap" to earn fees, "with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage". "Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again.”
He even left out one thing: lobby the government for bailouts of Goldman's failed schemes because they didn't get out before the collapses.
Goldman is not the only vampire, just the largest surviving one. We can fill in the blank with the names of other companies who did the same deeds with even worse results: AIG, Bear, Lehman, Merrill Lynch, and the list goes on.
We need to shut down and kill off all of these bailouts and pay a lot more attention to Matt Taibbi.
Goldman Sachs is simply doing what it is allowed to do: take money from the pockets of the many to transfer it in the pockets of the few. In the computing business the notion of "sniffer" is well documented and it does permit an institution to cheat and grab money from nearly anyone on the markets. You think they made X times the profit of the others by playing by the rule? Again? The fact that the government keeps the rates at zero demonstrate a few things: money is worthless (when something is given at no cost it has to be worthless), people who have money must go on the stock market in the hope of grabing any type of growth (even if they do not qualify or do not want to put their money in the hands of the banksters, and pension funds must also give your money to your friendly bankster), ang the monster profits are all for the bankster.
To conclude, there is a simple principle in the nature of money: it never disappear, it changes hands. The hundreds of billions that seems to have vanished are simply in the pockets of a few. And no one will ever bother them. By the way, they are already working on the next buble to get the money they missed the last time… The new monarchs can do what they want.
Who caused the financial crisis? How about both, villains AND jerks. Villains for offering the impossible sweet treat in a manner that appeared to be acceptable and jerks for not questioning the to good to be true aspect of the deal. Combine the two and we now have a financial crisis which hobbles the economy and puts a debt on the next generation. By the way, throw in a federal government that in no way monitors this farce and we find ourselves with a meltdown of epic proportions. Now we scramble to cover the losses and attempt to rebuild and recover a portion of the lost trust in the banking institutions (which continue to apply the screws to average Joe and Jane) along with observing the federal government spend money (bailout) which it really does not have. At a fairly young age I was taught not to spend funds which I could not cover on a monthly basis. My education was quite basic and plain vanilla, my question is what have these educated fools (both in business and government) who have various degrees and credentials done with their educations to place this nation in such financial peril? Once again, as history has shown, the burden of putting this nation back on track will fall upon the everyday citizen who goes without notice and lives his or her life with a bit of devotion towards financial prudence.
Everything has a root cause. Unfortunately, here the root cause is Real Estate Brokers & Estimators. Everyone was making money and everyone turned a blind eye. We all knew the Real Estate was not worth what it was selling at. During the boom, my wife said to me "do you know what our house is worth?" I said "if our kids can't afford to buy it the bubble will burst"…it did…the root problem with just about everything these days is plain old GREED. It starts at the bottom and works its way up.
What data Bif? Since the market has never been allowed to truly regulate itself, there is no data. Your cry for the gubment to ban all but 30-yr fixed mortgages is further proof that P.T. Barnum was right.
It's nobody's fault – it's demographic. Just as a "wall of money" hit markets when baby-boomers' earnings peaked, so now those same boomers are retiring – that's the sucking noise you're hearing. If I'm right, we're looking at 20 years to recover, just like back in 1929.
I think it was caused by Mr. Bush. It heppened in his time and he encouraged the sub prime. In his presidency a lot of Americans got home ownerships and in his presidency a lot of Americans lost homes. He is responsible.
Unfortunately, there's a boatload of blame to go around – from the individuals who borrowed and bought on speculation betting on the come that inflation would make them rich, to the brokers who helped the falsify their applications to show substantially more income than they produced – or could produce – to the financial people who ignored the obvious fraud and failed to protect their own institutions in the name of profit, to the regulators who were out to lunch instead of doing their jobs, to the politicians who fostered the kind of legislative and administrative environment that made it all possible. The problem is that NOBODY wants to do the hard work to sort it all out and fix the system once and for all. Instead, virtually every single person is so concerned with their own self interest that they can't and won't cooperate in any action to moves beyond their own selfish interest. Villains or Jerks is not the question when the actors are BOTH simultaneously. There is no simple answer – or solution – here. Someone much commit to do the HARD WORK to fix the system – and that someone is US.
