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Mar. 3 2010 - 11:40 am | 20,939 views | 7 recommendations | 176 comments

Santelli on Predatory Lending: ‘You can’t cheat an honest man’

Look at about the 5-minute mark of this video — Janet Tavakoli debating Rick Santelli about predatory lending. You basically have a whole panel of CNBC goons pooh-poohing the idea that predatory lending took place, setting up the inevitable revisionist history that the 2008 crash was caused by individual homeowners borrowing beyond their means.

My favorite part of this comes roughly at the six-minute mark. Tavakoli has just deftly explained how a lot of the predatory practices worked — people with limited financial literacy were presented with long and complicated mortgage deals, and told they would have a fixed payment in perpetuity or a guaranteed re-finance, or were nailed by fraudulent appraisals. Then she mentioned the big one, the fact that investment banks then took all these mortgages and with eyes wide open securitized them and sold them off as worthy investments to suckers on the other end of the chain.

While she’s saying all this stuff, Santelli, who is one of the fathers of the Tea Party movement, is shaking his head furiously, video-scoffing at everything she’s saying. When he finally does get a chance to speak, this is what he says:

Here’s my problem with this. It takes two to tango. You can’t cheat an honest man.

You can’t cheat an honest man? What the fuck does that mean?

This whole scene sort of encapsulates what’s wrong with the Tea Party movement. The movement, and let’s admit this, has some of its roots in legitimate grievances about government waste and some not-entirely-inaccurate observations about what’s left of the American welfare state. Of course what resonates most with the suburban whites who mostly make up the Tea Party are stories about minorities and immigrants using section 8 housing, food stamps, Medicaid, TANF and other programs, with the Obama stimulus being for them a symbol of this ongoing government largess. The heat of the Tea Party movement comes from the racial frustrations that actually exist out there, in the real world outside New York and LA, as urban expansion and immigration increasingly throw white and nonwhite communities together, with white Tea Party types more and more often blowing gaskets over increased crime rates, declining school standards, and mislaid or wasted tax revenue.

That this perception that minorities are the prime or sole consumers of government entitlement programs is absurdly inaccurate — white people, for instance, are overwhelmingly the largest nonelderly recipients of Medicaid, making up 42.8% of the program’s rolls nationwide, compared to 22.2% for blacks and 27.9% for Hispanics — is beside the point. The point is that the Tea Party is built largely on this narrative of “personal responsibility,” where the central demons are unwed black and Hispanic mothers and absent black and Hispanic fathers, who are, let’s face it, not uncommon characters in the American melodrama.

Which is another subject for another time, but let’s just say this: the Tea Party movement contains a lot of people who are far more impressed by what they can see with their own eyes than with what, for instance, they read about. I’ve been to Tea Party events where global warming was dismissed by speakers who, without irony, pointed to the fact that there was snow on the ground outside. And while very few people have ever actually seen a CDO manager or a Countrywide executive, or were aware if it when they saw them, the Tea Party folks sure as hell have seen who their neighbors in foreclosure are.

The Fox/CNBC types have very cannily latched on this narrative to rewrite the history of the financial crisis. They know that Tea Partiers will go for any narrative that puts blame on poor (and especially poor minority) homeowners, because the idea of poor blacks and Hispanics borrowing beyond their means fits seamlessly with their world view. But this is a situation where poor minorities were really incidental to a much larger fraud scheme that culminated in a welfare program — the bank bailouts — that dwarfs the entire “entitlement” infrastructure. But the millions of people who are actually in the Tea Party movement seem to have absolutely no idea that their so-called leaders, the Santellis of their world, are shilling for tax cheats and crooks and welfare bums of the sort they would despise (perhaps even more than their black and Hispanic neighbors), if they could actually see them.

But thanks to people like these CNBC goons, they don’t see them, and probably won’t. The further we get from the crisis, the muddier all of this stuff is going to get.

p.s. I seem to be getting a lot of mail from Ron Paul supporters about this, claiming that I’m overlooking the early Ron Paul tea parties and suppressing his message.  I actually like Ron Paul and have said nothing but nice things about him. I talk to people in his office regularly. But the Ron Paul tea parties and these post Feb-2009 Tea Parties are two different things. Certainly the current Tea Partiers see it that way. While these folks may have lifted some of the Paulian themes, they’re just physically different people. They’re mainstream Palin supporters, and the reason I find them ridiculous is because I was covering these people while the bailouts were happening and remember what was actually on their minds back then. Does anyone remember what the cause of the day was when the AIG bailout took place? It was the uproar from Palin supporters about Obama’s “lipstick on a pig” comment.

The reason I’ve always respected the Ron Paul people is that, even though I don’t always agree with them, they’re intellectually consistent and motivated by actual policy issues. These Teabagger types on the other hand are just a giant herd of video sheep being jerked around by snickering DC-New York types, who are very skillfully playing on their cultural paranoia and their economic and racial frustrations. When they were told to flip out about Obama’s “lipstick”  comment, they did. When they were told to flip out about the bailouts, they did. I’m not saying that some of these people weren’t frustrated about the bailouts, to the extent that they even knew about them, before Obama got elected. But they did not coalesce into a mass movement against them until part II of the bailout was passed under Obama’s watch, and one should note also that their keynote speaker in Nashville a few weeks ago, Palin, was a bailout supporter.

The Paul people were upset about deficit spending and Fed corruption throughout and ardently opposed Bush’s policies throughout his presidency. These Teabaggers did not. They were the people inside the rope-lines at McCain and Romney and Rudy events, complaining about “those people” consuming social services money, while the Paul people with their protest placards were physically barred from coming near the events. I must have seen that dynamic a dozen times during the campaign. So to all those Paul people, I hear you. I’m not trying to say you weren’t on these issues beforehand. What I’m saying is, this new Tea Party thing, it’s different from your protests, not necessarily because the message is so different, but because of two things. One, it was inspired by major-network media figures. Two, the people at the protests are overwhelmingly different people. They’re dupes; the Paul movement is more like a real grass-roots organization.


