In summer 2009, Rolling Stone published an article titled “The Great American Bubble Machine” by contributing editor Matt Taibbi. Its first two lines are worth reprinting here verbatim: “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
The article pissed some people off. Most notably, it pissed off Goldman Sachs. Why would such a powerful, faceless behemoth be so bothered by a piece tucked away inside an aging rock ’n’ roll magazine? Because in the world of finance, reputation is everything.
But after the financial catastrophes that nearly brought this country to its knees in 2008, the American people deserved some clarity, an explanation that could be understood. It still does. With Griftopia: Bubble Machines, Vampire Squids, And The Long Con That Is Breaking America, Taibbi gives that article a book-length spin, sifting through every popped bubble and unraveled Ponzi scheme to find more complex tales of thievery.
On the eve of the midterm elections, Taibbi spoke with The A.V. Club to dismantle the myths of Ayn Rand and Alan Greenspan, express admiration for Elizabeth Warren and Orson Welles, explain how short-term thinking is short-changing our country, and reveal why he might still have a tiny shred of hope leftover for Barack Obama and America.
The A.V. Club: There’s an epilogue in Griftopia where the hope portion should rear its head, but it never arrives. Where is the hope?
Matt Taibbi: You know, it’s funny. We discussed that, and we had a chapter where I was supposedly going to discuss what could be done, and that sort of thing. I wrote something up, and I don’t think I was believable when I wrote that chapter about the good news. [Laughs.] So we ended up just leaving that out. I’m probably not as pessimistic as I make it out to be in this book. I think some of this can be overcome, but on the other hand, I wanted people to be a little shocked at the scale of the problem.
AVC: Early on in the book, you admit to not being an economist, writing “Like most Americans, I don’t know a damn thing about high finance… None of us understands this shit.” How did you develop enough of an understanding of these issues to write this book?
MT: I think the process is very similar to learning a language. A lot of what this is… It’s a lot of jargon. If you’ve ever studied a language, at some point, you’re just able to speak it. I did a couple of these stories early on for Rolling Stone, and I was very cautious about what I wrote about, because I didn’t want to venture into any areas that I didn’t understand. But I think somewhere along the line, I talked to enough people that I got the basics down, at least. There’s still so much stuff that goes on that is so arcane and so difficult and so complicated, you really have to take a crash course every time you venture into any particular corner of the financial universe. Even people, for instance… If you talk to a commodities trader, he’s not going to understand foreclosure. All of these things are highly specialized and difficult. You’re never going to be a complete and total expert on any of this, but I feel at least I have the basics down.
AVC: At one point, you write, “We live in an economy that is immensely complex and we are completely at the mercy of the small group of people who understand it.” Is this why President Obama appointed National Economic Council Director Larry Summers and Treasury Secretary Timothy Geithner to his administration, and re-nominated Fed chairman Ben Bernanke—people closely connected to the players who arguably created the crisis? Is it necessary to hire the maze-makers because they’re the only ones who can navigate us back out of the maze?
MT: [Laughs.] Well, that’s the argument that they will make. If you listened to some of the coverage of Obama’s appointments, there were a lot of people on Wall Street who said, “Oh, you have to hire people and nominate people who work in the business, or who are from the business, because nobody else understands it. We’re the experts.” I think that’s not as true as they make it out to be. This stuff is not so difficult that ordinary people can’t get it. There are certainly plenty of people in Washington who are not from the financial-services industry who have gotten to the point where they really do get it. There are some politicians out there who are very qualified to do this stuff, who don’t have experience working at Goldman Sachs or Citigroup, or something like that. I think there’s some truth to that, but I also think that’s an argument they make to prevent outsiders from getting into the club.
AVC: You call Elizabeth Warren “one of the few honest people left in Washington.” Does her recent appointment as special advisor to the Consumer Financial Protection Bureau give her enough power to affect some significant changes?
