Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

  No, it wasn’t until a bailout program a tiny fraction of the size of the total bailout was put forward by a new president—a black Democratic president—that the Tea Party really exploded. The galvanizing issue here was not so much the giving away of taxpayer money, which had been given away by the trillions just months earlier, but the fact that the wrong people were receiving it.

  After all, the target of the Obama program was not Sarah Palin’s We, not the people who “do some of the hardest work,” but, disproportionately, poor minorities. Santelli used language similar to Palin’s when he launched into his televised rant on the floor of the Chicago Board of Trade.

  “Why don’t you put up a website to have people vote on the Internet as a referendum to see if we really want to subsidize the losers’ mortgages!” he barked, addressing Barack Obama. “Or would we like to at least buy cars and buy houses in foreclosure and give them to people that might have a chance to actually prosper down the road, and reward people that could carry the water instead of drink the water?”

  That was the money shot. After that iconic line, a random trader from the CBOT sitting next to Santelli piped in.

  “That’s a novel idea!” he said, sarcastically.

  It’s important to understand the context here. The Chicago Board of Trade is where commodities like futures in soybeans, corn, and other agricultural products are traded. The tie-clad white folks Santelli was addressing had played a major role in bidding up the commodities bubble of the summer of 2008, when prices of commodities—food, oil, natural gas—soared everywhere, despite minimal changes in supply or demand.

  Just a year before Santelli’s rant, in fact, riots had broken out in countries all over the world, including India, Haiti, and Mexico, thanks to the soaring costs of foods like bread and rice—and the big banks themselves even admitted at the time that the cause for this was a speculative bubble. “The markets seem to me to have a bubble-like quality,” Jim O’Neill, chief economist for Goldman Sachs, had said during the food bubble. And Goldman would know, since its commodities index is the most heavily traded in the world and it is the bank that stands to gain the most from a commodities bubble.

  Santelli was addressing a group of gamblers whose decision to bid up a speculative bubble had played a role in a man-made financial disaster causing people around the world to literally starve.

  And these were the people picked to play the role of fed-up “America” in the TV canvas behind Santelli during his “spontaneous” rant. When CNBC anchor Joe Kernen quipped that Santelli’s audience of commodities traders was like “putty in your hands,” Santelli balked.

  “They’re not like putty in our hands,” he shouted. “This is America!”

  Turning around, he added: “How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills? Raise your hand.”

  At this rhetorical question, “America” booed loudly. They were tired of “carrying water” for all those lazy black people!

  “President Obama,” Santelli raved on. “Are you listening?”

  Santelli went on to marshal forces for the first Tea Party. Here’s how it went:

  SANTELLI: You know, Cuba used to have mansions and a relatively decent economy. They moved from the individual to the collective. Now they’re driving ’54 Chevys, maybe the last great car to come out of Detroit.

  KERNEN: They’re driving them on water, too, which is a little strange to watch.

  SANTELLI: There you go.

  KERNEN: Hey Rick, how about the notion that, Wilbur pointed out, you can go down to two percent on the mortgage …

  SANTELLI: You could go down to minus two percent. They can’t afford the house.

  KERNEN: … and still have forty percent, and still have forty percent not be able to do it. So why are they in the house? Why are we trying to keep them in the house?

  SANTELLI: I know Mr. Summers is a great economist, but boy, I’d love the answer to that one.

  REBECCA QUICK: Wow. Wilbur, you get people fired up.

  SANTELLI: We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m gonna start organizing.

  From there the crowd exploded in cheers. That clip became an instant Internet sensation, and the Tea Party was born. The dominant meme of the resulting Tea Parties was the anger of the “water carriers” over having to pay for the “water drinkers,” which morphed naturally into hysteria about the new Democratic administration’s “socialism” and “Marxism.”

  The Tea Party would take up other causes, most notably health care, but the root idea of all of it is contained in this Santelli business.

  Again, you have to think about the context of the Santelli rant. Bush and Obama together, in a policy effort that was virtually identical under both administrations, had approved a bailout program of historic, monstrous proportions—an outlay of upwards of $13 to $14 trillion at this writing. That money was doled out according to the trickle-down concept of rescuing the bad investments of bank speculators who had gambled on the housing bubble.

  The banks that had been bailed out by Bush and Obama had engaged in behavior that was beyond insane. In 2004 the five biggest investment banks in the country (at the time, Merrill Lynch, Goldman, Morgan Stanley, Lehman Brothers, and Bear Stearns) had gone to then–SEC chairman William Donaldson and personally lobbied to remove restrictions on borrowing so that they could bet even more of whatever other people’s money they happened to be holding on bullshit investments like mortgage-backed securities.

  They were making so much straight cash betting on the burgeoning housing bubble that it was no longer enough to be able to bet twelve dollars for every dollar they actually had, the maximum that was then allowed under a thing called the net capital rule.

  So people like Hank Paulson (at the time, head of Goldman Sachs) got Donaldson to nix the rule, which allowed every single one of those banks to jack up their debt-to-equity ratio above 20:1. In the case of Merrill Lynch, it got as high as 40:1.