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  1. collapse expand

    The part of the narrative that seems to be continually left out of the Santelli screed is the fact that there are lending laws in many states that charge the lender with verifying the applicant’s ability to repay the loan. I know the lenders once practiced this “due diligence” because when I purchased my first house many years ago, I put down 50%, had the other half in investments, and had one of the better jobs in the town I lived in, yet it took a month before the loan was approved. Of course, in those days the lender expected to be paid back because they had not thought of the scam. IMO, by citing the “irresponsible” angle, it gives the impression that “mortgage fraud” can only be committed by the borrower.
    I would also like for these people to look at the defaulters in order: 1. The speculators who were flipping houses, 2. The ones who took ARM’s with the expectation of an easy re-fi which didn’t happen. 3. The ones who lost their jobs and could no longer afford payments. 4. The ones who saw their property values plummet and made a decision to stop paying on a property that was worth a fraction of what it once was.
    Numbers 1 and 4 are business decisions, really. Numbers 2 and 3 aren’t necessarily the fault of the borrowers because events beyond their control took place.

  2. collapse expand

    The MSM can keep trying to push the meme the financial crisis was the fault of middle America getting greedy (or black America, whatever) but the public ain’t buying it.

    http://www.visioncritical.com/wp-content/uploads/2009/12/2009.12.22_Banks_US.pdf

    As of December 2009, polling shows that 63% believe the banks are to blame, only 28% believe it was customers who took on too much debt. Additionally, 47% believe that indebted Americans are taking the right steps to get out of debt, while over 60% believe banks and big business hasn’t.

    It makes me livid whenever I see some idiot in the media going on about how this was all our fault. I guess banks aren’t responsible anymore in making good loans. Free money everyone!

    This junk isn’t just on CNBC either. I recently saw Tom Brokaw trying to spin it on the Daily Show. I’m glad Americans may finally have stopped buying whatever the MSM tries to shove down their throats. Maybe there is some hope for democracy after all.

    I do kind of wonder what will happen when the Ministry of Truth realizes the majority of the country has stopped listening to them though…

    • collapse expand

      I never heard a word about race in the video,all I heard was Mad Dog (Taibbi) race baiting. Taibbi sounds crazy and violent,(he looks like that John Gardner, creepy) Read this:http://www.businessinsider.com/what-happens-if-you-insult-taibbi-2010-2#comment-4b9452747f8b9a394f0c0000 He’s putting down blacks and latinos while hiding behind people that are just pointing out the facts. But after reading the article at this link, I’m just glad he can’t throw anything at me! But I wouldn’t blame Santelli if he threw some TEA in Taibbi face! HA! Wenner owner of Rolling Stone should get rid of that ass Taibbi, Dickinson is by far a better journanist! Truth be known, he may already be gone. Taibbi is just looking for attention,he should ask Dylan Ratigan how that race baiting worked for him!

      In response to another comment. See in context »
  3. collapse expand

    I have to say that I was quite disappointed in Santelli. I thought he was better than that. I completely agree with Janet on this issue. When are we gonna see people in prison over this heinous fraud.

    In defense of Santelli, he has no affiliation with the Tea Party movement other than inspiration. And the original inspiration that he promoted was anti bank bailout. He had nothing to do with the other social issues that the Tea Party may have co-opted at this point.

  4. collapse expand

    I don’t think you’re giving Santelli enough credit. It isn’t as if he is saying that there isn’t a problem with the way loans are originated. He just has a more market-biased view on how to go about fixing the problem.

    From his perspective the liquidity that allowed for the entire structure of asset backed securities (particularly mortgages) is a problem of moral hazard and that’s why predatory lending typically occurs. If there wasn’t that type of liquidity to sell these as standardized securities than the risk inherent in investing in these assets is far greater, especially via leverage.

    Risk and liquidity are functions of one another. So, when we step in to try and create artificial market-structures in order to increase liquidity we forget that we are also masking the risk inherent in investing in the more liquid version of the security.

    He should probably tone down the stuff that is being misconstrued, in my opinion, as class-warfare. If you listen to him enough though, his argument becomes pretty clear and I think he has legitimate beef.

  5. collapse expand

    Another really important distinction for the Bagger crowd to understand is the difference between crappy politicians and the institution of government itself. We’ve got a boatload of crappy politicians in Washington — yes, indeed, I agree with that. And we need to throw most of these bums out, I’m with you guys on that.

    But here’s the important distinction: government, itself, is not necessarily a bad thing. Contrary to the bullshit that Reagan spun, government can actually be a very important force for good in our lives. We’ve lost this sense of it in this country, because of the duplicitous Reaganite spell that’s been cast on the land for thirty years.

    By the way, I love how all these “super patriots” automatically rail against “big government” all the time, but genuflect at flag pins and “the framers” and “the troops” and all the other trappings of government. Big contradiction there.

    Here’s the thing the Baggers need to understand: all this business about “small government” is code, generated by the greedy rich, for “don’t tax and regulate us, cause we don’t want to pay for the stuff that you guys need — we’d rather keep all our money for ourselves.” That’s it. That’s what the “conservative” movement is all about, that’s what the Republican Party is all about, that’s what the corporate media (WSJ, Fox, etc.) trumpets day in and day out. It’s just a bunch of rich, lying pricks that don’t want to contribute their fair share to society. Cut taxes? Abolish the Estate Tax? Offshore tax havens? De-regulate? It’s all the same thing. Real patriotic, huh?

    But they can’t come right out and say all this, so they couch it in this coded language about “free markets” and “small government” and “trickle down” and the rest. This class of selfish, lazy neer-do-wells (GWBush is the epitome of the type) have been taking us, and this country, to the cleaners for years. They’ll continue doing it until we smarten up and get together and revolt.

    The Baggers have got the revolt part right, but they need to properly identify the enemy. Hint: it’s that gluttonous, revolting character whispering in your ear. I mean, c’mon, take a close look at Roger “The Hut” Ailes — does this look like a healthy human being to you?

    • collapse expand

      You make it sound so simple. The reality is that governments have traditionally done a lot of harm by sticking their noses in areas where it doesn’t belong despite the fact that we still need the framework they provide. And that isn’t even the whole of the problem.

