[ExI] Financial Crisis - What really happened

BillK pharos at gmail.com
Fri Feb 19 10:58:53 UTC 2010

Rolling Stone magazine has published Matt Taibbi's latest rant against
the Wall Street takeover of the US economy. Even if you feel like
nit-picking on some of the detail, the overall broad sweep explanation
of what Wall Street has done is remarkably clear.  It explains why
Main Street USA is broke, unemployed and homeless while Wall Street is
paying unbelievable sums of money in bonuses as though the crash never


Some quotes:

the financial crisis of 2008 was very much caused by a perverse series
of legal incentives that often made failed investments worth more than
thriving ones. Our economy was like a town where everyone has juicy
insurance policies on their neighbors' cars and houses. In such a
town, the driving will be suspiciously bad, and there will be a lot of
In fact, the Fed became not just a source of emergency borrowing that
enabled Goldman and Morgan Stanley to stave off disaster — it became a
source of long-term guaranteed income. Borrowing at zero percent
interest, banks like Goldman now had virtually infinite ways to make
money. In one of the most common maneuvers, they simply took the money
they borrowed from the government at zero percent and lent it back to
the government by buying Treasury bills that paid interest of three or
four percent. It was basically a license to print money — no different
than attaching an ATM to the side of the Federal Reserve.
To sum up, this is what Lloyd Blankfein meant by "performance": Take
massive sums of money from the government, sit on it until the
government starts printing trillions of dollars in a desperate attempt
to restart the economy, buy even more toxic assets to sell back to the
government at inflated prices — and then, when all else fails, start
driving us all toward the cliff again with a frank and open
endorsement of bubble economics. I mean, shit — who wouldn't deserve
billions in bonuses for doing all that?


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