On Jefferson County
My new article, “Looting Main Street,” is out on newsstands in Rolling Stone. It’s about Jefferson County, Alabama, and how a group of Wall Street banks (in particular JP Morgan Chase) ran the Birmingham area into the ground with predatory interest rate swap deals.
If you’ve heard of the financial scandal in Greece, JeffCo is sort of an earlier version of that, though slightly different. As Christopher “Kit” Taylor, the former chairman of the Municipal Securities Rulemaking Board, put it to me: “[The banks] basically took what they were doing in places like Jefferson County and exported it overseas.”
The broad story with municipal debt is that the incentives got out of whack for the banks, just like they had in the mortgage market, where commissions for doing safe, 30-year fixed loans fell to the point where they weren’t much of a moneymaker for brokers. And just as brokers reacted to the problem of low commissions by urging home-buyers into pricier variable-rate mortgages that inevitably had to be refinanced a few years down the line — bringing more fees to lenders, in a process called “churning’ — banks reacted to the low profit margins for normal, safe, long-term fixed municipal bonds by urging counties into riskier deals. They sold counties like Jefferson County on variable-rate and auction-rate bonds, and when the issuers’ debt service got too high, the banks pushed them into interest rate swaps to lower their variable-rate payments. This was just another form of “churning,” only on a much bigger scale: you hooked towns and cities and counties and school systems on risky bond issues, then got them to come back down the road and enter into interest rate swaps to refinance their ballooning debt structure.
The really sordid part of the Jefferson County story is how the banks funneled millions of dollars to buddies of the County Commissioner, who in turn bribed the local pols to sign off on the crappy swap deals. In the case of former Commissioner Larry Langford, a local greaseball named Bill Blount who had been paid millions in “consulting” fees by the banks was literally following Langford around with a charge card, picking up the tab for things like watches and Zegna suits. We get a rare look into this process in JeffCo, where the SEC published transcripts of taped conversations involving JP Morgan bankers talking about how much money it would take to grease guys like Blount. “Just tell us how much,” we hear former JP Morgan executive Charles LeCroy saying.
The financial transactions in Jefferson County are a little complicated, but once you fight through that you can see that this is basically an old-school organized crime story, with contractors buying off politicians to stick taxpayers with inflated bills for public “services.” The only difference is the scale of the ripoff and the complexity of the thing contracted for. Although there have been over 20 indictments in Jefferson County, the criminal prosecutions haven’t reached up to the banks yet, and part of that is because it’s so difficult to explain the crime to juries. The federal prosecutor who put Langford away for 15 years, George Martin, explained to me that even during that trial, he had to shy away from the details of the swap agreements in order to keep juries focused on the bribery. “I had to try to keep it simple as much as possible,” he said.
I got into this a little more on Don Imus’s show yesterday (I always feel bad delving into this highly unfunny stuff on his show). Of all the financial shenanigans I’ve had to write about in the last few years, this is the one that I wished was talked about more in public, because I think if more people knew what happened in places like Birmingham (and there are problems with swap agreements all over the country, from Pennsylvania to Detroit to Los Angeles to Chicago to Oakland and beyond), they’d completely lose their illusions about what modern Wall Street is all about. Anyway, more on this later on –
P.S. A friend of mine reminded me of this — over the summer, the Atlantic’s Randian blowhard Megan McArdle wrong a long criticism of my Goldman, Sachs piece. In making her case, McArdle in one part was trying to argue that I was naively painting all derivatives with the same brush, her point being that CDOs and CDS are nothing like, say, rate swaps. Which of course they aren’t, but that’s not the point; the similarity is in the fact that they’re not regulated at all. In any case, she writes:
To give you a flavor of what I mean, Taibbi rants about how we knew derivatives were bad bad BAD! because they’d gone so badly wrong before… But it’s not clear how much derivatives regulation would have helped any of these three companies. Gibson was defrauded by its bankers. P&G wasn’t; they spent a great deal of money unwinding their positions when the Treasurer realized they had a lot of exposure on a bad bet on falling interest rates. Orange County, too, was making a massive, levered bet on a steep yield curve (roughly, a large difference between short and long term interest rates) that came undone when the yield curve flattened and interest rates rose. Moderately complex derivatives allowed its idiot financial manager to take somewhat larger bets, but you can take massive, money losing bets without them. At any rate, none of these derivatives have much to do with CDOs or CDSs; you might as well conflate stocks and bonds because they’re both “securities”. No one, as far as I know, is now proposing that we need to curtail the use of interest rate swaps.
