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Apr. 14 2010 - 12:25 pm | 2,070 views | 1 recommendation | 38 comments

Jefferson County: Democracy Now

These are also derivatives. Again, there’s this whole galaxy of financial instruments that are basically unregulated, thanks to a law that was passed in 2000 called the Commodity Futures Modernization Act—credit default swaps, collateralized debt obligations, interest rate swaps.

via “Looting Main Street” – Matt Taibbi on How the Nation’s Biggest Banks Are Ripping Off American Cities with Predatory Deals.

Amy Goodman and co were good enough to have me on Democracy Now! this week to talk about Jefferson County. I recommend checking out the earlier segment on a 2007 Apache attack in Iraq — the video is disturbing.


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  1. collapse expand

    Nice work, I imagine it’s very stressful being the last segment on Dem Now given Goodman’s penchant for running the content up until the last possible second. (“What’s the future promise for regulating these banks you have five seconds go!”)

    As to the WikiLeaks video, that segment really is essential viewing, because the soldier interviewed perfectly deflects what’s become a troubling trend in the way the media have covered it. It’s not about vilifying these particular soldiers. They’re just doing what they were trained to do and treating it as exceptional only distorts the cause and effect of our military presence in the Middle East.

  2. collapse expand

    It’s one thing to know that this was possible, after studying what happened and understanding that the supply of derivatives is not limited by the supply of any real assets. But to see it spelled out like this, Matt — it’s really disturbing. Do you think that bribing officials is a necessary requirement for this sort of thievery? Or can the banks do it all on their own?

    MBIA, which insures municipal bonds, has $25,684,699,000 in assets and is named in $58,257,608,614 in credit default swaps — Someone stands to gain a boat load of money if they can push them into failure! MBIA is worth more dead than alive.

    • collapse expand

      According to an old Bloomberg article (by William Selway on October 1, 2008) $2.8B of the $3.2 billion Jefferson County bonds were insured by Syncora Guarantee Inc and Financial Guaranty Insurance Co.
      Syncora restructured and continues to face liquidity problems; share price $0.42; when they de-registered in March all the 13Gs I saw were filed by Bermuda companies.
      The FGIC insured bonds were reinsured by MBIA (see comment above). FGIC is currently passing $11.8B in credit default swap insurance they can’t pay to a newly created “Drop Down Company” in New York.

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

    yes, but Matt, as has been pointed out before….as the banks loot mainstreet
    …mainstreet maintains its public employee
    pension funds in the looters…….big
    public pension benefits from the bank mafia

    2500 state and local government pension systems are invested in every bank of any consequence in america,wall street corporations, real estate, and foreign markets and banks to the tune of $3 trillion…which equal one-seventh of every investable asset in the usa

    …boottom line, Jefferson county(officials) has screwed itself(the people) thorugh greed, don’t blame the banks…..the banks are just there to service greedy folk…..

    • collapse expand

      andy, you are saying robbers are good for a neighborhood because robbers spend some of the money they steal in neighborhood stores.

      I know you have a hard-on against the extravagent pensions of public employees. So do I! Why should those people get 80% of their salaries in retirement when people like me are going to get 12%! I understand your ire. But your complaint has nothing to do with the topic of the looting Main Street by Wall Street.

      The idea that investment banks are being allowed to loot in order to prop up government pension funds is nonsense. For one thing, Microsoft has a market cap equal to that of JP Morgan and Goldman Sachs combined. Financials do not make up the bulk of pension fund investments.

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

    More reason to audit the Fed and do an article on Ron Paul’s effort to do so!

    Rock on, Matt.

  5. collapse expand

    2012 can’t come soon enough! These guys make Jeff Skilling look like a piker.
    Aimlow Joe
    http://www.aimlow.com

  6. collapse expand

    Matt,

    If this is as you say, the tip of the iceberg; then what do you make of the municipal bond market? Are southern municipalities with high debt levels an indicator of the same Birmingham processes?

    You mentioned PA and Detroit; with this information what behaviors should be looking at with our local officials that typify the scam?

    All the best!

    • collapse expand

      “If this is as you say, the tip of the iceberg;..”

      While I don’t mean to presumptiously answer for Matt, please allow me to state the following:

      the credit derivatives market is composed of thousands upon thousands of different categories of securitzed financial instruments.

      Sometimes the names are used and tossed aside, with new categories of names taking their place.

      But they are all fundamentally the same. Whether it is the five categories of credit default swaps (highly important to grasp that an unlimited number of swaps can be written against one target corporation or entity) or Pinnacle Notes, or Crises Derivatives, or Carbon Derivatives, they are all designed, gamed and rigged in the same manner.

      Hence, the credit derivatives are the primary tool used to rig, game and manipulate those rigged, gamed and speculated-upon markets.

      It is, was and will be, by design.

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

        To further illustrate this — and the craziness we now exist in — please wrap your heads around the following:

        The top five banks make up 63 percent of the American G.D.P.