      Take a look at the massive conflicts of interest in dealing with the banking sector. The administration says one thing, does the opposite and the bankers are picking up the president’s tabs. You don’t see a problem with the government interjecting on the banker’s behalf a year after they almost drove us off a cliff? The regulation that is being touted as an effective fix is just placating the emotions of the progressive voters in this country who can’t balance their own checkbooks. It’s a crock of shit. They’re yelling at the top of their lungs about honest foot soldiers’ bonuses while their tax dollars are pilfered by the CEO’s from right underneath their noses. Fixing the “environment on wall street” is code for screw the proletariat and let the good times roll. Consumer protection regulation? rofl are you kidding me? It’s like a dog’s owner with a ball … look over here sparky .. okay now look back over here, here now … oh wait, no it’s over here.

      The Volcker rule was the first legitimate piece of legislation proposed to do something about the actual causes of the financial crisis (though only peripherally) and even its been sidelined along with Volcker because Larry Summer’s doesn’t like restricting god’s work.

      In response to another comment. See in context »
      • collapse expand

        Charles,

        You’re primarily arguing against corrupt government, which I don’t want either, and which actually gets to the core of the problem. American government does not serve the people, it currently serves accumulated wealth. We’ve got to remove Big Money’s overwhelming influence in Washington before anything’s going to really improve.

        If the Baggers were screaming “Money out of Washington” they’d really have something. We need Good Government, not No Government. This is the disconnect, and this is where they’re abetting the enemy, instead of driving towards a solution.

        Here’s a simple, basic example of good government regulation: the Glass-Steagall Act, enacted in 1933, repealed in 1999. That’s 66 years of relative economic calm, bookended by a Great Depression and a Great Recession.

        Laissez-faire is not good for The People, only Economic Predators.

        In response to another comment. See in context »
        • collapse expand

          The Glass-Steagall act wouldn’t have stopped the financial crisis. But essentially the reason many people fear the repeal of Glass-Steagall and point to it as a factor is because it very easily could cause a similar financial catastrophe. Glass-Steagall is an example of the government regulating its own influence out of the market place, which is a good thing. Since the federal reserve system gives clear advantage to commercial banks, Glass-Steagall created an effective barrier to commercials stopping them from using that that advantage to unduly influence capital markets (i.e. prop trading which the Volcker rule sought to prohibit).

          It isn’t that we want the government to stop regulating necessarily but rather to quit creating market structures that breeds moral hazard (similar to the one that glass-steagall stamped out) that can’t be effectively handled. Case in point, Fannie and Freddie – which were the biggest reasons for the sub-prime meltdown.

          There are further problems down the line for the world as well. The debt crisis is now gaining steam and there is certainly going to be more fallout to come. These problems arise out of the reckless fiscal policies that western countries + Japan have had over the better part of a century. They are unsustainable, as is the ideology that created them. I’m not naive enough to believe, like many do, that the government could fix things by stopping spending or even reducing spending right now. However, something must be done to seriously look at government balance sheets and come up with something more sustainable at least. Creating ridiculous health care plans which act as an under-the-table bailout to insurance companies and banks is not the correct response. Unless of course they have already priced in that the dollar is doomed and are just trying to borrow as much as they can before the inevitable tsunami of selling hits. Who knows?

          I’ve never hear a teabagger specifically ask for no government, simply less of it. Personally, I see it as an apt solution to most of the problems we currently face as too much government was the source of many of our current ills to begin with. No government wouldn’t work, for obvious reasons.

          In response to another comment. See in context »
          • collapse expand

            I think we agree on much, Chase, all but the part about “too much government.” I think this country needs much better government, not less of it.

            We are at the end point of a thirty-year experiment of “government bad, greed is good, taxes bad, shrink government, de-regulate, let the markets be free.” The results are in. It didn’t work out well. In fact, it was a complete disaster. It’s really important to learn that lesson now. That is the big challenge for everyone in this country, and it is precisely where I depart from the Bagger narrative.

            It’s a difficult challenge because the mass corporate media is not telling the right story, the true story, about what happened and what we need to do to recover. Mass corporate media represents the interests of accumulated wealth. People have to dig deeper, on their own, to find voices like Stiglitz, Taibbi, Nader, Krugman, Moyers and all the others who aren’t drunk on Reagan Kool-aid.

            Good government is a crucial component in righting this ship. And our government isn’t going to get better until we pry Big Money out of Washington. That is the key to the whole thing right now. We need government to start serving the people’s interests, rather than accumulated wealth, and it simply can not do that right now, with the way things are set up. For me, it is the absolute essence of the problem.

            In response to another comment. See in context »
          • collapse expand

            “We are at the end point of a thirty-year experiment of “government bad, greed is good, taxes bad, shrink government, de-regulate, let the markets be free.””

            No, we’ve been in a thirty-year experiment of let’s only use the power of government to the benefit of the business powers at the top of the food chain. Again, politicians say one thing and do another and politicians have played a lot of lip service to the concept of “free markets” over the last 30 years. Fact is, they’ve gotten rid of regulation that served legitimate purposes while also enacting new regulation that served the interest of the same powers asking for the other de-regulation. They’ve had their cake and ate it too, pardon the cliche.

            Here’s the rub on Kruman and Stiglitz, these guys think that the best way to fight recessions/depressions is to devalue currencies until it goes away through expansionary fiscal policies e.g. monetary inflation. In other words, in order to fight the problem of too much debt in the world we need to devalue that debt and create more new debt. Because in their minds you can have expansionary fiscal policies and expansionary monetary policies in order to stimulate output so long as everyone else is doing it at roughly the same time in the same proportions. But what we know now, is the more debt there is the faster and deeper everything falls apart when something goes wrong and the whole becomes too deep to stimulate out of.

            Putting our current crisis in terms of the great depression we can now see the writing on the wall – excessive sovereign debt is as unsustainable as excessive debt elsewhere.

            Forget about ideology and the rest of the noise. Our current path is unsustainable, Bernanke may have a trick up his sleeve that we all can’t see coming, but the rest of the government is acting whole-heartedly against the interests of the American people and in the interest of the top corporations, as they have increasingly for a number of years.

            In response to another comment. See in context »
      • collapse expand

        I’ve sat here and read all the recent posts from various people, theorising about capitalism and regulation and trying to suggest who’s to blame and how to fix it.

        So this isn’t really a reply to Chase’s comment above, but the ‘reply’ button vanishes about 3 levels deep so this is as good a place as any.