McArdle wrote this after Jefferson County had blown up. This is just FYI. It’s on par with Charlie Gasparino calling the notion that Hank Paulson and Lloyd Blankfein were regularly on the phone with each other brokering the AIG deal “the mother of all conspiracy theories.” The story about Blankfein and Paulson’s regular phone contacts during the AIG deal broke in the New York Times just days after Gasparino’s post.
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Hey Matt!
What’s up with Imus? You think he might’ve discussed YOUR article instead of riffing on James/Bullock and someone else’s book.
Keep up the good work!
Have you read any of the reporting done by Mike Hudson? he has been following this story for a long time and I think he has a book out in the fall.
Actually, not this particular story…the whole mess in general. Anyway, he is a good investigative reporter.
In response to another comment. See in context »Actually Mike Hudson is an economist, not a journalist. He just writes very well for an economist
He and Pam Martens did a fantastic series of articles during the meltdown. highly recommended.
In response to another comment. See in context »No, there is Michael Hudson the economist and Michael Hudson the journalist. I believe Michael Hudson economist is at University of Missouri-KC. Michael Hudson the journalist is now affiliated with the Center for Responsible Lending. He used to write for WSJ when they had some really good writers.
In response to another comment. See in context »There’s also another investigative journalist named Mike Hudson who runs the Niagra Falls Reporter. He was in the punk rock band, the Pagans.
In response to another comment. See in context »There was a Michael Hudson from Scranton, Kansas? That shithole?
In response to another comment. See in context »Oh, but yeah, the economist Michael Hudson called this mess early. Not everyone was blind.
In response to another comment. See in context »Really? THE Pagans? from Cleveland?
In response to another comment. See in context »While the banks have been looting Main Street….Main Street has been looting the taxpayers, stashing away trillions of taxpayer dollars for public employee pensions across the USA…….
State and local governments run over 2500 retirement systems across the usa for teachers, police, fire, state employees, county, city employees, judges, prosecutors, for elected officials…….pennsylvania alone has 900 such retirement systems, california has 59 government retirement systems…..state and local government spends a hell of a lot of public time preparing for their own retirement.
State and local government has literally stolen billions upon billions from the taxpayers and stashed them on wall street, in real estate, in public bonds, in foreign stocks….they even invest in foreign governments……
CALPERS, california state employees retirement, is the biggest and badest no 1 government retirement system on earth of them all with $200 billion invested worldwide in thousands of corporations from exxon to dutch shell to china….pump out pensions up to and over $200,000 for high rollers and small bettors in government
Continuing….while the banks loot main street….mainstreet, state and local government has their pension funds invested in the very banks which are looting….so as government budgets suffer, their pension funds swell…..
In response to another comment. See in context »As the Marines like to say
“Get some.”
In response to another comment. See in context »Join the government folk and get some of the loot?
In response to another comment. See in context »“State and local governments run over 2500 retirement systems across the usa for teachers, police, fire, state employees, county, city employees, judges, prosecutors, for elected officials…….”
Um…of course they do. That’s what these people get in exchange for lousy pay and, in many of the jobs you mention, risking their lives on a daily basis. I guess it would be cooler to just shoot them in the head when they’ve outlived their usefulness, and in the perfect world you envision for us all, hopefully you will get that job (but don’t expect a pension!).
In response to another comment. See in context »I agree that state and municipal pensions are a scandal — in my town policemen with $100K salaries can retire at 40 and collect huge pensions until death — but pointing that out is a strange response to the Jefferson County story.
In response to another comment. See in context »But Matt, you din’t read what I said……the city probably has its pensions funds invested in the same banks that are screwing it…at least partially invested…..
