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

by Matt Taibbi

  For instance, it eventually passed a measure repealing the so-called right of first refusal. Previously, when the county wanted to place a housing unit in a place like Elmsford, what it would do is take a piece of county land and sell it to developers. Residents of the town of Elmsford, however, would in the past have always had a right to buy the property themselves.

  “But they took that away,” Bock explained to me later. “They keep chipping away.”

  Another example: In the past, when a town was mandated to build affordable housing with HUD money by the county, there had always been room to try to set aside that housing for local residents. Bock cited the example of a housing project in his home town of Greenburgh. The building was built on the site of what had been a two-story halfway house that had been a source of much local controversy owing to constant complaints about crime, crack vials on neighboring lawns, and so on. The building was ultimately torn down amid promises from the county that the new building would be used either as an old folks’ home or as housing for municipal employees of the town.

  But HUD ultimately balked at that plan. New rules were instituted that eliminated any local input into the process. Now, if municipal employees of a town like Greenburgh or Elmsford want to be placed in HUD housing in their town, they had to put their names into a lottery system with applicants from all over the state. “So now you don’t have a say in who gets to live in these units either,” Bock explains.

  To the Tea Partiers, this is a simple case of taxation without representation. They look at the timeline of stories like this—first a federal settlement, then the right of first refusal removed, then local control over the application process terminated—and they imagine a grim endgame.

  “I think this is all headed for eminent domain,” says Bock, by phone, a month after the Tea Party meeting.

  “So you think,” I ask him, “that ultimately the government is just going to seize properties in towns like Elmsford willy-nilly and plant affordable housing units there?”

  “Yes,” he says.

  Is that crazy? Sure, a little. But given what’s happened in the last few years in Westchester, it’s not completely crazy. It’s not in the same ballpark of craziness, for instance, as thirteen million Tea Partiers believing the Obama health care plan—a massive giveaway to private profit-making corporations—is the first step in a long-range plan to eliminate the American free enterprise system and install a Trotskyite dictatorship. And the reason the former is less crazy than the latter is that they don’t need to read 1,200-page legislative tomes to know the issue; all they have to do is look out the window and see their world changing in ways they can’t control.

  That’s why the Tea Party has responded to the financial crisis with such confusion. Most of the Tea Partiers view national politics through the prism of what they have seen, personally, in their own communities: intrusive government and layer upon layer of regulatory red tape. When Bock talks about the process for building the new apartment units, for instance, he laughs.

  “I always tell people, rule of thumb, once the project is approved, you’re still two years away from the first shovel hitting the ground,” he says. “It just takes that long to get all the permits and the paperwork done.”

  I ask him if experiences like that would color his opinion on, say, the deregulation of the financial services industry in the late nineties. “Absolutely,” he says. When I bring up the repeal of the Glass-Steagall Act (which prevented the mergers of insurance, investment banking, and commercial banking companies) and the 2000 law that deregulated the derivatives industry, Bock demurs. I’m not sure he knows what I’m talking about, but then he plunges forward anyway. In his opinion, he says, the deregulation of Wall Street was the right move, but it was just implemented too quickly.

  “I think it needed to be done more gradually,” he says.

  This is how you get middle-class Americans pushing deregulation for rich bankers. Your average working American looks around and sees evidence of government power over his life everywhere. He pays high taxes and can’t sell a house or buy a car without paying all sorts of fees. If he owns a business, inspectors come to his workplace once a year to gouge him for something whether he’s in compliance or not. If he wants to build a shed in his backyard, he needs a permit from some local thief in the city clerk’s office.

  And, who knows, he might live in a sleepy suburb like Greenburgh where the federal government has decided to install a halfway house and a bus route leading to it, so that newly released prisoners can have all their old accomplices come visit them from the city, leave condom wrappers on lawns and sidewalks, maybe commit the odd B and E or rape/murder.

  This stuff happens. It’s not paranoia. There are a lot of well-meaning laws that can be manipulated, or go wrong over time, or become captive to corrupt lawyers and bureaucrats who fight not to fix the targeted social problems, but to retain their budgetary turf. Tea Party grievances against these issues are entirely legitimate and shouldn’t be dismissed. The problem is that they think the same dynamic they see locally or in their own lives—an overbearing, interventionist government that seeks to control, tax, and regulate everything it can get its hands on—operates the same everywhere.

  ———

  There are really two Americas, one for the grifter class, and one for everybody else. In everybody-else land, the world of small businesses 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 that will be the major players in this book 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. To sustain this confusion, predatory banks launch expensive lobbying campaigns against even the mildest laws reining in their behavior and rely on carefully cultivated allies in that effort, like the Rick Santellis on networks like CNBC. In the narrative pushed by the Santellis, bankers are decent businessmen-citizens just trying to make an honest buck who are being chiseled by an overweening state, just like the small-town hardware-store owner forced to pay a fine for a crack in the sidewalk outside his shop.