        My take on the subject goes something like this: I’ve lived under 3 different capitalist democracies and none of them feature the kind of slimy lying vermin that continually show up in the legislative branch of the US government.

        Nor do other capitalist democracies feature the brutal bubble/crash cycle that the US citizens get hammered by on a regular basis (although, like everywhere else, these economies are affected greatly by the situation in the US).

        When I look at the differences between systems, I can see instantly why the US has these problems, and it comes down to the same thing every time: Money in politics. Buying influence.

        It’s absurd to expect businesses to NOT try and corrupt the government. There comes a point for every CEO of companies that reach a certain size, where they realise it’s far cheaper to buy legislation that favours them than it is to find and implement strategy to acheive the same increases in profit.

        Throwing money at congress is just good business.

        I believe it’s also absurd to expect politicians to be lily-white and uncorruptable. The type of people who *want* a career in politics are just not like that. There are a few notable exceptions, but if you only let people like Ron Paul or Denis Kucinich stand for election, you would never have more than 20 people in the government.

        So you have to build the system so that purchasing of politicians is too difficult. And strangely enough, it’s not very difficult.

        The difficult part is getting from the current mess to the ideal system.

        The ideal system is really only 2 major changes from the current:

        - Publicly financed campaigns. It should be a priority to ensure than no politician has any use for private donations. And then make receiving or giving them illegal and punished quite severely.

        - The lobbyist system has to be abolished completely. Make everything the do illegal. Make the whole corporate PAC system illegal.

        If you do those two things (and the million other little changes that will follow from that) you will find most of the current issues will just disappear. When the legislative branch is free to vote on their political desires rather than commercial demands, stuff like financial regulations and healthcare will magically be a thousand percent more aligned with the citizen’s real needs.

        There will still be problems. Some people will get greedy and take bribes. But on the whole it will be a vast improvement. The GOP will actually be able to *be* the small-government party. The democrats will suddenly remember that they are supposed to *help* the disadvantaged instead of just lying to them.

        Sure, we here in Australia moan about the right-wing party being owned by big business. We complain that the left-wing party is beholden to the unions. Some of us bitch that the 3rd party is never going to be a real contender due to the lock that the 2 big parties have on everything.

        But compared to what is going on in the US right now, our system is incredibly free from corruption.

        And once you’ve got that sorted out, you can implement mixed-member proportional representation which gives the independents and smaller parties some actual power to influence legislation effectively.

        But until those two measures are taken, until you get private money out of campaigns and demolish the lobby industry, nothing is going to make any difference.

        Unfortunately I don’t see how it’s possible in the existing climate. It’s going to take some truly catastrophic events to provoke what people will call ‘radical’ changes like these.

        In response to another comment. See in context »
  6. collapse expand

    Listen to Isaac’s ridiculous bullshit that it wasn’t the banks (which he says had good enforcement)putting together the bad deals, but the non-banks, then see the news today: “March 5 (Bloomberg) — Fannie Mae and Freddie Mac may force lenders including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. to buy back $21 billion of home loans this year as part of a crackdown on faulty mortgages.” This guy was the former head of FDIC, a regulator. Those are some pretty big turds slipping through the cracks, eh?

  7. collapse expand

    Matt

    I have been a financial trade journalist for over 20 years (ran Risk magazine, about derivatives and Worth, about the rich, among others). I’m refinancing my mortgage now. It’s pitched as the simplest thing on the planet. The package the bank sent me is completely incomprehensible. I find the argument that people dug themselves into these holes pretty unsatisfying, although perhaps some did. I think for the most part Elizabeth Warren is right – as are you.

  8. collapse expand

    http://www.tavakolistructuredfinance.com/cnbc23.html

    I worked with Santelli on the CBOT floor.
    He’s a “customers man” on a dried up trading floor so he was forced to multi task into a CNBC blowhard to make up for the fact that the trading floor is a morgue.

    He has no buisness acumen other than “seven bid , offered at eight”

    PS you make a huge mistake generalizing about the Tea Party.They care. They show up. How you gonna fix the Fascist Bankster Oligarchy by painting genuinely concerned activists as racist ? Bad one Matt but I still love you otherwise.

    http://www.takeitbackday.org/

    • collapse expand

      You sound jealous of Santelli, you must still be on the dried-up trading floor. But thanks for reminding people that recreating yourself is the true American way! I have more respect for Rick now, I would have been bummed to find out he didn’t walk the walk. Santelli said we live in the greatest country in the world, where the individual has the right to continually better themselves. But since you really didn’t KNOW Rick you should look him up, read about him,and take a lesson from him.

      In response to another comment. See in context »
  9. collapse expand

    Michael: You asked, so I will tell. “You can’t cheat an honest man” simply means that people wanted these houses and when the lender says “We can make this happen” or when the borrower says “Make it happen” the borrower is at much at fault as the lender. Anyone who ever buys property should know what my brother told me when I bought my first house: “Your lawyer is your only friend in this deal.” If you have never met any people who thought they put one over when they got a sweet deal on a too good to be true mortgage, then you have lived a sheltered life. Maybe Rick pushes the point, but a large # of them were lying to the lenders or themselves or both.

    One more thing: Do you real need to use F-bombs? Do you kiss your mother with that mouth?

  10. collapse expand

    Thanks Matt. Really.

    I’m a Ron Paul supporter. And even I don’t agree with all of his themes. For instance, I think we need more government regulation of the markets than Paul admits to supporting. Nevertheless, thanks for not lumping us Paul supporters in with a bunch of genetic heirloom types, the type that flips out when HBO is offline then proceeds to climb on top of the trailer to “fix the antenna”.

    The Tea Party has been hijacked. Now it’s Palin’s gang, the disciples of Mooselini so to speak. We’ve been lumped in with these hive thinking morons, and to be honest, I have to wonder if that was the objective all along once the DC crowd hijacked it.

    The funny thing is that Paul supporters find much more common ground with liberals than this trash. Yet too many paint with a broad brush.