In response to another comment. See in context »Right, but that just means that all these teachers, police, firefighters, etc. are getting screwed, too; many of their pension funds ended up in AAA-rated crap. Certainly, some local politicians skimmed money from those deals (hell, local powerbrokers profiting via alliances with JP Morgan what Matt’s article is about), but your response is strange because it seems like you’re implying [heavily] that these pensions simply shouldn’t exist, because there’s inevitably going to be some corruption. Corruption sucks, but if the proposed alternative is to put a bunch of retired civil servants on an ice floe, that sounds a lot like blaming the victim.
In response to another comment. See in context »You said it, Kramer!!
Those pension funds are invested in private equity firms which turn around and screw unions, union workers and non-union workers alike.
They they work to dismantle American businesses, the American economy and ship any and all jobs overseas.
And then those pension funds run into trouble for the reasons you stated. Evil ju jitsu or akido.
And, those $14 trillion to $17 trillion from the Fed and the Treausry, given free to the banksters and private equiteers, are then invested overseas in China, India and elsewhere, instead of being invested in America, for American citizens and workers.
The only thing we get is all that debt, which causes further unemployment and the dismantling of the economy.
In response to another comment. See in context »what do you mean by this: or whom do you mean:
In response to another comment. See in context »“invested in private equity firms”
what constitutes a private equity firm?
I mean, isn’t any retirement fund going to be invested in the bond market? What about mutual funds?
In response to another comment. See in context »Why is it stealing?
In response to another comment. See in context »Anyway, my feeling is that everyone should just be getting social security rather than public pension plans for some, social security for others. It would make it harder for those who wish to do away with SS to divide and conquer, for one thing.
But, my guess is you probably think social security is a big boondoggle too.
Thanks for getting back to finance. It really is the most important thing going on in the world (as it will be the single most significant influence on *everything* going forward).
I also certainly hope you stick to reporting on it. While I appreciate your left-wing sensibilities, your left vs. right view of things is what has allowed the banks to distract the majority of the population from the most important issue: who controls the freaking money. The tactic is called “divide and conquer”.
There’s a very good reason they don’t teach modern monetary theory and the US Constitution in high school.
The only real political issue anymore is freedom vs. the banking/federal government cabal. Let’s get that fight won first – Then we can go back to arguing about too many crazy liberals/conservatives in our particular neighborhood (because nationally, it’s a pretty even split).
Dave Narby,
Secretary,
Staten Island Libertarians
http://www.statenislandlp.org/
No, it ain’t an even split, it’s 3-2 good guys with two on nobody out. Bachmann, Palin, Inc. practically guarantees the conserves won’t be back for a while. Even eric Massa made them look bad and he was thr grossest Democrat in a long time. Fox News audience can’t get bigger and every day they lose thousands to old age and bad health care.
In response to another comment. See in context »Where does the federal government enter into this story? Oh Yeah, they are the ones who are prosecuting the crooks at the local level. I’m sorry but your blame the feds dogma just doesn’t cut it on this one. Yes. the banks are crooks; yes, we need big banks if we want to do big deals, yes, the federal government is the only institution strong enough to control the big banks that do the big deals.
In response to another comment. See in context »Please,libertarians, wake up and understand that religion and corporations are just as big a threat to your liberty as government.
I guess Imus proves your point…you can’t keep things simple enough for some people. George Martin would have had to strike Imus from his jury. As soon as Imus had to think, we go right into Jesse James and Sandra Bullock. And let me see if I have this part right…if you marry a movie star, your job is to keep the movie star. Maybe it’s really all there and I’m just missing it…Sandra is Jefferson County and Jesse is the county commissioner and Jesse’s buddies are the tattooed biker bimbos. Imus…you’re a genius.
Matt – as one who has lived in Jefferson County for going on 15 years, you condensed it and nailed it about as well as anyone could in the space given.
I only wish you could get more of a flavor of how much additional idiocy existed on the Commission.
Lambs to slaughter is right.
I’m having a hard time telling the difference between the illegal loan sharking the Mafia does, and the shady lending practices of our fine, upstanding banking institutions. And the CEO of JPMorgan has the chutzpah to say the big banks are being demonized! (Boo hoo.) If it walks like a duck and quacks like a duck…
Much lower interest rates. From the Mafia.