        Those banks are really insolvent, if their credit derivatives were in actuality marked to market value.

        They remain solvent due to all those free monies and bailouts from the Fed and Treasury.

        These banksters create their profits from manipulating those rigged markets, and speculating upon those rigged markets via insider trading knowledge.

        They utilize those credit derivatives to do this.

        Thusly, they are using taxpayer funds to destroy taxpayer jobs, savings and futures, and creating their very own profits, perks and mega-bonuses.

        A circular Ponzi-Tontine scheme of epic, almost unimaginable, proportions.

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

    Great interview. I wrote one of my senators today and mentioned “Looting Main Street.” I told him I was on the side of Main Street and hoped he was, too. (The truth is, I know he isn’t!)

    I caught Bernanke in a hearing this morning. Asked about a financial transactions tax, he said he opposed it because such a tax would reduce liquidity. The Wall Streeters use “liquidity” to justify everything. Persopnally, I think we need to replace the liquidity obsession with a transparency obsession. Besides, the one place where Americans really needed liquidity — the housing market — turned out not to have it. And if the empty houses in my neighborhood are any indication, it still doesn’t.

    • collapse expand

      Their idea of liquidity is even half-assed backwards. The only liquidity available to the “bottom economy” is in the financial sector through credit gate keepers. Any real money supply that becomes available to the general public is immediately soaked up through debt, taxes, price inflation, mandatory insurance, and anyone else further up in the debt daisy chain losing blood to the squid.

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

      There is a Goldman Sachs 2009 October release called TURNING GOOD IDEAS INTO GOOD OUTCOMES: Effective Regulation Part 4,

      Your comment reminded me of this quote:

      “Liquidity should be the key to good regulation, and transparency should be seen as a tool to create liquidity, not the goal itself.”

      GOLDMAN SACHS STOOGES: Global Markets Institute

      Steve Strongin Amanda Hindian Sandra Lawson

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

      Interestingly, the financial transaction tax was first instituted back in 1914 with the Revenue Act, and lasted until 1966 (although it was doubled in size during the Great Depression and JFK had mentioned raising it as well).

      Should definitely be reinstituted, and with the existence of the DTCC, ICE, ICE Futures, ICE Clear, ICE US Trust, Swaps Wire, Elx Futures, and the CLimate Exchange PLC — it shouldn’t really be difficult to track.

      That is, as long as Goldman Sachs, Morgan Stanley and JP Morgan Chase allow the feds to track them on all those previously mentioned exchanges they happen to own?????

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

    My favorite part of the interview is when Juan Gonzalez asks you to explain the interest rate swap after explaining how complicated it is.

    Right. Real complicated stuff. Matt explained it in three seconds.

    Same with credit default swaps, mortgage backed securities — none of this stuff is complicated. Wall Street Bankers are just stupid and the American people were stupid to believe them that they didn’t need to explain this crap.

    Now the wizard behind the curtain has been exposed.

    BTW — Is there any particular reason why this story (and Matt) is not appearing on the Today Show or Bill O’Reilly? They don’t want to report fraud any more?

    • collapse expand

      LOL – yeah, O’Reilly could have MAtt on and agree about the criminal behavior and say that Wall Street should be allowed to do what the hell it pleases all in the same breath. And the Today show? They do controversy these days?

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

      Martin,

      Complexity is a strategy that used:

      John Kenneth Galbraith – complexity is used more in the study of money as a way to conceal the truth than to illuminate it

      I do not choose to call people stupid Martin since we all operate on incomplete knowledge; this is not to say that we can’t understand more (like Polyani)than we know, but it does mean that there is a reason that the noise machine stands to benefit by dividing people who have similar and legitimate interests

      all the best

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

        Trend, I undestand your point. I was mostly calling myself stupid. Before the crisis, I had no idea what the Wall Street crowd was doing. It took an essay I wrote called “Enron 3.0″ on the CFMA to finally understand what happened, how it happened and how simple these concepts really are. Of course, Matt does the best job that I have read of making it accessible to people.

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

    Yeah, the apache video. i think I’m starting to figure out why they dont like us. The “aw, come on, let me shoot” guy is clearly displaying some weird sort of inferiority complex like those old geezers in DC who keep starting wars, as taibbi has referenced on several occasions. This a the soldiers way of building up “street cred”. I guarantee you that fucker bragged about shooting those kids in the dfac for weeks and months. I hope he shoots himself now that his crimes have come to light. “Shouldn’t have brought your children to a battle”…. I was a soldier and did 2 tours in iraq so I can tell you nothing about this situation is uncommon. The pilots can either face the fact that they are murderers of children and persecute impoverished, defenseless brown people or rationalize it and lose everything. Seriously, what the hell do you do for money after you quit flying helicopters? Kiss the wife, kids, friends,cars, etc goodbye. It isn’t hard to figure out why they say these things if you think about it. It’s hard to be a soldier if and when you ever face the facts of your existence.