  11. collapse expand

    The ego-oriented, antiquated system is designed to be gamed. This one mean, MF! Communism, democracy, facism, capitalism, dictorships, or monarchies; this old boy has no loyalty to any. He will however, eat one or two for breakfast. The ego-oriented, antiquated system has seen its’ day in the sun. Babylon, Greece, Rome; t these empires ladened with, monopolized control of legal tender and hence the control of society itself, followed this system over a cliff and the process is repeated now, as we babble on the sidelines. Yes, in small, but growing numbers, the sheeple are finally getting tired of the bullshit. Hiding in a Wall street canyon, a place where the past will always bury the future, the banker waits.

    Scarcity has conditioned our collective mindset for centuries. [Hammurabi 1800 B.C.] Money is part of our collective identity – a belief; made to seem natural and too widespread to change. As it turns out, knowing your brain is being hacked by an ancient, Hammurabi robot doesn’t make it any easier to resist. Much of the world’s population strongly believes survival and then prosperity and happiness are a function of personal financial wealth. In reality, an empty belief system. Nothing about wealth comes up to the level of being an absolute perquisite for survival, prosperity, or happiness. Two words come to mind “cognitive trap”…so cometh entrenched, profit centers and their M.Os

    So, it’s a process with a very, very long beard …quaintly out of place in the technological world of collaborative design, regenerative medicine, genome sequencing, bacterials, exponential computations capabilities, petaflop, extaflops and mind blowing robotics. In the past lack of technology could be considered a cause of scarcity.

  12. collapse expand

    Matt:

    late to the table here and I made a comment on ZeroHedge before reading your article and watching the Santelli clip. First off, Rick Santelli at the inception of the meltdown was pleading for failure and let things run the course. You painted Santelli in a negative light. Second you obviously did not watch the whole clip as Santelli wasn not arguing against predatory lending, that wasn’t the premise of the clip but saying predatory lending is illegal. He did point out as much as you don’t want to accept, that Fannie and Freddie relaxed their standards causing a large part of the damage. I am sorry you can’t accept that, but that is the truth and it had nothing to do with predatory lending.

    • collapse expand

      Wasn’t the main point Santelli’s idiotic comment?

      “You can’t cheat an honest man.”

      That makes absolutely no sense. If an auto mechanic overcharges a customer, it has nothing to do with the customer’s honesty (or lack thereof).

      In response to another comment. See in context »
      • collapse expand

        It means that individuals who took these loans do have some responsibility for their own misfortunes. Which I agree with to a certain extent. If they didn’t understand the loan structure then they shouldn’t have signed it. But they see a new house in their mind or whatever and it overtakes their common sense. It shouldn’t happen but it does, and unfortunately the victims deserve part of the blame.

        In response to another comment. See in context »
        • collapse expand

          So one should never use services that one doesn’t understand completely? By that logic, we shouldn’t go to doctors unless we know as much as they do or drink water that’s been through a treatment plan, or hell, use an HVAC system.

          We use the services of experts PRECISELY because they know things that we do not. That is what professional services are, by definition. Things that experts can do which we cannot.

          There’s actually a term for this in economics called “information asymmetry.” Free market economics discuss it at length and it’s considered quite a conundrum among free market purists. Check it out: “In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry. Examples of this problem are adverse selection and moral hazard. Most commonly, information asymmetries are studied in the context of principal-agent problems.”

          http://en.wikipedia.org/wiki/Information_asymmetry

          Look, we expect more from our doctors because we rely on their expertise and they are heavily regulated. Well, we also rely heavily on the expertise of those in finance. Don’t you think they should be held up to similar standards since their information and skill gives puts others at such a huge disadvantage. Yes, I can take time and read medical journals and textbooks to try to keep up with doctors before undergoing treatment, but should I have to?

          In response to another comment. See in context »
          • collapse expand

            If you don’t understand a contract, you shouldn’t sign it. If you are entering into an agreement with a loan agent, then he is not a third-party expert as he has something to gain from misleading you or not completely disclosing everything he could. An third-party expert would likely be a contract lawyer, or some sort of retainer that you have look over your contracts.

            If the individual is in your service specifically to recommend a course of action to you and has no conflict of interest, like a doctor, then that qualifies as an expert. A loan originator fails to qualify as an expert.

            Information asymmetry isn’t really a problem if you take fairly simple steps to prevent it. But of course, our law makers would never do something as silly as using the most obvious and direct method of fixing a problem. Better just make “predatory lending” illegal with enough loop holes to make sure that it doesn’t actually stop the practice.

            In response to another comment. See in context »
          • collapse expand

            Chase –

            Easier said then done, you must admit. I think we agree about A LOT, but not everything, and I think you rock for coming onto a forum where many won’t agree with you and having a substantive conversation about real disagreements between reasonable people. If we could do more of this, I bet the (sane) Tea Partiers and the (sane) WTO protesters would come together on a lot of issues. That’s what makes the mongering of people like Santelli so damn infuriation.

            ANYWAY. While I agree that individuals have responsibility and should be encouraged in every way possible to arm themselves with information, education, common and sense and good values, that’s not what public policy is for. That’s a cultural issue, and yes, public policy can potentially influence that in the same way that if can potentially influence people to not be financial sociopaths. Bottom line: Public policy is not about what people _should_ do, it’s about what people _actually_ do. And what people do is pretty damn predictable. If it wasn’t those financial firms wouldn’t have been able to make so much money by hanging shiny, rotten fruit so low. Regulation is for what people DO do, which is generally to _attempt_ (and that’s an important distinction) what’s in their immediate self-interest in spite of what’s in the best interest of the economy as a whole.

            Fine, I’m sure we’re both in agreement about that. Where we differ, I think, is whether a system of strict self-interest will somehow balance the world out so that a perfectly calibrated larger economic good. I don’t think so, not for one instant. For one thing, not everyone is equally equipped. Actually, that’s enough of a reason for me. Am I well equipped for it? Yes, but my value system will not allow me to take advantage of those weaker than I am, which means that those who are immoral or amoral or whatever will benefit from the social decency of others. It’s basically asking for a system of war lords. The only reason we don’t have that system now, not any worse than we do now, is because some people work very, very, very hard and at great personal risk to prevent it. You’re children have access to an education — even if something calamitous happens to you and you’re unable to provide one privately — because people who don’t know you care that much about your children. Hell, my great-great grandparents were educated; I would be educated without a formal system in place. Very few American can say the same.