MT: Not yet, no. But what’s great about Elizabeth Warren is that she is completely literate in all of this stuff, which is a rarity among Washington politicians. There are some senators who have been excellent on a lot of this material—Ted Kaufman is an example, Sherrod Brown, Bernie Sanders is actually pretty good on a lot of this stuff. But Elizabeth Warren, she taught this stuff at Harvard, she knows it inside and out, and that’s really what’s needed. I think one of the things people are disappointed about with Barack Obama is that what’s really needed with all this material is someone with great communication skills to explain it all to voters and people out there. Obama seemed, to me, perfectly suited to do that job. He’s a great communicator, but he didn’t make the argument. He didn’t explain Wall Street to people after he got elected. So we need somebody like Elizabeth Warren, I think, to do that. And she’s able to do that.
AVC: In terms of being disappointed with Barack Obama, in the book, you don’t seem to give him any credit for his passage of health-care legislation. In fact, you accuse him of flat-out lying and imply that as a candidate, he not only knew he wouldn’t be able to accomplish what he claimed he could, he didn’t even want to.
MT: I had an argument with some of the folks at Rolling Stone about this, when we wrote about this topic, because it’s probably an unprovable assertion either way. My impression of it is that they never believed they were really going to follow through on a lot of these promises. I think if it were just one or two campaign promises he didn’t follow through on, I might’ve given him more credit, but it just seems like every single one of them ended up falling by the wayside. And they didn’t fight particularly hard, either. The manner by which these promises disappeared, to me, was so disappointing. When I was writing that chapter, I was just particularly disappointed in the way it all unraveled. The whole business of giving up the right for the state to negotiate bulk prices for Medicare, the drug re-importation from Canada—they bargained that away in a meeting with PHRMA, in a backroom meeting with [pharmaceutical company lobbyist] Billy Tauzin, a guy they made a [negative] campaign ad about! That just told me a lot about what the administration was all about.
AVC: You write in the book, “This was a party leadership that was not really interested in actually fixing the health care problem…” You’re implying that there was never any genuine motivation to create a viable health-care system for the country, and that it was all politics. But wasn’t that an eventuality that Obama and his administration came to realize over time? Don’t you think the president at some level truly wanted to reform health care?
MT: Yeah, sure. I see what you’re saying. I think you’re right in the sense that what they said to themselves was, “We want to do what we can to fix the problem.” Right? But my quibble with them, I guess, would be about what was possible and what wasn’t. I know—because I talked to some of the people who were in the meetings on the Hill when all of these proposals were being hammered out—for instance, that Rahm Emanuel basically openly said, “I almost don’t care what’s in the bill. I just want to pass something that’s called ‘health care.’” He was not even shy about saying that. Barack Obama probably thought, “I want to pass health care.” But I think he had a sense that he could only do it if he did it a certain way. I just don’t see how you can try to pass health care and call it meaningful if you don’t eliminate the antitrust exemption. My sense was that they didn’t think it was politically possible to take that on, so they didn’t.
AVC: That antitrust exemption—or the McCarran-Ferguson—you call it “one of the worst pieces of legislation in American history,” and say it “just might be a more shameful chapter in our legal history than the Jim Crow laws.” Isn’t there some implicit agreement that you’re not allowed to say any legislation is worse than Jim Crow?
MT: Yeah, I know, I know. [Laughs.] I had been doing the health-care stuff for so long, by the time I wrote that chapter, I was probably… That’s probably a little hyperbolic, but it is an awful, awful thing. And it never gets any press. I think that’s what is so frustrating to me.
AVC: There’s an entire chapter in Griftopia devoted to systematically dismantling the character of former Fed chairman Alan Greenspan. It’s called “The Biggest Asshole In The World.” Maybe we should just start with that title.
