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Matt Taibbi’s Class Warfare is Truthy and Depressing

By posted at 6:01 am on November 26, 2010 11

coverIn his new book, Griftopia, Matt Taibbi tries to portray America as a thieve’s paradise, where foreign and domestic moneyed interests fleece the rest of us in the open and we are powerless to resist.  Taibbi covers politics and, more recently, the financial crisis for Rolling Stone, and Griftopia is primarily a compilation of his recent feature stories.  It’s an entertaining but ultimately frustrating and unsatisfying read, long on adjectives and invective but sorely lacking depth of analysis or reporting.  Ultimately, Taibbi undermines himself: his assertions of fact, even regarding core points, often are colored past reality and occasionally are simply, provably wrong, discrediting the wild-eyed conclusions he reaches based on them.

covercoverPrior to the financial crisis, some of Taibbi’s best-known work, collected in previous books, involved politics and campaigns.  This work, in tone as much as subject matter, implicitly invokes that of Hunter S. Thompson, who famously covered politics for Rolling Stone during the Nixon years, although Taibbi’s book on the 2004 campaign, Spanking the Donkey, pales in comparison to Fear and Loathing on the Campaign Trail ’72, probably the high point of Thompson’s career.  Thompson’s stories often were filled with foul-mouthed, fractured and impossibly weird or vile allegations regarding its subjects, expanding or exploding reality to reflect some otherwise-inaccessible greater Truth.  There doesn’t seem to be any greater Truth beyond the paranoia of Taibbi’s furious language, but in these Glenn Beck and Stephen Colbert days, what does it matter?  Fear sells.

The emotional core of the book lies in a rant that closes a chapter describing the creation and progression of the mortgage crisis:

At the tail end of all this frantic lying, cheating, and scamming on all sides, … the final result is that we all ended up picking up the tab, subsidizing all this crime and dishonesty and pessimism as a matter of national policy.

We paid for this instead of a generation of health insurance, or an alternative energy grid, or a brand-new system of roads and highways. With the $13-plus trillion we are estimated to ultimately spend on the bailouts, we could not only have bought and paid off every single subprime mortgage in the country (that would only have cost $1.4 trillion), we could have paid off every remaining mortgage of any kind in this country — and still have had enough money left over to buy a new house for every American who does not already have one.

But we didn’t do that, and we didn’t spend the money on anything else useful, either. Why? For a very good reason. Because we’re no good any more at building bridges and highways or coming up with brilliant innovations in energy or medicine. We’re shit now at finishing massive public works projects or launching brilliant fairy-tale public policy ventures like the moon landing.

What are we good at? Robbing what’s left. When it comes to that, we Americans have no peer.

Well, if he’s right, then America is truly Fucked.  Time to hit the road, bub.  Luckily for us, however, Taibbi is dead wrong about the $13 trillion figure, and, as a result, America may not be hopeless after all.

Sure, it’s been reported that the total potential cost of the bailouts is $12.8 trillion, true, but the crucial word there is “potential.”  $12.8 trillion is the potential total cost if every dollar the government pledged or loaned were actually paid out and never paid back.

But that’s not what’s happening.  Much of the money loaned already has been repaid, and on some of the constituent “bailouts,” the government actually may make a profit.  And, likewise, much of the money used to guarantee assets will never be tapped.  This is a good thing for America.  And it’s also a distinction that a professional reporter who has been knee-deep in the financial crisis should have recognized before proclaiming the moral bankruptcy of the country.  It would be a devastating passage if it weren’t fundamentally untrue.

Look, I agree with Taibbi, at least in spirit, on some issues he raises, but if you’re going to be caustic and depressing and a brutal buzzkill I think you have a responsibility to make sure your facts are correct, especially a fact that forms the crux of both the chapter it ends and of the central depressing accusations of the entire book.  And because the subjects Taibbi covers – securitized mortgage instruments, the commodity markets, etc., — are hyper-complex, I had trouble putting any faith in Taibbi’s understanding and descriptions of the details once I noticed that he whiffed on a few of those that I already understood.