Unfortunately, consumers are not smart enough to understand the consequences of their own stupid decisions. Spending more money than you have is an addiction, and needs to be cured cold turkey: the federal government needs to outlaw anything but 30-year fixed mortgages, and impose strict income and capital requirements for anyone taking out a home, boat, car, etc., loan. Similar requirements should be imposed for credit card debt.
This would similar to what we do with cars: minimum safety requirements to protect consumers who don't have enough information or wouldn't use the correct information to make optimal decisions.
People say that left to itself, the free market will self-correct. Over and over again, the data confirms this is false.
To simply call the men and women in the financial industry who directly and indirectly contributed to the financial crisis and its consequences as "jerks" is very forgiving, if not, saintly. If you look at the lives of everyone affected by it, including, those that have worked for years in the financial industry, then, the word, "egotistical jerk" does not do justice. The people in the financial industry whom the experts believe to cause the financial crisis lack moral compass and basically acted on only one fundamental instinct; "Greed". Psychologist may say that their actions were "fear-based" and even "New Agers",like Echart Tolle, may say they acted from the "ego" or "mind". Regardless, all in all, "GREED" was the key controlling factor. Journalist, political analyst, and poll-takers need a large dose of reality and/or pragmatism to understand the motivating factor in human behaviour.
"If borrowers would have fulfilled their promises to pay back loans, the entire ‘crisis’ would never have happened."
That is such a simplistic ignorant self-rightous statement that it is laughable. Millions of Americans bought houses. Many of them just trying to get a part of the American dream. Unfortunately for them, with unscrupulous lending and disingenuous securitization driving things, they almost all ended up under water on their loans. As energy prices surged near the end of the cycle and now unemployment through the roof, many people didn't stand a chance to "fulfill their promises to pay back loans." Interestingly, about 2/3 of the defaults were speculators, not owner occupiers, which implies this is not some rampant mom and pop scheme to not pay their bills, but a problem of ethics among investors, and sales and securities hacks at several levels.
Ladies & Gentleman, this time, (very soon) when these Banks fall, (and they will fall) no government will be there to catch the Banks this time. The Government is Dead Broke, these banks that I speak of, are dead broke. You ask how are they dead broke. I will explain. The banks financed leveraged investments known as derivatives. Derivatives made them massive paper profits in the 1990s and 2000s.But when the real estate market crashed, those investments suddenly became worthless. That's because they don't just owe trillions of dollars. They owe Hundreds of trillions of dollars. And there is no way in can they pay it back. This will all happen within 12 months.
Goldman Sux is a large vampire squid that has taken over our government and they and the Federal Reserve should be gotten rid of and our country given back to "US". How much did Goldman pay you to write this?
When Goldmans trading platform software was stolen this week, an assistant US attorney said, "The bank (Goldman Sachs) has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." So are we to believe that GS did not use it the same way?
Our monetary policy under the Federal Reserve was the root cause. Policy efforts under both Republican & Democrat administrations also contributed to the meltdown but only one institution has the authority to control monetary policy & the amount of currency in circulation, the privately owned central bank known as our Federal Reserve.
Read about Fractional Reserve Banking, Read about how the Fed granted permission to all the major wall street investment firms (most of which are now failed) in 2004 to increase their reserve ratios (the amount of cash banks must retain vs. the amount of loans they can extend).
Ignorance is bliss!
You (and I) caused it. By overspending and overborrowing to support a lifestyle you (and I) couldn't afford. The banks and fed may have facilitated the issue, but fundamentally a (spending) addict can't place all the blame on the banks (drug dealers).
the final arbiter is price…goldman's stock price is almost back to pre-debacle levels…thus, goldman today stands as one of the few winners in this financial mess…what they probably did was use a ploy that good chess players use—the gambit…goldman initially loses a little to eventually win plenty…taibbi is much closer to the truth than the author of this article.