MT: [Laughs.] There are three things going on with Greenspan, three reasons why I thought it was worthwhile doing that chapter, and doing it in that way. He had a specific role, as a politician, in the sense that he was one of the primary people pushing deregulation—and a specific kind of deregulation—that ended up being a major factor in the crisis. So there was that. Then there was the second thing, which was his role as the head of the Fed, which basically allowed Wall Street to bail itself out every time it got into a speculative disaster. And then the third thing was, he was really a symbol of the kind of mindset, the ideology, that sort of Ayn Randian belief in complete and total deregulation, and the cult of the producer, and all of that stuff. The superficial pushing of that ideology, on the one hand. On the other hand, the sort of backdoor use of the government as an insurance policy and welfare program for the financial-services industry. Those contradictions were so perfectly symbolized in Greenspan, I just thought he was the ideal way to start out the whole discussion of what Wall Street was all about. He had a specific role as a villain, and he also had a sort of general role as an ideological leader of everything that went wrong.
AVC: Oh, and you also call him “a lying whore.”
MT: [Laughs] You keep throwing out all these terrible things that I’ve said back to me. Now I’m beginning to feel bad.
AVC: You also spend a lot of time criticizing the cult of Ayn Rand and her acolytes. Greenspan was a devotee, heavily influenced by her books, and even spent time socializing with her. You, on the other hand, characterize Rand as “a bloviating, arbitrary, self-important pseudo-intellectual” and call Atlas Shrugged an “incredibly long-winded piece of aristocratic paranoia.” How influential are Rand’s ideas in the financial world, and why is that a problem?
MT: I think [she] is very influential, even if people aren’t specifically referencing [her books]. I just hear the Randian philosophy constantly when I talk to Wall Street people, this whole excuse that “Everything we do is okay, because we are the producers. We’re the productive members of society. Everybody else is a parasite, therefore what’s good for Goldman Sachs is good for America.” This whole mindset is so deeply ingrained in a lot of people in this particular part of America that I don’t think there is any way you can talk about modern Wall Street without talking about these ideas.
You know, maybe it’s not Ayn Rand in particular that’s responsible for it, but the ideas that are in her books are incredibly widespread. They’re important in the sense that a lot the things these people do they couldn’t do if they didn’t have some kind of intellectual justification for it. If you’re going to sell $30 million of worthless mortgage-backed securities to some pension fund in Minnesota, and you know that’s going to bankrupt some janitor who’s been saving up his pension his entire life, you can’t do that if you don’t think it all works out well in the end for everybody. This provided the moral cover for people to do that stuff, so that’s why I thought it was worth writing about.
AVC: Reading about some of these traders and financiers and their scams, you begin to sense that money is only part of what drives them. When they operate, they operate almost like military minds, with the numbers never really connecting to actual people’s lives.
MT: That’s a completely accurate impression. Have you ever seen the movie The Third Man?
AVC: A long time ago.
MT: That scene where Orson Welles, they’re up in the Ferris wheel looking at the little people below, and he’s like, “If I could give you X amount of money every time one of those dots stopped moving, would you really tell me to keep my money?” That’s what these guys are; they don’t see the dots. The money is so easy, they’re so completely divorced from consequence. It’s an incredible rush for these guys. Talking about the thrill of making these trades and doing these billion-dollar deals is enormous, but they can’t even think about the consequences of it, because they will instantly go insane if they do. I think their minds get really, really weird after being in that environment for a long time.
For instance, I talked to this one guy who was sitting in one of those meetings where they’re trying to sell the Pennsylvania Turnpike to a bunch of Arabs. There was a guy at a desk next to him who was involved in the Chicago parking-meter deal who actually went and bought a Chicago parking meter and stuck it on his desk as a trophy. [Laughs.] He got a kick out of the fact that he bilked the city of Chicago out of a billion dollars! You have to be a pretty strange person to get off on something like that.