  This was gambling, pure and simple, and it got rewarded with the most gargantuan bailout in history. It was irresponsibility on a scale far beyond anything any individual homeowner could even conceive of. The only problem was, it was invisible. When the economy tanked, the public knew it should be upset about something, that somebody had been irresponsible. But who?

  What the Santelli rant did was provide those already pissed-off viewers a place to focus their anger away from the financial services industry, and away from the genuinely bipartisan effort to subsidize Wall Street. Santelli’s rant fostered the illusion that the crisis was caused by poor people, which in this county usually conjures a vision of minorities, no matter how many poor white people there are, borrowing for too much house. It was classic race politics—the plantation owner keeping the seemingly inevitable pitchfork out of his abdomen by pitting poor whites against poor blacks. And it worked, big-time.

  It’s February 27, 2010, Elmsford, New York, a very small town in Westchester County, just north of New York City. The date is the one-year anniversary of the first Tea Parties, which had been launched a week after the original Santelli rant.

  Here in Westchester, the local chapter—the White Plains Tea Party—is getting together for drinks and angst at a modest Italian restaurant called the Alaroma Ristorante, just outside the center of town.

  My original plan here was to show up and openly announce myself as a reporter for Rolling Stone, but the instant I walk into this sad-looking, seemingly windowless third-class Italian joint, speckled with red-white-and-blue crepe paper and angry middle-aged white faces, I change my mind.

  I feel like everyone here can smell my incorrect opinions. If this were a Terminator movie there would be German shepherds at the door barking furiously at the scent of my liberal arts education and my recent contact with a DVD of Ghost World.

  Along the walls the local Tea Party leaders have lined up copies of a
ll your favorite conservative tomes, including Glenn Beck’s Arguing with Idiots (the one where Beck appears, har har, to be wearing an East German uniform on the cover) and up-and-comer Mark Levin’s Liberty and Tyranny: A Conservative Manifesto. I’m asked to sign some sort of petition against Chuck Schumer, and do, not mentioning to this very Catholic-looking crowd that my beef with Schumer dates back to his denouncing me for having written a column celebrating the death of the pope years ago.

  The crowd is asked to gather in the main dining room for speeches and a movie. I stupidly sit in the front row, next to the TV—meaning that if I want to leave early, I’ll have to get up and walk past at least two dozen sets of eyes. Once seated, I pick up a copy of the newspaper that’s been handed out to each of us, a thing called the Patriot. The headline of the lead story reads:

  BLACK HISTORY MONTH SHOULD BE ABOUT BLACK HISTORY

  The author of this piece, a remarkable personage named Lloyd Marcus, identifies himself at the bottom of the page as follows:

  Lloyd Marcus (black) Unhyphenated American, Singer/Songwriter, Entertainer, Author, Artist and Tea Party Patriot.

  Marcus is the cultural mutant who wrote the song that’s now considered the anthem of the Tea Party. If you haven’t heard it, look it up—the lyrics rock. The opening salvo goes like this:

  Mr. President, your stimulus is sure a bust. It’s a socialistic scheme

  The only thing it will do is kill the American dream

  You wanna take from achievers, somehow you think that’s fair

  And redistribute to those folks who won’t get out of their easy chair!

  Bob Dylan, move on over! In any case, the Marcus piece in the Patriot rips off the page with a thrilling lede.

  “I’ve often said jokingly,” he writes, “that Black History Month should more accurately be called ‘white people and America suck’ month.”

  The argument is that Black History Month dwells too much on the downside of white America’s relationship to its brothers of African heritage, slavery and torture and the like, and ignores the work of all the good white folk through the years who were nice to black people (did you know it was a white teacher who first suggested George Washington Carver study horticulture?).

  According to Marcus, all this anti-white black history propaganda is undertaken with the darkly pragmatic agenda of guilting the power structure into offering up more of our hard-earned tax dollars for entitlement programs.

  I look around. You’d have to be out of your fucking mind to write, as Marcus did, that Black History Month is a ploy to lever more entitlement money out of Congress, but the ho-hum nonresponse of the white crowd reading this bit of transparent insanity is, to me, even weirder.

  There have been a great many critiques of the Tea Party movement, which is often described as a thinly disguised white power uprising, but to me these critiques miss the mark. To me the most notable characteristic of the Tea Party movement is its bizarre psychological profile. It’s like a mass exercise in narcissistic personality disorder, so intensely focused on itself and its own hurt feelings that it can’t even recognize the lunacy of a bunch of middle-class white people nodding in agreement at the idea that Black History Month doesn’t do enough to celebrate nice white people.

  As this meeting would go on to demonstrate, the Tea Party movement is not without some very legitimate grievances. But its origins—going back to Santelli’s rant—are steeped in a gigantic exercise in delusional self-worship.

  They are, if you listen to them, the only people in America who love their country, obey the law, and do any work at all. They’re lonely martyrs to the lost national ethos of industriousness and self-reliance, whose only reward for their Herculean labors is the bleeding of their tax money for welfare programs—programs that of course will be consumed by ungrateful minorities who hate America and white people and love Islamic terrorists.