In response to another comment. See in context »When you pay off the Mafia your debt is cleared. The Mafia can’t go to a judge to keep garnishing your wages for the rest of your life. (http://www.nytimes.com/2010/04/02/business/economy/02garnish.html?hp)
In response to another comment. See in context »The Mafia hires locally, doesn’t routinely offshore jobs, puts money into the local community and isn’t allowed trillions of free dollars to lend out at interest back to the government.
They are also not shadow bankers, but bank with the shadow banking system.
In response to another comment. See in context »Well, the Mafia has a code of honor, and their rackets are well understood by almost everyone.
The Mafia ain’t got nothing on these guys.
In response to another comment. See in context »What do you think ordinary people can do in the face of all this? There have been volumes upon volumes of books, articles, and documentaries about the madness and destructive greed on Wall Street but it just seems like Americans are just sitting back and letting the country slip into a sharecropping plantation.
I really believe that old fashioned street protests are the way to go. Look at the teabaggers– you cannot say that they’re not getting lots of attention. For regular folk like ourselves, this is what we need to do to be heard. Signing an online petition is not going to cut it. We’ll never be on an equal footing with the opposition if we try to work from within the system.
In response to another comment. See in context »Obama needs pressure from the left. I mean, do you think FDR would have accomplished so much without the pressure he was getting from below– from communists, socialists, labor activists, etc.?
I agree
In response to another comment. See in context »feel like going to the tea parties just to do something
Forget about online-they just want yr credit card info
I read here http://blog.al.com/spotnews/2010/02/bill_blount_sentenced.html that Blount cooperated and was sentenced just 52 months, while Lecroy was sentenced just 3 months! http://www.sec.gov/news/digest/2007/dig060407.txt
I wonder of Blount was required to forfeit any of the 7.1 million he received?
Matt,
I know this is a bit late, but have you seen the GQ article “None Dare Call it Conspiracy” by Scott Anderson? Having lived in Russia and being one of the few writers brave enough to expose the crimes of the powerful, I’m wondering if you’ve read it and what you think?
Ashley
If Morgan Stanley, Lehman Brothers, Goldman Sachs, and their ilk made magazine covers with the frequency hollywood cheaters do, their would be rioting in the streets. So maybe Imus was on to something after all.
The only reason I think that John Edwards is worse than Jesse James is because he was running for president. Had he won the Democratic nomination, his campaign would have been doomed by the pending philandering story (generally philandering only hurts once you supposedly love, not scads of people country or world wide). While Obama managed to piss me off even more with the off-shore drilling declaration this week, it would indeed have been worse to have McPain in office.
Keep. fighting. the. good. fight. Get this stuff out there as much as possible, and good luck with the book deadline.
Matt, I am Howard Stern fan (so I hate Imus) but you look so uncomfortable on that show it is hysterical — what gives?
It’s hard to fake that smile, isn’t it?
Hey, I like ‘em both. Imus cause he’s so creepy. howard because the truth feels so refreshing once in a while. Imus melting down once in a while, Howard’s made of rock and has never even perspired.
In response to another comment. See in context »BTW — the City of Los Angeles wants the Wall Street Bankers to tear up these swap contracts. Yeah right, I am sure they will get right on it.
I actually think L.A. should tear it up the contract, then tear up the ridiculous pensions that they give some city employees.
Is it possible that we can have both outcomes?
Can’t wait to read it. Your con game piece was your best yet (my kudos about it got printed in RS letters to the editor). Keep up the good work.
-tony healy
Matt,
I totally agree with you that “if more people knew what happened in places like Birmingham…they’d completely lose their illusions about what modern Wall Street is all about.”
In addition to incredibly reckless and destructive greed, there is so much outright criminality on Wall Street that it boggles the mind. We need a lot more criminal convictions to really drive home the point that Wall Street firms are for the most part criminal enterprises.
Excellent piece, Matt. Thanks for writing it. Like you said, this is a story deserving of serious national attention. I hope your article does the trick.
This is the kind of story that, in a just world, would wake up the populace. They would notice that, despite the nightly Socialism vs. Capitalism shoutfests we’re fed on cable news, the battle is not really Government vs. Business, but the oligarchy vs. people trying to make honest (and modest) livings. Both the politicians and businessmen in this case are obviously deserving of long prison sentences, but that doesn’t fit the approved narrative. Neither Democrats nor Republicans can make hay, and the story muddies the tidy binary divide we have all been taught to believe in — so it is largely ignored.