AVC: In the book, you always come back to this idea of “short-term” thinking as the new norm. Whether it’s the mayor of Chicago selling off the city’s parking meters to a financial group from the United Arab Emirates, or Goldman Sachs essentially winning a staring contest against AIG—all of it is in the moment, concerned with now, never about the old long-term ideas of saving, pensions, or what investing implicitly once meant—
MT: Right, exactly. That short-term thinking, what’s so amazing about it is how widespread it is. It requires everybody to have that same mindset, not just these guys who work at AIG, for instance, who bet half a trillion dollars on mortgages knowing it’s eventually going to blow up their company. But they’ll get a huge bonus this year. It’s not just guys like that, it’s these politicians who work in the city of Chicago who know they’re doing a terrible deal, who know they’re going to lose their city billions of dollars in the end, but it’s going to get them through this year in the budget. It’s expedient for 10 minutes. After that, it’s someone else’s problem. I guess that’s one of the themes I was trying to get to in this book. One of the reasons this stuff didn’t happen before, I think, is that there was just a little bit more, I don’t know, patriotism, or decency, or whatever. I’m sure the opportunities to do this kind of stuff were there, but people just didn’t do them before. That change is pretty chilling.
AVC: You relay the travails of a non-English-speaking Mexican immigrant making $9 an hour who was sold a $615,000 house. The loan went through because the lender falsified the documents without the buyer’s knowledge. To play devil’s advocate: Why is someone who makes $9 an hour even shopping for a house? Yes, there are predatory lenders, but nobody who makes just above minimum wage can possibly think they can afford a six-figure loan. Is this particular type of homebuyer to blame on some level too?
MT: On some level, sure. But I think the common misconception about all of this is that the reason all of these people were suddenly buying these houses was because the government was forcing banks to lend to all of these people. Exactly the opposite was true. These securitization practices were suddenly making it possible for banks to take that guy’s worthless loan and chop it up and disguise it as a triple-A rated security and sell it off to some fund in China or Holland. It’s basically like taking oregano and selling it as weed to somebody. They just found a way to do that, and as soon as they figured out they could get away with taking all these bad loans and selling them off to people who didn’t know what it was, then they suddenly started looking for people to give those loans to.
I didn’t put this in the book, but at the height of this crisis, there were literally guys from lenders like Countrywide going out into the street and 7-Elevens in the middle of the night looking for people to lend houses to. The tail had begun to wag the dog at that point. There was such an unbelievable demand for these assets, these loans, that these banks were just constantly ordering more and more and more because they knew they could ship it off somewhere else.
And, yeah, the people who took these loans? They were oftentimes being really stupid and oftentimes being irresponsible. But on the other hand, the one thing I will say in defense of a lot of these people is that there was even an incentive for people to buy houses and then flip them. Even Alan Greenspan suggested this was sort of a good idea. All of this easy credit was making it possible for people to get these properties and at the time, they were all increasing in value immediately, so why not buy a house and hold on to it for three months and flip it for $20,000 [profit] a little while later? It was irresponsible for people to do that, but it wasn’t nuts. The other thing, taking a billion dollars worth of subprime mortgages that you know are bad mortgages and selling them off to some Dutch bank as safer than treasuries, that’s a crime. That’s not just a bad investment decision, that’s a crime.
AVC: Your observation that “organized greed always defeats disorganized democracy” seems particularly deflating on the eve of the interim elections. Have elections become completely irrelevant?
MT: No, it’s not completely irrelevant. That’s hyperbolic. Elections aren’t irrelevant. For the purposes of this stuff—the rules of the financial-services industry and how the economy works—elections just don’t decide a whole lot, because 90 percent of it is done in these rule-making sessions that take place outside of Congress. The few things that are debated in Congress, the two parties tend to be more or less in line on most of the issues. What we saw this summer with the financial-reform bill that got passed—they basically didn’t touch about 90 percent of the stuff that made up this crisis. So, yeah, obviously elections are important, because a lot of other issues get decided through elections, but on this particular stuff, the stuff involving money and how the economy works? There isn’t a whole lot of change, no matter which way they vote, which is the really depressing thing.