Taibbi carries his populist flag throughout the book, and in the final chapter acknowledges proudly that class warfare is one of his goals while asserting that those who panned his Goldman Sachs article were with Them in this great battle, and not Us, claiming that the criticisms of his piece amounted to nothing more than a defense of “class privilege.”  Like so much else in Griftopia, this is fun and entertaining, sure, but lazy.  Had Taibbi’s article been about “class privilege” and seriously wrestled with the structure and institutions of the American economy that led to the problems he identified, it explicitly or implicitly would have suggested solutions.  Instead, Taibbi aims for the fattened ducks operating the levers of power rather than the levers themselves: he seems quite proud, for example, of publicly calling Goldman chief Lloyd Blankfein a “motherfucker.”

Griftopia portrays America as a ghetto being looted by evil drug lords, but a simpler explanation of the financial crisis, to me at least, seems to be the economics of laziness and arrogance.  Laziness in entering a trade that is working (here, seemingly safe mortgage bonds) not because it makes sense but because it is easy and arrogance in assuming that you will know precisely when to get out.  And the evidence from the last bubble (and the tech bubble before that) seems to be that as good as these Wall Street folks may have been at riding a massive wave to shore, few knew how to pull off before the wave broke.

coverOn Griftopia’s back cover, Taibbi’s publishers praise him via pull quote as supplanting Michael Lewis as the “King Writer of Wall Street.”  Not so fast.  Lewis’s most recent book, The Big Short, walks the reader through the last few years of economic crisis with a level head and enough detail to allow a reader to understand how decisions that almost brought down the world could have seemed so common sense at the time to those who made them.  Lewis’s book handles the complexity of the financial world with both grace and precision.  Taibbi’s approach is closer to a drunken swagger: seemingly smooth, but not necessarily precise.

To be fair, Griftopia and The Big Short serve different audiences.  Taibbi’s book will be of greatest utility to those who know exactly what they think but aren’t quite sure why.  Lewis’s book well serves everyone else.

Bonus Link: Stockholm Syndrome: Two Books on High Finance





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11 Responses to “Matt Taibbi’s Class Warfare is Truthy and Depressing”

  1. Bill
    at 12:56 am on November 27, 2010

    How about you read some information from William K. Black, the regulator brought in to fix our last big banking scandal, the Savings and Loan crisis of the 80’s?

    Here is what a tough regulator who had over 1,000 fraudulent bankers thrown in prison a couple of decades ago has to say about our current crisis:

    “There was fraud at every step in the home finance food chain: the appraisers were paid to overvalue real estate; mortgage brokers were paid to induce borrowers to accept loan terms they could not possibly afford; loan applications overstated the borrowers’ incomes; speculators lied when they claimed that six different homes were their principal dwelling; mortgage securitizers made false reps and warranties about the quality of the packaged loans; credit ratings agencies were overpaid to overrate the securities sold on to investors; and investment banks stuffed collateralized debt obligations with toxic securities that were handpicked by hedge fund managers to ensure they would self destruct.

    That homeowners would default on the nonprime mortgages was a foregone conclusion throughout the industry — indeed, it was the desired outcome. This was something the lending side knew, but which few on the borrowing side could have realized. ”

    Continued here: http://www.huffingtonpost.com/william-k-black/post_1115_b_772820.html

    Our most recent Financial Crisis was not just a result of laziness and arrogance.

  2. bulfinch
    at 5:06 am on November 27, 2010

    Mr Teslik, you really need to do better research before playing the critic. For starters, the “we might make a profit from TARP” line is a little stale. “TARP only represents a slice (~10%) of the total federal funds disbursed to the financial sector through the bailout. The back door bailouts provided to Wall St by the Fed are where the real action is.