  At this writing, Tea Partiers in Tennessee have just launched protests against Republican senator Bob Corker for announcing his willingness to work with outgoing Democrat Chris Dodd on the Consumer Financial Protection Agency Act, a bill that is pitifully weak in its specifics but at least addresses some of the major causes of the financial crisis—including mandating a new resolution authority section that would help prevent companies from becoming too big to fail and would force banks to pay for their own bailouts in the future. The same Tea Partiers who initially rallied against bailouts of individual homeowners now find themselves protesting against new laws that would force irresponsible banks in the future to bail themselves out.

  How was this accomplished? Well, you have CNBC’s Larry Kudlow—a classic trickle-down capitalist from the cufflinks-and-coke-habit school that peaked in the 1980s—suddenly wrapping his usual Wall Street propaganda in Tea Party rhetoric. He angrily warns that this new CFPA bill will result in a hated liberal viceroy—in this case, Elizabeth Warren, chair of the Congressional Oversight Panel for TARP and one of the few honest people left in Washington—regulating small businesses to death.

  “The Fed itself apparently would have no say on CFPA rule-making, which is sort of like giving Elizabeth Warren her own wing at the central bank in order to make mischief. At a minimum, she’ll need grown-up supervision,” Kudlow sneered on his blog. “Many smaller community bankers and non-bank Main Street lenders—such as stores with layaway plans, check-cashing companies, pay-day lenders, and even car dealers—could be put out of business by Elizabeth Warren.”

  These are al
l lies, but they fly, maybe because they are lies, and comforting in their way. The fact that an unapologetic fat cat like Kudlow—one who talks and acts and dresses like a fat cat—can, when convenient, throw on the mantle of a populist revolt and get away with it reassures us that for all the talk about pitchforks and revolutions and fighting back, the Tea Party movement remains in thrall to the authority of the rich and powerful. Which renders the so-called movement completely meaningless.

  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 their 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. That’s the idea at the core of trickle-down economics and the basis for American economic policy for a generation. The entire premise—that the way society works is for the productive rich to feed the needy poor and that any attempt by the latter to punish the former for their excesses might inspire Atlas to shrug his way out of town and leave the rest of us on our own to starve—should be insulting to people so proud to call themselves the “water carriers.” But in a country where every Joe the Plumber has been hoodwinked into thinking he’s one clogged toilet away from being rich himself, we’re all invested in rigging the system for the rich.

  What’s accelerated over the last few decades, however, is just how thoroughly the members of the grifter class have mastered their art. They’ve placed themselves at a nexus of political and economic connections that make them nearly impossible to police. And even if they could be policed, there are not and were not even laws on the books to deal with the kinds of things that went on at Goldman Sachs and other investment banks in the run-up to the financial crisis. What has taken place over the last generation is a highly complicated merger of crime and policy, of stealing and government. 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 in our hollowed-out economy. They don’t feed us, we feed them.

  The same giant military-industrial complex that once dotted the horizon of the American states with smokestacks and telephone poles as far as the eye could see has now been expertly and painstakingly refitted for a monstrous new mission: sucking up whatever savings remains in the pockets of the actual people still living between the coasts, the little hidden nest eggs of the men and women who built the country and fought its wars, plus whatever pennies and nickels their aimless and doomed Gen-X offspring might have managed to accumulate in preparation for the gleaming future implicitly promised them, but already abandoned and rejected as unfeasible in reality by the people who run this country.

  But our politics—even in the form of “grassroots” movements represented by Tea Partiers (who line up to support a narcissistic, money-grubbing hack like Palin) or MoveOn (who rallied their followers behind a corporation-engorging health care bill)—is silent about this. Instead, it grounds our new and disturbing state of affairs in familiar, forty-year-old narratives. The right is eternally fighting against Lyndon Johnson; the left, George Wallace. When the Republicans win elections, their voters think they’ve struck a blow against big government. And when a Democratic hero like Barack Obama wins, his supporters think they’ve won a great victory for tolerance and diversity. Even I thought that.

  The reality is that neither of these narratives makes sense anymore. The new America, instead, is fast becoming a vast ghetto in which all of us, conservatives and progressives, are being bled dry by a relatively tiny oligarchy of extremely clever financial criminals and their castrato henchmen in government, whose main job is to be good actors on TV and put on a good show. This invisible hive of high-class thieves stays in business because when we’re not completely distracted and exhausted by our work and entertainments, we prefer not to ponder the dilemma of why gasoline went over four dollars a gallon, why our pension funds just lost 20 percent of their value, or why when we do the right thing by saving money, we keep being punished by interest rates that hover near zero, while banks that have been the opposite of prudent get rewarded with free billions. In reality political power is simply taken from most of us by a grubby kind of fiat, in little fractions of a percent here and there each and every day, through a thousand separate transactions that take place in fine print and in the margins of a vast social mechanism that most of us are simply not conscious of.