Or maybe people just can’t handle how ugly things have become in America.
I’ve always been amused by how cheaply the commisioners came. Mary Buckelew, for example, was caught lying to the grand jury about receiving shoes, a purse, and a spa treatment. Perhaps there were other undiscovered payoffs, but to sell your soul to JP Morgan for $4000 shows a major lack of understanding regarding Wall Street. $4000 won’t cover wine at a small dinner.
Gonna be a long time before things change in this ‘game’. Can’t even get a Democratic president to buck their grip on the Feds. One of the biggest blunders ever made by any president was reappointing Bernanke.
-RLee
http://therleepost.blogspot.com
Lower than Jesse James? Hmmm… If truth be stranger than fiction, they must be like Patrick from ‘American Psycho’? Can I page ahead to the cocaine stuff? I like to read that stuff first.
Thanks for this, I’ll take up the baton a bit on my own blog tomorrow with it. Please stay well.
Keep shouting this out until the sheeple understand how they’ve been screwed. Some might be able to pull their head out of their azz’s and learn how to resist the temptation to play the ponzi credit game. This is an old fashioned play on the greed of the mark (us) and playinng the fish until the vig reaches the maximum pain. My guess is they have pretty much destroyed any future that we might have had when they backed the big banks but hell maybe they can extend this ponzi ad infinitum. Its wrong and the law of nature will eventually step in. gl man
Of course the Republicans claim all of this happened because the Democrats – mostly Barney Frank – were pressuring banks to make loans to people that could not afford them out of “fairness”.
Matt…
Please do a piece about the only financially sane politician we have…Ron Paul.
Thank you.
Ah yes, “everything I need to know is to be found in Atlas Shrugged”.
In response to another comment. See in context »This is what Ron Paul does with his congressional office stipend money…
http://www.house.gov/apps/list/press/tx14_paul/MRESurplus.shtml
He also returned $58,000 in 2008. On the surface, returning nearly a quarter of a million dollars in 3 years says “something” other than he like the free market system and Austrian economics.
In response to another comment. See in context »Dear Matt,
You do some really fine work and I am not the only one who thinks so because rumor has it there is a little town in Italy that thinks you are the bomb.
Thank you for this good reporting on Jeffco but I would appreciate if in the future you could provide this information just a little bit earlier, say like in time for an enterprising individual to get in on the ground floor and really make something of himself. By the time people are going to jail the scam has pretty much ran out and its too late to get involved in a meaningful way.
I appreciate what you say about the complexity of the operation and wonder if it is necessary to have it be that complicated when you consider most of the high schoolers working at jack in the box can’t make change unless the machine tells them what it is. Do you think Obama and his crack team of financial heavyweights can see through the sort of stuff going on in Jeffco or is it too complicated for even them?
Thank you for all your good work,
Conrad C. Elledge
Matt,
Does Imus just invite guests on his show to watch him talk and not stay on point? The only question he really asked was if jesse james was a worse person than these Wall Street guys. I wished he would of let you talked more instead of rambling about other people’s books.
[...] Taibbi has more commentary on his [...]
The same JP Morgan that was bought out by Bear Stearns which was of course bailed out by a back-room deal by the Fed:
http://trueslant.com/matttaibbi/2010/04/01/on-jefferson-county/
Gotta love it.
I worked for the IRS and evasion prosecutions had that same problem with jurors. The run of the mill juror is not the “peer” of these clever manipulative scoundrels.
We must follow the money more closely in our gov’t. If our elected officials worked in teams of integrity…maybe we could minimize this scum. Makes one wonder if the Federal Reserve was involved.
How can this problem be solved? Greed is obviously like a bad drug problem.
Obviously the Federal Reserve is involved — haven’t you seen all those Youtube vids with the Inspector General of the Fed Reserve System, sitting on her hands and still claiming she can’t find her own butt?
There’s nothing to follow at this point — it’s all been soundly publicized (opensecrets & http://www.wallstreetwatch.org/reports/sold_out.pdf).