AVC: There seem to be rallies every other week on the Mall in Washington, whether it’s Tea Partiers or progressives, yet they’re generally directed at fringe issues that don’t seem to particularly matter in the grand scheme. Even if both sides are misguided, the energy for movements and marches is very real and ready to be tapped. Will this so-called “disorganized democracy” ever find a way to focus its energies at the right things and accomplish anything?
MT: It’s hard, right? I think the first thing that has to happen is that people have to get it a little bit more. Then they’ll start asking for specific things. The one thing that leads me to believe that that will eventually happen is that people are all over the place coming into personal conflict with Wall Street and the economic system in a way that will teach them about what’s going on. Whether their houses are being foreclosed on, or whether they’re being wiped out because of credit-card debt, or whether you’re that janitor in Minnesota who lost his pension because the state invested mortgage-backed securities, or you’re in Jefferson County, Alabama, and you’re paying a sewer bill that’s 1200 percent more than it was two years ago, because your city got involved in an interest-rate swap deal with JP Morgan.
Constantly when I’m traveling around the country I run into people who understand this stuff more just because they’ve been personally wiped out by it in some way. Eventually, there’s going to be some politician who is going to be able to talk about this stuff that makes sense to people, and there will be a lot of people who will respond instantly because they’ve already been forced to learn it, for very unpleasant reasons. It’ll eventually come around, it’s just going to take a while, or it’s going to take another disaster before it happens.
AVC: Were you optimistic when Barack Obama was elected?
MT: Oh, yeah.
AVC: But it’s safe to say, that enthusiasm has drastically waned for you.
MT: Yeah. I was very disappointed. The funny thing is, a lot of people who I talked to who were sources for me on all of these stories, they were also very hopeful. They thought, “Wow, this whole thing just blew up on all of us, and there’s no way that is going to happen and they’re not going to step in and make big changes.” I think even people in the business were really shocked that there weren’t sterner measures after 2008. So, yeah, I was definitely disappointed. I was very inspired when he won. I don’t know about you, but I thought he was going to be something different, and he wasn’t. On this stuff, anyway.
AVC: On the one hand, you can make an honest argument that Obama was handed two wars and a financial crisis, and to get them into at least a holding pattern is some kind of an achievement. On the other hand, you can say he squandered an opportunity to take the immediate emergency of financial ruin to make significant, long-term, historic changes.
MT: I can’t say which one, but I talked to a U.S. senator who was literally grinding his hand against his head in frustration because he was saying, “After 2008, that was the teaching moment. After Obama got elected, the whole world had blown up, he could’ve just stood in the ruins like Bush after 9/11 and laid down the law at that point.” Also, the Democratic Party—that was the moment they could have made a great argument about everything that had gone wrong in the last 20 years with the changes in regulation, and they completely blew off that opportunity. Instead, they just brought in the same old crew. Not only did they bring in Wall Street guys, but they also brought in guys who had directly been responsible for this mess, all these Bob Rubin people. [Robert Rubin was Secretary of the Treasury under Bill Clinton, and has worked for both Goldman Sachs and Citigroup. —ed.] That was incredibly disappointing. The excuse that he inherited Bush’s mess would be a valid one, but he brought in Timothy Geithner and re-nominated Ben Bernanke, who were the two chief architects of Bush’s bailout. So how do you campaign against Bush’s policies when you bring back those guys?
AVC: Is this a ship the Obama administration can turn around in the next two years?
MT: Maybe. There have been a few signs that they’ve gotten a little bit of religion on it. After Scott Brown got elected [to the Senate], they suddenly went on this rampage about telling Wall Street they can’t be giving billion-dollar bonuses with bailout money, and that sorta thing. And they got tougher on a few of the things in the Dodd-Franks bill this year. I think they see… They maybe see that there’s political hay to be made with this, but we’ll see if they actually do that in two years.