  This stuff is difficult to unravel, often fiendishly so. But those invisible processes, those unseen labyrinths of the Grifter Archipelago that are indifferent to party affiliation, are our real politics. Which makes sense, if you think about it. It should always have been obvious that a country as rich and powerful as America should be governed by an immensely complex, labyrinthine political system, one that requires almost unspeakable cunning and wolfish ruthlessness to navigate with any success, and which interacts with its unwitting subject peoples not once every four years but every day, in a variety of ways, seen and unseen. Like any big ship, America is run by people who understand how the vessel works. And the bigger the country gets, the fewer such people there are.

  America’s dirty little secret is that for this small group of plugged-in bubble lords, the political system works fine not just without elections, but without any political input from any people at all outside Manhattan. In bubble economics, actual human beings have only a few legitimate roles: they’re either customers of the financial services industry (borrowers, investors, or depositors) or else they’re wage earners whose taxes are used to provide both implicit and explicit investment insurance for the big casino-banks pushing the bubble scam. People aren’t really needed for anything else in the Griftopia, but since Americans require the illusion of self-government, we have elections.

  To make sure those elections are effectively meaningless as far as Wall Street is concerned, two things end up being true. One is that voters on both sides of the aisle are gradually weaned off that habit of having real expectations for their politicians, consuming the voting process entirely as culture-war entertainment. The other is that millions of tenuously middle-class voters are conned into pushing Wall Street’s own twisted greed ethos as though it were their own. The Tea Party, with its weirdly binary view of society as being split up cleanly into competing groups of producers and parasites—that’s just a cultural echo of the insane greed-is-good belief system on Wall Street that’s provided the foundation/excuse for a generation of brilliantly complex thievery. Those beliefs have trickled down to the ex-middle-class suckers struggling to stay on top of their mortgages and their credit card bills, and the real joke is that these voters listen to CNBC and Fox and they genuinely believe they’re the producers in this binary narrative. They don’t get that somewhere way up above, there’s a group of people who’ve been living the Atlas dream for real—and building a self-dealing financial bureaucracy in their own insane image.

  2

  The Biggest Asshole in the Universe

  BAD POLITICAL SYSTEMS on their own don’t always make societies fail. Sometimes what’s required for a real social catastrophe is for one or two ingeniously obnoxious individuals to rise to a position of great power—get a one-in-a-billion asshole in the wrong job and a merely unfair system of government suddenly turns into seventies Guatemala, the Serbian despotate, the modern United States.

  Former Federal Reserve chief Alan Greenspan is that one-in-a-billion asshole who made America the dissembling mess that it is today. If his achievements were reversed, if this gnomish bug-eyed party crasher had managed to convert his weird social hang-ups into positive accomplishments, then today we’d be calling his career one of the greatest political fairy tales ever witnessed, an unlikeliest of ugly ducklings who through sheer
pluck, cunning, and determination made it to the top and changed the world forever.

  But that isn’t what happened. Greenspan’s rise is instead a tale of a gerbilish mirror-gazer who flattered and bullshitted his way up the Matterhorn of American power and then, once he got to the top, feverishly jacked himself off to the attentions of Wall Street for twenty consecutive years—in the process laying the intellectual foundation for a generation of orgiastic greed and overconsumption and turning the Federal Reserve into a permanent bailout mechanism for the super-rich.

  Greenspan was also the perfect front man for the hijacking of the democratic process that took place in the eighties, nineties, and the early part of the 2000s. During that time political power gradually shifted from the elected government to private and semiprivate institutions run by unelected officials whose sympathies were with their own class rather than any popular constituency. We suffered a series of economic shocks over the course of those years, and the official response from the institutions subtly pushed the country’s remaining private wealth to one side while continually shifting the risk and the loss to the public.

  This profoundly focused effort led to an intense concentration of private wealth on the one hand and the steady disenfranchisement of the average voter and the taxpayer on the other (who advanced inexorably, headfirst, into the resultant debt). But the true genius of this blunt power play was that it was cloaked in a process that everyone who mattered agreed to call the apolitical, “technocratic” stewardship of the economy.

  Greenspan was the deadpan figurehead who as head of the “apolitical” Federal Reserve brilliantly played the part of that impartial technocrat. His impartiality was believable to the public precisely because of his long-demonstrated unscrupulousness and political spinelessness: he sucked up with equal ferocity to presidents of both parties and courted pundit-admirers from both sides of the editorial page, who all blessed his wrinkly pronouncements as purely nonpartisan economic wisdom.