The point is that our Republican president, President Obama, is successfully pushing forth Republican programs (health insurance just passed, next will be cap-and-trade), while using those poor dupes who still believe they are democrats working on his behalf.
Same thing happenened with that Republican president, Bill Clinton.
The point being: ignore the theatre of the absurd, and only support REAL DEMOCRATIC programs (single payer, carbon tax, etc.).
And stop sending all your money to Wall Street, Goldman Sachs, JPMorgan Chase and Morgan Stanley!@!!!
And those superbanksters, Blackstone Group, Carlyle Group, Citadel, KKR, etc.
In response to another comment. See in context »Matt, I caught you on the Gun Cellar Straight Shooter Hotline this morning. Thought it might be worthwhile to point out the toothless Southerners had read and wanted to discuss your article, unlike the Northeast Megalopolis talk show host who lost his job for… well, no reason to bring up the nappy-headed ho stuff.
Steve’s question — which you brought up in your article — seems to be the big one. Alabama has put a lot of people in jail over this. Why aren’t we seeing the same up there? I don’t know how familiar you are with Richard Scrushy and HealthSouth, but it took two tries to get Brother Richard. Tell the Manhattanites that just because someone pushes you down, you don’t have to give up.
Anyway, I know YOU are fighting, and for that we owe you a debt of gratitude.
The Rolling Stone article “Looting Main Street” provides a critically important piece of the puzzle which is befuddling many Americans, largely because of the tendency of the human mind to, as dnarby states, “divide and conquer.” The Jefferson County story reveals that Wall Street’s wrath can and will hit very close to home, that its havoc is supremely indiscriminate. No matter whether the system is global, national, regional or local, it will destroy.
The very last piece of this puzzle is of course individual. I suspect that the reason there are not more street protests/mass demonstrations is that even after all we’ve been through, a fair number of people still believe, or perhaps desperately hope, they can ride out the economic storm, that they can somehow escape the malevolent forces with which Wall Street works.
Of course, these individuals are wrong. Whether it’s a bond or a dollar, debt will destroy. Remember what Albert Einstein, who should know a thing or two about forces of nature, said: “The most powerful force in the universe is compound interest.”
The more I learn about the devious and nefarious practices of the Banksters and Wall Street, the more I agree with something comedian Dana Carvey said. He was doing a stand-up routine about Bush stealing the election from Al Gore and Al Gore’s gracious concession even though he knew he’d been robbed. Carvey remarked about how he must have really felt and reacted in private. He said Gore must have wanted to scream in frustration, “Mother-Fu****!”
http://exiledonline.com/as-the-billionaires-plunder-alabama-us-troops-occupy-townsillegally/
I am a little bit of a slow learner so after reading Matt’s article for the 3rd time (and it is excellent) I am once again sickened but not by the bankers at JP Morgan; rather by the lack of response by those charged with protecting Americans from crime: Prosecutors.
Is there any particular reason why people up the food chain from Blount and Langford have not been prosecuted? What am I missing here?
Matt It’s so true,the mainstream press has to write/talk more about this. When I read your articles,and Michael Lewis’ work as well,it confirms what I said to my son’s friend 10 years ago,when he asked if I was in the Mafia,(being Italian-American),my response was” no I work in a more crooked industry called Wall Street”—keep up the good work
Matt,
Where were all of the local newspapers when this shit started going down? Was this one of those moments where something might have been caught early if certain papers had deep and experienced staffs watching local government?
Well, in the case of a local project here in Jefferson County, Kentucky (Ohio River Bridges Project), the city’s “newspaper of record” is in on the game, with its editorial board locked into the power circle that promotes the project and browbeats the public and politicians into compliance.
In response to another comment. See in context »Really, another fine piece, Matt! Well written,well researched, convincing, important, giving a perspective that the mainstream media cannot or will not give…with some exceptions, like a programme called the “The Fifth Estate” here in Canada on the CBC (the Canadian Broadcasting Corporation).That programme is a little little like “Frontline” in your counrty. Last night ,they broadcast a fine doc on Lehman Brothers called “House of Cards”. Check their website to see it, folks.