  There’s a definite emphasis on race and dog-whistle politics in their rhetoric, but the racism burns a lot less brightly than these almost unfathomable levels of self-pity and self-congratulation. It would be a lot easier to listen to what these people have to say if they would just stop whining about how underappreciated they are and insisting that they’re the only people left in America who’ve read the Constitution. In fact, if you listen to them long enough, you almost want to strap them into chairs and make them watch as you redistribute their tax money directly into the arms of illegal immigrant dope addicts.

  Which is too bad, because when they get past the pathetic self-regard and start to articulate their grievances, they are rooted in genuine anxieties about what’s going on in this country. In the case of these Westchester County revolutionaries, the rallying cry was a lawsuit filed jointly by a liberal nonprofit group in New York City and the Department of Housing and Urban Development against the county. The suit alleged that Westchester falsified HUD grant applications, asking for federal grant money without conforming to federal affirmative action guidelines designed to push desegregation.

  The county lost the suit and as a result was now going to be forced by the federal government to build seven hundred new subsidized low-income housing units in the area. Whereas subsidized housing in the county had historically been built closer to New York City, the new ruling would now place “affordable housing” in places like Elmsford whether Elmsford wanted it or not.

  The first speaker is a fireman and former Republican candidate for county legislator named Tom Bock. Bock isn’t a member of the Tea Party (when I talked to him later on he was careful to point that out) but he is sympathetic to a lot of what they’re about. Asked to address the crowd, he launches into the local issue.

  “We should never have settled this lawsuit,” says Bock, a burly man in jeans and a cop’s mustache. “I don’t think Westchester County is racist. There may be people who are racist, but I don’t think that anyone is going to say to anyone who can afford a house, you can’t move here because you’re black or Hispanic. Nobody’s going to say you can’t move into Westchester because of race.

  “What they say,” Bock goes on, “is you can’t move into Westchester because of money.”

  The crowd cheers. The odd thing about Bock’s speech is that, throughout the course of this lawsuit, nobody ever really accused the citizens of Westchester of being racist. There was never any grassroots protest against racism or segregation in the county. The entire controversy was dreamed up and resolved behind closed doors by lawyers, mostly out-of-town lawyers. What they accused the government of Westchester of was having an inadequate amount of zeal for submitting the mountains of paperwork that goes hand in hand with antiquated, Johnson-era affirmative action housing programs.

  The Westchester housing settlement that resulted from that suit is the kind of politics that would turn anyone into a Tea Partier—a classic example of dizzy left-wing meddling mixed with socially meaningless legal grifting that enriches opportunistic lawyers with an eye for low-hanging fruit.

  What happened: A nonprofit organization called the Anti-Discrimination Center based out of New York City stumbled upon a mandate in federal housing guidelines that required communities applying for federal housing money to conduct studies to see if their populations were too racially segregated. They then latched on to Westchester County, which apparently treated this mandate as a formality in applying for federal grants—they hadn’t bothered to conduct any such studies—and launched a lawsuit.

  How important this bureaucratic oversight was (“They forgot to check a box, basically,” was how one lawyer involved described it) is a matter of debate, but the county was, undeniably, technically in violation. The Obama administration joined the center in the lawsuit, and the county’s lawyers, who understood they were busted, advised the community that it had no choice but to walk the legal plank. They settled with the government.

  So far, so good. But then things went off the rails. The resulting settlement was a classic example of nutty racial politics. It was white lawyers suin
g white lawyers (the lead counsel for the Anti-Discrimination Center, Craig Gurian, is a bald, bearded New Yorker who looks like a model for a Nation house ad) so that low-income blacks and Hispanics living close to New York City in places like Mount Vernon and Yonkers, none of whom were ever involved in the suit in any way, could now be moved to subsidized housing in faraway white bedroom suburbs like Mount Kisco and Croton-on-Hudson.

  Meanwhile, for so heroically pushing for all this aid to very poor minorities, all the white lawyers involved got paid huge money. The Anti-Discrimination Center got $7.5 million, outside counsel from a DC firm called Relman, Dane & Colfax got $2.5 million, and EpsteinBeckerGreen, the firm that defended Westchester County, got paid $3 million for its services. “There wasn’t a single minority involved with the case,” says one lawyer who worked on the suit.

  Meanwhile, just $50 million was ultimately designated for new housing, and even that money might not all be spent, since it is dependent in part upon whether or not the county can find financing and developers to do the job.

  “It could all not come off,” says Stuart Gerson, one of the lawyers for Westchester County. “Everybody’s approaching it in good faith, but you never know.”

  This Westchester case smells like a case of sociological ambulance chasing, with a bunch of lawyers surfing on the federal housing code to a pile of fees and then riding off into the sunset. It’s not hard to see where the creeping paranoia that’s such a distinctive feature of the Tea Party comes from. After Westchester County agreed to this settlement, it kept making moves that limited the rights of the local communities to have a say about where these subsidized housing units would be located.