Book review: Griftopia

GRIFTOPIA
By: Matt Taibbi, 2010
Spiegel and Grau, 250 p.

If you’re like me, the whole economic meltdown of 2008 elicited a few general reactions:

1. Wow, this sucks.

2. How the hell did it happen?

But really, you didn’t wonder so much about the second part, because you innately knew there were a bunch of unethical, greedy bastards behind the whole thing. You just wondered what the heck they’d done, exactly.

But when the punditocracy started talking about credit default swaps and mortgage-backed securities, your eyes glazed over. Because no one either had the time or the skill to explain in layman’s terms what these financial instruments were.

So none of us really knew how much we’d been screwed by the Wall Street banks (with the complicity of our fine representatives in Washington, D.C.).

And then along comes Matt Taibbi.

Taibbi is a contributing editor for Rolling Stone and, quite frankly, the best political journalist they’ve had since Hunter Thompson.

And for a taste of Taibbi’s gift for explaining things, this is how he defines a credit default swap.

“A credit default swap is just a bet on an outcome. It works like this: Two bankers get together and decide to bet on whether or not a homeowner is going to default on his $300,000 home loan. Banker A, betting against the homeowner, offers to pay Banker B $1,000 a month for five years on one condition: if the homeowner defaults, Banker B has to pay Banker A the full value of the home loan.

… So Banker B has basically taken 5-1 odds that the homeowner will not default. This is gambling, pure and simple.”

In his opening chapter, Taibbi scorchingly lays out his premise, which I’ve tried to condense here:

“There are really two Americas, one for the grifter class, and one for everybody else. In everybody-else land, the world of small business and wage-earning employees, the government is something to be avoided, an overwhelming, all-powerful entity whose attentions usually presage some kind of financial setback, if not complete ruin. In the grifter world, however, government is a slavish lapdog that the financial companies … use as a tool for making money.

The grifter class depends on these two positions getting confused in the minds of everybody else. They want the average American to believe that what government is to him, it is also to JPMorgan Chase and Goldman Sachs.

… The insurmountable hurdle for so-called populist movements is having the nerve to attack the rich instead of the poor. Even after the rich almost destroyed the entire global economy through sheer unrestrained greed and stupidity, we can’t shake the peasant mentality that says we should go easy on them, because the best hope for our collective prosperity is in them creating wealth for us all.

… Far from taking care of the rest of us, the financial leaders of America and their political servants have seemingly reached the cynical conclusion that our society is not worth saving and have taken on a new mission that involves not creating wealth for all, but simply absconding with whatever wealth remains. They don’t feed us. We feed them.”

If Taibbi had then proceeeded to hammer me mercilessly with variations of the above, I may have soon tired of the book. But Taibbi is not a one-trick pony. It’s not one’s professed political affiliation which draws his ire so much as the backroom dealing, the shortsightedness and the naked opportunism.

He rips President Barack Obama and former Chief of Staff Rahm Emanuel just as vehemently as Goldman Sachs’ bankers in his denunciation of the Obamacare legislation, which he calls “The Trillion Dollar Band-Aid.”

“Obamacare,” writes Taibbi, “had been designed as a coldly cynical political deal: massive giveaways to Big Pharma in the form of monster subsidies, and an equally lucrative handout to big insurance in the form of an individual mandate granting a few already-wealthy companies 25-30 million new customers who would be forced to buy their products at artifically inflated, federally protected prices.”

Matt Taibbi is a gifted writer and journalist, and it’s refreshing to read someone who digs underneath the platitudes to try and tell you the whole story. I had no idea how important the McCarran-Ferguson Act of 1944 was or how it continues to impact the regulation (or lack thereof) of the insurance industry today and why the failure of Obamacare is really the failure of politicians to not take on the insurance lobby and amend this legislation.

Pick up a copy of Griftopia at your favorite local bookstore.