  10. collapse expand

    阿彌陀佛 無相佈施

    不要吃五辛(葷菜,在古代宗教指的是一些食用後會影響性情、慾望的植
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    之為腥。所謂「葷腥」即這兩類的合稱。 葷菜
    維基百科,自由的百科全書
    (重定向自五辛) 佛家五葷

    在佛家另稱為五辛,五種辛味之菜。根據《楞嚴經》記載,佛家五葷為大
    蒜、小蒜、興渠、慈蔥、茖蔥;五葷生啖增恚,使人易怒;熟食發淫,令
    人多慾。[1]

    《本草備要》註解云:「慈蔥,冬蔥也;茖蔥,山蔥也;興渠,西域菜,云
    即中國之荽。」

    興渠另說為洋蔥。) 肉 蛋 奶?!

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    不婚 不生子女 生生世世不當老師

    log 二0.3010 三0.47710.48 五0.6990 七0.8451 .85
    root 二1.414 1.41 三1.732 1.73五 2.236 2.24七 2.646
    =>十3.16 π∈Q’ 一點八1.34

  11. collapse expand

    I did not know that we were premitted to post in other languages.

    My next post will be in Irish.

    Slan

  12. collapse expand

    I had a bit of trouble with the link above. Here is a direct link to Matt’s segment.

    http://www.democracynow.org/2010/4/12/looting_main_street_matt_taibbi_on

    I am a huge fan of Democracy Now but, if you ask people on the street, I doubt if 99 out of 100 of them have even heard of the program. Matt’s coverage of the financial industry’s culpability in this economic meltdown should be available to the American public via all major news outlets…but it isn’t. And even if Matt was interviewed by a major network or newspaper, the media would then give equal time to some lying asshole from Goldman, Lehman, or AIG and there would be no challenge or fact-check of their bullshit.

    Consequently, American citizens are denied information that would most certainly lead to pressure on politicians to properly regulate these robber barons. If our democracy ultimately fails, it will be the result of a poorly informed and a wrongly informed populace. Ignorance is freedom’s greatest enemy.

    • collapse expand

      You’re right. They most definitely would “counterbalance” the interview with some dick from one of the investment banks. Instead of simply fact checking like you said, these “journalists” give equal time to both parties and are satisfied that they covered the story “fairly”. Its a lazy sort of journalism.
      Like these banker assholes have not been controlling the storyline in America for years.

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

    SEC charges Goldman Sachs with fraud…stock down 10-15 points…moving rapidly, bouncing around violently.

  14. collapse expand

    Great interview Matt.

    Funny how you can grasp and communicate the scam of Interest/credit default swaps in a nanosecton……Yet MBA Bansksta Execs. play stupid and blather on about how they are so sophisticated they didn’t even know how risky they were……

    RICO – starting with Wall Street – No club Fed, straight to Gitmo, No presidential pardons …..I have a dream.

  15. collapse expand

    I’d bet it costs each resident $25 for every flush.

    But those little near extinct reptiles that have been saved are sure happy.

  16. collapse expand

    Cruss, I heard the same. Good start but why aren’t these criminal charges?

    Civil fines aren’t going to deter anyone especially if you make a billion and only have to pay a million as a fine.

    I am pretty sure that they call that the cost of business.

  17. collapse expand

    Here is the Press Release:

    SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages
    FOR IMMEDIATE RELEASE
    2010-59
    Washington, D.C., April 16, 2010 — The Securities and Exchange Commission today charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.

    ——————————————————————————–

    Additional Materials
    Litigation Release No. 21489
    SEC Complaint

    ——————————————————————————–

    The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

    “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

    Kenneth Lench, Chief of the SEC’s Structured and New Products Unit, added, “The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. housing market as it was beginning to show signs of distress.”

    The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

    According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio.

    The SEC’s complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.’s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors.

    The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.’s undisclosed short interest and role in the collateral selection process. In addition, he misled ACA into believing that Paulson & Co. invested approximately $200 million in the equity of ABACUS, indicating that Paulson & Co.’s interests in the collateral selection process were closely aligned with ACA’s interests. In reality, however, their interests were sharply conflicting.

    According to the SEC’s complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.

    Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion.

    The SEC’s complaint charges Goldman Sachs and Tourre with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, and financial penalties.

    # # #

  18. collapse expand

    I have not yet read the complaint yet but it begs the question as to why these were not criminal charges and how did they single this transaction out since I am sure that nearly every similar transaction involved the same kind of market manipulation.

    Indeed, Matt has explained many of these concepts here for months.

  19. collapse expand

    Interesting: MSN reports charges against Goldman Sachs and in same sentence says market drops. Hmmmmm!

    Scare tactic?

    Warning shot across bow? Look what happens when you take on America’s financial darling?

    Hold fast, we can weather this.

    Let the motherfucker plunge if it wants too. We made it through a plunge to 6500 we can handle this.

    Clean up the cesspool and the toilet will work better than ever.

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