            The point is that a strict free market system denies that value of those things. It doesn’t even make room for them. It’s uncivil, in the literal sense. I mean, it’s a system that tells people to go to the public square, meet with their fellow man, and try to get as much out of him for as little in return as he can possibly manage.

            I don’t want to live in that world.

            In response to another comment. See in context »
          • collapse expand

            I’m not against all government, just a lot of it. I’m not for a completely free-market, though I think that it may be the power structure of the future. But that’s a different argument, for now we are somewhere in between with a archaic, slow-moving bureaucracy that runs some things and a new, fast-changing, ever evolving market-based system that increasingly dominates our lives. Place your bets.

            It all comes down to perspective. You say that not everyone is as equally equipped to be able to defend themselves. Yet, there is a job and a role for everyone in an economy. If we are running at full economic throttle and inflation is balanced each person will live on means that are equal to the dependence of the rest of the economy on that person. You call it a system of War Lords, but how is that concept different from the current one that we use in politics or in business? The cream rises to the top of any field, regardless of barriers – market systems and democracy does it better than despotisms and communism. But overall, market systems are a democracy; you vote with dollars and the number of dollars you have to vote with is equal to your importance in the society. Of course the more important of us will have more influence and get their interests looked after more, but I can certainly see how those interests are balanced by competition in a market. Rant over.

            One other things I wanted to respond to:

            “And what people do is pretty damn predictable. If it wasn’t those financial firms wouldn’t have been able to make so much money by hanging shiny, rotten fruit so low. Regulation is for what people DO do, which is generally to _attempt_ (and that’s an important distinction) what’s in their immediate self-interest in spite of what’s in the best interest of the economy as a whole.”

            I agree completely that what people will do is pretty predictable, especially in aggregate. They will follow their own self-interest. So what happens when a government sets up two agencies in order to create a market liquidity structure that supports the trading of financial instruments based on mortgages? Would you expect the number of mortgages to increase? Would you expect that mortgage originators would be less picky about who they lent money to now that they could immediately sell off that loan to the secondary market thanks to the new found liquidity? Would you expect that mortgages which paid high yields that were implicitly backed by the government would become extremely in-demand? Would you expect that these high-yields in an environment of cheap credit would create an incredibly unstable market that blows up in a spectacular failure? Would you expect that all the politicians/econoticians would blame de-regulation?

            That’s the crux of Santelli’s argument, but since he is on CNBC, he only gets to talk in sound bites so you gotta listen to the whole story rather than just one chapter.

            I’m mostly just against direct government intervention in markets. Not necessarily regulation but the things like fannie mae and freddie mac, or the bailouts and back room deal bank-mergers with bridge loans provided by the fed. At least things like the SEC don’t do critical, structural harm to the global economy. Let them regulate, they’ll probably fail to do it effectively anyway.

            In response to another comment. See in context »
          • collapse expand

            It’s called a second opinion. DA! If your doctor hasn’t recommended meds. or brain surgery yet, I’d get a second opinion. Do it before they pass the mystery healthcare bill, unless you want your surgery at Walgreens.

            In response to another comment. See in context »
      • collapse expand

        We don’t read,agree, and sign a contract with our auto mechanics.But if I did and that contract was breeched, I would sue them.

        In response to another comment. See in context »
  13. collapse expand

    Imagine if we called all the Madoff investors financial illiterates.

    • collapse expand

      Funny you should mention Madoff. Do you think decades of above average returns, and NO losses may have been a red flag? So you think the goverment/you the taxpayer should pay those rich people back?

      In response to another comment. See in context »
    • collapse expand

      The Madoff investors are in interesting case because I’m seen many of them ‘fess up that they semi-deliberately avoided digging any deeper than necessary as to the source of his high returns.

      Most of them put a little money in to begin with, then as they returns consistently came in, they shifted more and more of their nest egg to Madoff to take as much advantage as they could.

      A lot of these guys were individuals, like the hollywood types we’ve heard about. They instinctively felt that something was fishy but I think they just thought they had finally got in on the gravy train that most investors think exists somewhere. But either way, they didn’t ask too many questions.

      But far more culpable were the institutional investors – hedges, superannuation funds, etc – who should have known damn well that even if it *was* legit, they should still have done a lot more due diligence and been able see the source of these returns.

      “You can’t cheat an honest man” may be a bit glib, it may even be completely wrong, but in the context of that axiom, nobody with money in Madoff was an ‘honest man’.

      In response to another comment. See in context »
  14. collapse expand

    Matt sorry to say you have been behind the learning curve on this financial crisis. Rick Santelli never said that the homeowners were at total fault. We all know poeple that live beyond their means. Santelli also said banks should share the blame. Remember he never wanted to bailout the banks, AIG, or any other so-called Wall St. institution. Santelli never talked about blacks,latinos, or any minority. You attribute negative stereo types to these races. You’ve made-up a scenario that screams racism, you being the racist! I also would love to know who Santelli is being paid by to shill. If you are really a journalist (LOL), why don’t you back-up what you say with facts, or are you just high on crack?

  15. collapse expand

    Matt, I forgot to mention Barney Frank and the subprime monster loans that started all this mess. Santelli made a New Years resolution to talk about it every day. You should try and brush-up on this,I know it’s complicated, but you may be able figure it out. I really think it would improve on your work! Wait, tell us again who Santelli shills for, because that part doesn’t make sense.

    • collapse expand

      Lynne, I’m not going to disagree with your points but you should realise this isn’t a ‘piece’ by Matt. This is his personal blog where he just rants about shit that is in his head at any given time.

      So there’s no guarantee or even expectation that he’s done any research or fact-checking when he posts stuff here.

      If he was going to turn this into a published article, then you would expect he would be a lot more diligent.

      I think Matt’s attitude to this blog is a bit different from other bloggers, for whom the blog is their only outlet. Those guys treat their blog postings as proper publishing and do research etc.

      But for Matt this is just a bleed valve to let off some steam when something’s built up too much pressure in his head. Of course you would expect that his basic premise is sound but it would be foolish to expect the same standards as his Rolling Stone or Men’s Journal articles.

      At least that’s how I treat this page.