I always amazes me the differences between the mainstream media, and the alternative media like Rolling Stone. I suppose the mainstream media do not want to see the rot and corruption at the heart of this society that gives them such status and a good living.
Marco Ermacora Montreal
Just read your new article in RS on the bilking of US cities. As usual, it’s both revitalizing and painful read the truth, so curtly and lyrically rendered.
I was wondering if you were going to write something on the demolition of state pension funds across the country.
I was doing an extra credit assignment watching part three of an old PBS series called Commanding Heights, and there’s this inspired banker dude on there talking about how pension funds will drive the new economy. Wonder where that guy is now.
I love your bullshit-free prose. Keep up the real work. Reading your stuff is good pain, like rubbing hard on a sore muscle.
Hey, wasn’t Larry Summers and Harvard nailed by JP Morgan interest rate spreads?
http://blogs.reuters.com/felix-salmon/2009/12/18/those-harvard-swaps-even-more-of-a-fiasco-than-we-thought/
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHQ2Xh55jI.Q
How can anyone expect the government to deal with the snake oil men when Jamie Diamond is Obama’s favorite banker and Larry Summers was not only an architect of financial innovation, but also its dupe?
This was very interesting. I wonder if it will attract the same denials from the Banks that the last Wall-St-focused article in RS did.
Considering Birmingham first started getting into trouble was 2008, I’m very surprised this stiff hasn’t been attracting more national attention.
This stuff snowballs badly too; first they blow up the mortgage markets, making suburbs all over the world into ghettos, now we find they’ve bankrupted the public institutions in those same places, which in many cases are likely to be the biggest employers locally too.
If the public at large genuinely understood all this, they would legalise the guillotine, set it up next to that bronze bull on Wall St, and line up everyone who works there.
sound like only the local guys got busted
In response to another comment. See in context »do bankers have immunity from prosecution?
Matt, what is the answer for us, the American taxpayer? Who are we supposed to complain to when our Congress won’t listen and our POTUS is apparently too enamored with Goldman [and some of the other banksters] to listen? I don’t live in Alabama, but I just get angry over all the crap Wall Street has gotten away with, not just during the meltdown, but for years prior to 2008. When I realize the millions of regular Americans who don’t have and can’t find jobs, the people losing their homes to foreclosure, and the just-graduated college youth who are also down and out with huge debts to banks for college loans, I want to know what we can to do to bring these bastards down where they not only spend time in prison, but also pay back what they have stolen from us, and at least make the remainder of our apathetic citizens finally get educated to become mad enough and act out? Any suggestions are welcomed. Thank you for all you do to help people like me [who only knows how to run a household, not a corporation] understand just how badly they screwed us. They’re just so corrupt.
hit the streets
In response to another comment. See in context »if you dont want to join tea party then make your own group
car bumper stickers
meetings
if the bank has local branch go there
nothing illegal,just make them hear you
Did anybody happen to read this?
http://www.nytimes.com/2010/04/04/opinion/04koniak.html
I don’t think anyone should actually need a conspiracy theory or bribery case to explain to a jury that what passes for financial innovation these days (i.e., CDO, CDS, swaps, etc.) are “speculative schemes which have no more basis than so many feet of ‘blue sky’” (http://www.seclaw.com/bluesky.htm). The essential point is that these bankers are selling things that don’t exist. And people, cities, states and nations are buying it in the hopes of making money — at any cost.
Susanne Trimbath, Ph.D.
http://www.stpadvisors.com
Great, illuminating stuff, as usual. Congrats. B-b-but isn’t it time to move on to identifying and raising awareness of the most promising efforts to end the reign of the kleptobankers?
Findings of top researchers indicate that providers of online markets for customized education (CE) will end said reign.
Understanding why starts with knowing about the so-called “problem of collective action.”
In their 2006 textbook, International Economics (7th ed.), Paul Krugman and Maurice Obstfeld define the problem:
“While it is in the interests of the group as a whole to press for favorable policies, it is not in any individual’s interest to do so.”
Krugman and Obstfeld continue:
“In a now famous book [The Logic of Collective Action], economist Mancur Olson pointed out that…the problem of collective action can best be overcome when a group is small (so that each individual reaps a significant share of the benefits of favorable policies) and/or well-organized.”