    The Wall St Bailout Cost Table by Sourcewatch is worth checking out — essentially a peer reviewed running tally of the total bailout outlay to date, updated monthly. It notably excludes the automotive bailouts or any initiatives for job creation.

    http://www.sourcewatch.org/index.php?title=Total_Wall_Street_Bailout_Cost

  3. James
    at 10:27 am on November 28, 2010

    “And because the subjects Taibbi covers – securitized mortgage instruments, the commodity markets, etc., — are hyper-complex, I had trouble putting any faith in Taibbi’s understanding and descriptions of the details once I noticed that he whiffed on a few of those that I already understood.”

    If you are going to make a statement like that you might have to show at least a few more errors in fact contained in the book. You mention only the bailout figure – which you erroneously conflate with only the TARP money – but then fail to illustrate any other colorings or errors in fact. If, in fact, the assertions you make are true, this review needs to be much longer and have more research included.

  4. nicolas notabene
    at 11:38 am on November 28, 2010

    Sounds like sour grapes Derek. The fact that you start off the review by putting Glenn Beck and Stephen Colbert on the same plane was very telling. Oh, too bad that Taibbi is a “brutal buzzkill” in these promising economic times where people are getting booted from their houses because of Wall Street greed! God forbid he actually call a spade a spade. If you want someone to paint the crisis in daisies and roses you’re better off getting your financial analysis from the Wall Street Journal or CNBC.

  5. Derek Teslik
    at 5:45 pm on November 28, 2010

    Heh. I guess I touched a nerve with some folks. One dude on twitter added me to his “asshole list.” Fair enough. But, bulfinch and James, do either of you argue that Taibbi was accurate with his statement that the U.S. government will spend more than $13 Trillion on the bailouts? The Sourcewatch table that Bulfinch linked quotes indicates a current total outstanding of less than $2 Trillion.

    Look, nicolas, yes, call a spade a spade, but if you’re going to do so, get your facts right. I’m disappointed with Taibbi because this country needs fearless journalists to dive into these subjects and emerge unafraid, doing what Taibbi tried to to but failed. This is all too Important to take the shortcuts that litter Griftopia.

  6. James
    at 9:22 am on November 29, 2010

    In reference to my comment/yours above –

    The article you linked to in your review is specifically about the TARP program (more specifically about AIG). That is the program that is projected to perhaps make a profit. It is also a small part of the 13 tril. total current outlay. So you did indeed conflate the TARP program with the sum total of government fiscal actions taken thus far.

    And to my original point, you again say there are “shortcuts that litter Griftopia”, but still don’t say what they are. You need to come up with more than one example to make a statement like that or else it’s a shortcut.

    p.s. Looking at the sourcewatch table, it’s fucking hilarious that the Toxic Asset Purchases of Bear Sterns (RIP) and AIG are called Maiden Lane I,II & III. I totally want the job of naming these programs.

  7. James
    at 9:42 am on November 29, 2010

    Also, not to elide the question you asked, his phrasing of “$13-plus trillion we are estimated to ultimately spend on the bailouts” doesn’t seem crazy at all.

    According to that Sourcewatch table, we currently have dispersed nearly 5 tril. in funds, have nearly 2 tril. outstanding and have nearly 14 tril. more at risk of going out. That seems to put us right in that ball park. This is not a static event, it’s ongoing, and we still have (probably) more rounds of quantitative easing and toxic asset repurchases left, seeing as there are still a year or two of foreclosures directly related to this to wade through. Also, re-looking at the Sourcewatch table, I don’t think that easing (to attempt to “combat deflation”) is included on that chart and I definitely think you can call it a linked cost since it is specifically designed to shore up credit and provide liquidity as a result of the crisis two years ago and it certainly ends up being a straight up bank subsidy anyway as it involves treasury bonds purchased by the government from investment banks at inflated prices. It now stands at 2 tril. + 600 bill. (November 2010), so it seems like we’re getting there.

  8. Clifford
    at 2:11 pm on December 17, 2010

    “Much of the money loaned already has been repaid, and on some of the constituent “bailouts,” the government actually may make a profit…”

    Question, Derek: You accuse Matt of crafting conclusions out of thin air sans adequate corroboration. But where are you getting YOUR info from in order to pass the foregoing blanket remark off as fact??