      In response to another comment. See in context »
      • collapse expand

        Taniwha I guess your saying that Taibbi is only racist in his blog, in his head, or as one of his buddies said, (when)” he’s sick in bed”! Well he’s sick, that much i’ll buy. Here is another way he blows off steam. http:/www.businessinsider-what happens-if-you-insult-taibbi-2010-2#comment-469452747f869a394f0c0000 So the insult to the black and latino community was just his personal feelings added to give it that racial overtone.

        In response to another comment. See in context »
        • collapse expand

          Just shut the fuck up, Lynne. I saw your feverish gloating post at the businessinsider site.. were you masturbating while you typed it? It certainly sounded like it.

          You’ve got a giant chip on your shoulder about Taibbi and it’s got nothing to do with this blog post.

          Either way, you’re not worth my time. And my time is worth almost nothing.

          In response to another comment. See in context »
          • collapse expand

            To the tune of true colors……I see your true colors shinning through, I see your true colors, that’s why Matt loves you. But don’t be sad and don’t be blue those livin’ in your Mamas basement days will one day be through. A little song taniwha, to release your anger and brighten your day:)

            In response to another comment. See in context »
  16. collapse expand

    would like to mention a partcularly heinous aspect of the weird lie that you cant cheat an honest man:

    many roman catholics were taken to the cleaners by con men taking advantage of their charitable nature.

    honest men assume other people are honest

  17. collapse expand

    “You can’t cheat an honest man? What the fuck does that mean?”

    A while ago, I figured out what was meant by the anti-utilitarian phrase “personal responsibility.” What this phrase means is “the suckers deserve to be fleeced.” Shorthand for Social Darwinism. “If Hansel and Gretel didn’t want to be eaten they should never have gone into the Gingerbread House.” “It’s her fault for opening the closet when Bluebeard specifically told her not too.”

    It works because there are a lot of complicated ideas underlying this simple phrase:

    1. Bad things only rarely happen to Good people, and when the do it’s only because the Good people strayed however slightly from God’s path.

    2. This is because God rules the world, and wouldn’t let His people suffer. (Story of Job not withstanding, they’ll hand-wave that with some optimistic reading of Christ Crucified.)

    3. Therefore, if someone is suffering, they must be wicked.

    It’s a powerful, if primitive believe system.

    If you sacrifice a young lady, and then it doesn’t rain, well, she must not have been a virgin then, right?

    Because of this the fact that in a neighborhood that has been blighted by predatory lending, where even people with solid, fixed rate loans that they carefully saved a down-payment for will see their neighborhoods deteriorate and their houses become worthless, it must be their fault.

    If you lost your well paying construction job because the housing bubble burst after banks made shady loans, well, that’s your tough luck.

    If you suffer senile dementia and were talked into a bad refinance by “sleazy sam, the housing man,” well it’s your fault for going senile. Enjoy suffering your senile dementia as a homeless person.

    Because the alternative is a world where you are not divinely protected if you do the right things and say the right prayers. It’s a world where dark forces destroy the righteous as well as the wicked.

    The dark forces, the Giant Vampire Squid, understand this, and prey on it.

    “Oh yes,” they say, “It was our victim’s fault, like the frog and the scorpion, they should have realized our malevolent nature even though we did our best to cover it up. Don’t come after us, we are just fulfilling God’s plan, sort of like Satan is in another context.” Well, better marketing, obviously, they are masters of the Dark Art of Marketing.

    Here’s the kicker… in America this is a secular, non-religious philosophy. It’s THE secular philosophy, the one you must believe in order to be a pod person and not have the other pod people screech at you like in the updated Body Snatchers with Donald Sutherland.

    Heck, Barbara Ehrenreich got a book out of it: http://articles.sfgate.com/2009-10-19/entertainment/17186382_1_breast-cancer-attitude-smile

    Don’t be bitter, don’t be gloomy, don’t curse your fate. No one is going to help you, anyway, because amid all the forced optimism it turns out that a substantial minority of Americans don’t actually care about each other. (And with our rigged House, Senate and Electoral college, this minority can play at being a powerful majority even without the numbers.)

    It’s a system of thought that needs to be rooted out and destroyed utterly. Scorched earth, no quarter given and none asked.

  18. collapse expand

    to follow up my previous thing about being able to cheat honest men:

    http://saints.sqpn.com/saint-gregory-of-nyssa/

    it’s his feast today

  19. collapse expand

    Money perverting American politics is the beating heart of the matter. It’s important to remember that, for until that gets cleaned up, all the little tweaks in the world won’t fix the real problem at the bottom of it all. The motivation in America is wrong right now, it should be about people, but it’s about money instead. Until we address that, people will continue to suffer, and money will continue having a good time (at the people’s expense). In fact, all the little stuff can be a diversion and distraction. We’ve got to stay adamant and focused on expelling the moneychangers.

    P.S., Chase, the more you go on, the more you sound like an apologist for the moneychanger set, and I’m beginning to suspect that you are in the industry, and thus profit from it. This business about blaming the victim is ludicrous, and is something someone in the industry would have to recite in order to face themselves in the mirror each morning.

    I’m in the Web business, and I make hundreds of complex decisions every day on behalf of my clients. There is not enough time in the day for me to explain ALL the reasons for doing what I do on their behalf. There is just a certain amount of trust that is part of our transaction. If I make a bad decision, which leads to failure, I’m not going to turn around and tell my customers that they should have researched and known about all the ramifications. That’s my job, that’s why they pay me, to know my stuff and make good decisions on their behalf.

    Are all my clients greedy? Sure, yeah, to one extent or another, their all greedy, because they are all human. But some are much greedier than others, to the point where I will refuse to work with them anymore.

    It’s a moral failing, not some kink in the economic formula. People are not machines, and America is sick with the money fever.

    • collapse expand

      There is fault to go around. The fact is that many of the people who got these high risk mortgages colluded with the originators and committed fraud themselves – and don’t get preachy on me, because I know individuals that did in order to try and get rich quick. There were also people who were honestly just trying to get into a house but didn’t understand the contract they were signing. But regardless of the situation, both had a certain amount of responsibility to themselves, regardless of whether they themselves overstepped the law or not. Customers have to protect themselves to some extent because even if we had more regulation there will always be those that slip through the cracks and that’s the burden of responsibility that the customer has.