The group must have the means to buy changes of policy.
Krugman and Obstfeld, summarizing canonical research findings:
“Politicians are, indeed, for sale.”
Successful entrepreneurs in a given industry are the small group who have the motive and means to buy policy changes that disadvantage the industry’s old guard.
From The Innovator’s Prescription, a 2009 book co-authored by Harvard Business School professor Clayton Christensen:
“Regulations ultimately change in reaction to [disruptive] innovators’ success in those markets.”
From elsewhere in the book:
“Those disruptors that successfully dismantled the regulations that stood in their way succeeded by circumventing the regulation — by innovating in a disruptive market that was beyond the regulators’ reach or was peripheral to their vision.”
For a banking entrepreneur, a peripheral market that is ideal to disrupt is one wherein:
* the act of consuming makes customers (more) creditworthy
* a lot of money can be made directly (i.e., independent of banking)
Creditworthiness correlates positively with educational attainment. Moreover, education is big business, and CE is brutally disruptive to standardized education.
For a banking entrepreneur, the ideal niche to occupy in the CE industry is provider of a popular online market.
Providers of these markets can expect to increase profits dramatically by:
1. introducing a loan program for CE consumers
2. making the popularity of the company’s market and loan program mutually reinforcing (e.g., a borrower who performs well as a student is rewarded with a lower interest rate)
3. becoming a bank, as a means of increasing the amount of money the company can lend
4. introducing other loan programs and financial services that complement the market (e.g., loans to small businesses, so more jobs are available to CE consumers)
The business model of these banks, then, will center on facilitating genuine wealth creation.
So, again, providers of CE markets that become popular in the U.S. can be expected to buy changes of regulation that outlaw kleptobanking in America.
BONUS CONTENT: CE markets that become popular in America can be expected to catalyze the creation of many jobs for U.S. residents.
Details:
http://www.opportunitv.com/many-jobs/
An article that centers on the above could be a fun read for many…
I’m just sayin’…
Best,
[...] Taibbi has more commentary on his [...]
London Interbank Exchange [Rate]
Kinda fitting that the ‘rate’ jp morgan used is based on a LIE, but then what isn’t a lie when it comes to Wall St banks?
Excellent piece, Matt. I am not going to even pretend that I understand the concept of a synthetic rate swap. I used to think muni bonds were a straightforward concept, but I am learning otherwise. These odd financial instruments seem quite abstract to me.
But, there is nothing abstract about churning and larding on the fees. You would assume that someone entrusted with public monies would hesitate to get involved with a transaction that is so difficult to understand. But, you can toss that assumption aside when the bankers rely on old fashioned bribes to garner business.
Sort of unrelated, but fuck– that mining accident in WV. The head of Massey Energy is such an evil bastard. No consequences for the rich and powerful, that is for sure– just like these banksters sitting pretty.
What do I really expect in a country where the only ones who went to jail for Abu Ghraib were some enlisted soldiers?
Matt, I have been following your work for a bit and it is great stuff. Very good fact checking. There is a huge need for enforcement of these criminals. One thing, Don Imus?, I am sorry about that. That is probably where the extra negative comments are coming from. He is jerk off and so is most of his audience. Your material needs to be in the hands of mass public. Keep up the great work, you are the new wave! Shake it Up!
Worse than not prosecuting the criminals at JPM, the FDIC has rewarded them with washington mutual for free! WMfsb’s 350B+ in assets sold for 1.8B to JPM in the middle of the night and now 2B of tax refunds blonging to Washington Mutual Holdings given to JPM
Thank you Mr. Taibbi for such a brilliant, timely article.
I found a good number of parallels between the Jefferson County, Alabama sewer project and the Jefferson County, Kentucky bridges project, and thus I was inspired to do some dot-connecting to demonstrate that the Ohio River Bridges Project is potentially a swindle on the same level. Basically, this is a $4.1 billion project with a lot of unnecessary parts, an unelected authority, and a push for tolling _existing_ bridges to pay for it all.
Check out the topic “The Ohio River Bridges Project — Will it go down in history as ‘The OR-BoP Swindle’?” on the Louisville History & Issues discussion board, easily found on Google.