Personal responsibility is so out of style that it escapes consideration when looking for the cause of the financial crisis. If borrowers would have fulfilled their promises to pay back loans, the entire 'crisis' would never have happened.
Even if this obvious primary cause is discounted, the next reason in line for blame is the pressure on banks from the government to make risky loans. There again, the crisis would not have happened if this never occurred.
The two reasons I mention set the stage for the activities that the article suggests are the causes. This is like blaming the museum for the heist because the artwork on its walls was too beautiful. There could have been many problems with the security system and staff but lets not forget the people who stole the paintings.
The article also states that government intervention prevented the bankruptcy of “every major American financial institution”. While intervention may have averted this outcome, these companies should have been allowed to fail because this is what they deserved. New and smarter financial institutions would have emerged to take their place.
The pain the Country would have felt because of this has simply been pushed into the future. It will be more intense and prolonged when it is finally felt than if it were dealt with now.
I find it ironic that the problem of people borrowing money they cannot afford to pay back is thought to be solved by the government doing the same, just on an immensely larger scale.
I swear this article was written with the help of someone at Goldman Sachs. Such a shame that most journalism now serves the Corporatocracy.
Smells like damage control Mr. Futrelle. Most people are morally decent and unable see that there do exist villainous people/institutes/think tanks/groups who DO conspire and carry out insidious acts such as what we currently experience. Goldman is a piece of the puzzle…..
"When does the person who was told that they could afford a $500,000 house on $45k/yr salary, no docs required, look in the mirror and take some responsibilty?"
People will always try to scam the system. Banks are supposed to lend responsibly, check income, credit worthiness, etc. just like I had to do for five mortgages in the '90s. If banks put out the word that they will give money to anyone who walks in the door regardless of credit or income, I would blame the banks for their stupidity and for the regulators for being asleep on the job.
There are so many flaws in the structure and regulation of the financial system that many institutions and individuals have been scamming it. Goldman Sachs is more prominent because of its political connections, past and present. It is power, greed and immorality on display.
Actually, bubbles are generally caused by lots of stupid people doing the same stupid thing repeatedly until it fails.
You are misreading the Taibbi article,
which is not suprising, he finds specific facts against Goldman such as their selling of subprime while they were shorting it with
derivatives, the IPO scandals of taking companies public that had no track record, they are implicated in the fixing commodity price by under cutting regulation etc etc, on and on,
you never mention these facts because it gets in the way of you smear campaign of Taibbi, someone who put this scandal in plain English so that masses can understand it, but you guys
at CNN know who your Master are, its the elite who have used you and paid for you to lie the pubic again and again. You so called financial journalism its a complete joke no one
but a moron would ever believe anything CNN money said. Instead you refer to an article that will find no blame to the Goldman or anyone else, it was karma I guess. Your monopoly
media of endlessly repeating lies make me sick
one choice missing from your poll (to use the ever-popular MJ vernacular of the day)– "the man in the mirror"
when does the person who was sold that they could afford a $500,000 house on $45k/yr salary, no docs required, look in the mirror and take some responsibilty?
We should pay attention to this fellow Taibbi and not dismiss him so quickly.
If Goldman was present and involved in every bubble including 1929, that's a pretty strong correlation and not just a coincidence.
Whether they caused the bubbles or not is a question of causation. But, if my memory serves me correctly, there were a lot of Goldman people inside the government when these bubbles happened (Rubin, Paulson, and the list goes on …).
The real problem may be that we have too many bankers inside the government, whether or not they're working for Goldman. And, their screw-ups are costing a LOT of lost money.
We should check this story out fully.
"as trapped as anyone else in the bubble he helped create"
That means he has only 1 way – He goes the way of Madoff, instead of garnering a helpless image.
Jerks and Villains are equally to blame; one creates the problem – and the other enables it.