    Just curious…

  9. gen.sabine
    at 12:13 pm on December 20, 2010

    You object to Taibbi’s rhetoric when he states that the money we spent on TARP, pledges and no-interest loans to banks could have easily bought every sub-prime mortgage in the country, or bought national health care whole parcel for a decade, or built an alternative energy grid….but to counter, you state that TARP will probably turn us a small, dozen-to-100 billion profit….and that much of the 12.8 trillion we’ve promised won’t end up being paid out.

    The true cost of the bailout is hard to calculate, but in terms of LOSSES to taxpayers, we’ve unquestionably LOST enough in this 12.8 trillion array of programs to cover any of the projects Taibbi cites. None of them cost more than a couple of trillion. And if we had bought the sub-prime mortgages, we’d be leveraged to handle both the current foreclosure crisis and any subsequent crises related to these assets. The fed will likely achieve a bare fraction of the value of these mortgages by purchasing the MBS-es, whereas lien modifications would have brought them much more.

    You seem to be saying that because these crimes were the culmination of a thousand ethical “paper cuts”, with hoards of desk jockeys making banal, slightly self-serving decisions and ceding personal responsibility for poor decisions over a decade, that invective isn’t called for and there are no villains. But every single one of those weasels was a villain. The corporate environment is a villain. Human psychology is a villain. The people at the top of the chain reaping hundreds of millions RIGHT NOW as a result of these phenomena- are villains. How is it unfair or unseemly to call spades spades?

    It appears you published this article before the Fed finally complied with the courts and disclosed details of this 12.8 trillion package. Have you reviewed those details? Do they qualify your thinking at all, or do you see the potential for us to get all of that 12.8 trillion back?

  10. Peter Herring
    at 4:09 pm on January 10, 2011

    “Griftopia portrays America as a ghetto being looted by evil drug lords, but a simpler explanation of the financial crisis, to me at least, seems to be the economics of laziness and arrogance.” I actually wish you were right, and that were so – but you’re wrong, and it aint so. By odd circumstances, I was in Phoenix during the mortgage madness, and had two interesting connections: one, a fellow who ran a mortgage company, so I got to see the process from the inside out, witness the “fog a mirror, get a loan” jokes and the actual drooling of the LO’s; two, a fellow who had been chief legal council for Morgan Stanley during the Asian collapse. So I got an education in how that was done, and a glimpse into the folks who have the amoral psyches that allow them to do it – whatever else you can say about them, they’re not lazy. When the crisis hit, I spent a day using what I knew to drive research about what happened. So reading Taibbi, as I’m now doing, is not all news to me – and, according to my background and research, he pretty much got it right. And as for the securitized instruments, CDOs, CDS’s, he’s pretty much on. Whereas you don’t give a single instance in your “review” of where he’s off.
    I will read Michael Lewis’ book next. And I actually wish that Taibbi had written his book less sensationally, and with a few less cuss words – because, as a result, I think a lot of people who should read it won’t. I detest that he talks about how we’re no longer good at actually creating anything (end of Hot Potato chapter) because it’s demoralizing and simply not true -as an entrepreneur I take offense. But someone has to get this stuff out there in a manner that folks who fall asleep when the word economic is mentioned will read. For anyone who knows even a percentage of what goes on behind the financial/government doors, the endless spew of BS from our politicians, both left and right, is nothing more than bad entertainment on the Titanic. If we don’t understand what, and who, really moves things, we’re going to keep thinking that oil and food crises come from shortages, and that we fight wars for freedom – we’re going to believe the play. And every few years, we’re going to elect more puppets from the right or left (anachronisms), which will have zero effect on the direction this country, and the world, are going.

  11. BAC Bank of America Corp - Stocks and ETFs Trading - Page 9
    at 8:08 pm on March 14, 2012

    […] Couldn't find a better to place the link for this IMO, well written article by Matt Taibbi from the Rolling Stone Mag. Bank of America: Too Crooked to Fail | Politics News | Rolling Stone here's a well written article about matt taibbi. The Millions : Matt Taibbi’s Class Warfare is Truthy and Depressing […]

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