      That isn’t to say that things can’t be improved through regulation or more effective contract framework (easier to translate contracts etc.) However, you need to also understand that the original sin here was allowing mortgage originators to sell off loans into a secondary market in the first place. And you don’t need government intervention to get rid of that, because government intervention was what created it in the first place – fannie mae and freddie mac. The creation of these entities were the only reason the loan originators were separated from who actually ended up holding the loan. Do you think that a loan originator is going to commit fraud if he is the one that has to hold onto that more risky loan? No, of course not. And if you listen to everything Santelli says, that is what the core of his argument is.

      In response to another comment. See in context »
  20. collapse expand

    I’m not much of a big CNBC watcher, so I’m most struck (aside from the naked partisanship shown by the hosts, and their desperation to have Santelli respond to Tavakoli’s arguments) by the way the CNBC regulars (the hosts, Santelli) speak. It reminds me most of sports commentators – very loud, fast, a litany of disconnected facts that make them seem knowledgeable about the subject without actually offering much. I imagine this resemblance isn’t accidental.

    • collapse expand

      It’s theater … but it isn’t supposed to be hard information. It’s entertainment for those that work in finance and not much else. They get to watch live speeches and such live as well … but other than that entertainment.

      Santelli actually has one of the more unique perspectives on there – one that echoes most traders you’ll find working in the industry. Which if you want an honest perspective of how things actually work on the street and where the corruption is, are the people you should be listening to. Case in point, zerohedge.com

      In response to another comment. See in context »
  21. collapse expand

    Kd, one last ping to your e-mail box. (BTY if you click the button above the comment box, the ping will go away, I promise.)The only thing I hope to provoke is thought. People like Taibbi and Stewart cast aspertions on good people(Tea Party) and those in the media that are just doing their jobs. Stewart, I believe did not have a clue what he was talking about a year ago, and of course he hides behind comedy. Yes, I know when he had Cramer on that it wasn’t funny. (pathetic really) Jon was really full of himself. I really have no idea what label he hung on Santelli. Santelli had been yelling about this stuff all along, yes, even when Bush was president, he has been consistent.( heck,he yelled about Cramer too, check the youtube videos) He has said many times the blame goes all around., banks, F/F, Barney Frank, and peoples misuse of home equity loans. On that I think we could all agree. When journalist falsely use the race card to get attention, I think it is a detriment to society, something WE should not tolerate. Your just as bad as the person that laughs at the racial jokes, etc., if you don’t speak up. It’s funny how you can understand what projecting is when you thought I was doing it to Matt, but think it’s o.k. for him to do it to others. I guess your o.k. with that. As far as being unhinged, I wasn’t the one using four letters words and talking about Matts boyhood, that would be you. Last, I said Matt is a coward because if you are going to make accusations like he did, then be man enough to debate Santelli to his face. Matt IS the goon he speaks of! I see Santelli everyday, many times,(in the light of day) I’m pretty sure Matt could find Rick. If he is sooo indignant over this, why doesn’t he?! That is if he comes out from under his rock. But Taibbi won’t, because he’s a liar. Stewart on the other hand has to many Wall St. friends, and his brother is on the board of the NYSE,(free market guys) by now he gets the picture. Notice Jon doesn’t mention Rick, and that whole thing brought some of Stewarts biggest ratings. Wonder why. Just a different point of view KD, just food for thought.

  22. collapse expand

    Matt, This narrative you have that all tea baggers are idiots and racist has to stop. You have to understand that stupid people are superior to smart people… They do not start the war they fight the war. They do not start the financial crisis but they pay for it. It’s smart people like you and me that are destroying this country. WAKE UP

  23. collapse expand

    Matt – I recall reading at least one article encouraging people to buy their dream home now instead of doing what was done in the past – buying a starter home. So how can we blame people for following financial advice from someone claiming to be an expert -the media covering it as such? I am 100% for financial education for every citizen in high school and before would be even better. It is so important. I used to work in the industry. I read an article in Money magazine from a so-called financial expert who wrote against financial education b/c things change so much. A little information could be dangerous. I strongly disagree.

  24. collapse expand

    Temecula CA has a massive foreclosure rate and I would bet that the majority of those are white, upper middle class folks..who vote republican.

    A good friend (repub voter) recently walked away from her huge home in a very upscale part of Temecula. As I helped her pack, I noticed at least three homes on her block that sat empty and she said they were all walk-aways or foreclosed upon homes.

    So much for the nutters who blame the people of color for the foreclosure crisis.

  25. collapse expand

    Matt, I enjoy your articles. But, on Ron Paul you are wrong. For one thing, there are two Tea Party movements–one planned by David Koch and his Americans for Prosperity and the Sam Adams Alliance, the other planned by Ron Paul and his Campaign for Liberty.

    Koch’s movement is to make the Republican Party more fiscally and socially conservative.

    Ron Paul’s movement is to delegitimize the existing political structures. Paul’s political strategy was laid out in a series of articles by his informal adviser Gary North–a Christian Reconstructionist libertarian economist.

    Paul’s base since 1982 has been at the neo-Confederate Ludwig von Mises Institute which Paul helped co-found with Lew Rockwell and the late Murray Rothbard.

    Second, Ron Paul has been pushing through his Texas Straight Talk articles on his House website and through legislation a white nationalist and a Christian nationalist agenda.

    I am publishing a series of articles on politicalchili.com laying this out in chapter and verse.

    I do not argue from guilt by association.

    I argue from causality. Ron Paul has deliberately courted white and Christian nationalists for decades. They, especially white nationalists, responded to his courting with cash and becoming part of his virtual and grassroots structure that we now see in the Tea Party movement, at least his part of it.

    Ron Paul’s writings at Texas Straight Talk are not explicitly racist, rather they are very slick version of the Republican Southern Strategy and Paul’s discussion of race is the same argument made in the mid-1950s in the Southern Manifesto–the call for “massive resistance” to the Civil Rights movement.

    I hope you will take the time to look at the evidence.

  26. collapse expand

    Matt: I am constantly amazed at people’s capacity to Rewrite History to Suit Current Requirements–in personal, political, and other arenas. I guess this is the crux of cognitive dissonance. Very important to keep tabs on what really happened, when.

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    About Me

    I'm a political reporter for Rolling Stone magazine, a sports columnist for Men's Journal, and I also write books for a Random House imprint called Spiegel and Grau.

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