Who could have foreseen?

As the Bush Administration winds down, the Big Money Boys have just about finished cleaning us out. Per Think Progress, CNBC has a nice chart detailing all the various bailout monies that’ve been lavished on corporate America… and the total is over 4 trillion dollars:

Financial Crisis Balance Sheet
Government Entity Sum in Billions of Dollars
Federal Reserve
(TAF) Term Auction Facility 900
Discount Window Lending
Commercial Banks 99.2
Investment Banks 56.7
Loans to buy ABCP 76.5
AIG 112.5
Bear Stearns 29.5
(TSLF) Term Securities Lending Facility 225
Swap Lines 613
(MMIFF) Money Market Investor Funding Facility 540
Commercial Paper Funding Facility 257
(TARP) Treasury Asset Relief Program 700
Automakers 25
(FHA) Federal Housing Administration 300
Fannie Mae/Freddie Mac 350
Total 4284.5
Note: Figures as of Nov. 13, 2008

Allow me to ask a rhetorical question or twelve:

How did this happen? Was this economic crisis an accident? The cost of doing business? A simple but inevitable downturn on the great cycle of prosperity? An unfortunate confluence of economic forces, caused by the ripple effects of a far off butterfly, flapping its wings to the (temporary!) detriment of our glorious DOW?

Could this have been avoided? In other words, who the hell can we blame for this mess? Because for something to be avoidable, it must be knowable in advance. And if it was knowable, and there were people sounding the alarm, then it surely follows that there were those who heard that alarm and cynically ignored its warning.

Ladies and Gentlemen, I give you Exhibit A: Peter Schiff. This video is a compilation of Peter’s greatest hits from 2006-2007, before the shit was even near the fan, when various cable outlets would routinely trot him out as the token pessimist to be ridiculed like the town simpleton in a medieval passion play. Watch in amazement as poor Peter’s clear-eyed prescience is rewarded with howls of derision from his fellow Fox News “analysts” (anal-cysts?).

When I saw the length of the video, I figured there was no way I’d watch to the end, and yet there was super genius Ben Stein braying like an ignorant jackass and I couldn’t look away.

Exhibit B is the remarkable true story of Steve Eisman, an investor who for years has been short selling all manner of stocks and bonds related to the the housing market, on the basis that the emperor has no clothes. [Note to you Fantasy Wieners, the article is written by noted Moneyball author, Michael Lewis.]

He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made […]

“You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

Even if you have no idea about any of this (especially if you don’t) I recommend reading the whole piece. You come away with the distinct impression that high finance is nothing more than an elaborate Ponzi scheme.

Kurt Vonnegut wrote about the Money River (God Bless You Mr. Rosewater). How if you were lucky enough or smart enough, you could get one of the guardians to show you the river so that you yourself might “slurp”. I think nowadays the proper metaphor is not a river, but rather a Money Vortex – I’m just not sure if it’s a tornado, funneling money up and out of our pockets… or a swirling eddy, siphoning it down the drain. Nothing about the last 8 years has been an accident. Sure, there has been “collateral damage”, and that’s been regrettable. But in the end, everybody in charge got more or less what they wanted.

The question is, will they get what they deserve?

  • Jimmy

    The video really is essential to understanding what is going on. If we could simply remember for mor than the 1 week news cycle, then we could reward those who were correct and assume that those who were wrong are either incompetant, or worse they were liars, waiting to cash out, but trying to build up more artificial investment into failing ventures.

    The same concept applied to the Iraq war, and you see that those who were correct were either fired or mocked, and have never been vindicated, and those who were either liars or incompetant, still have their jobs, or have been promoted. there is no accountabiliy in media, and that my friends, is a hypocritical notion to say the least. all us poor working schmucks have to face the consequences when we fuck up, but they do not, perhaps because their fuck ups are planned orchestrated lies, and they need to be kept around for the next round of lies. I am not paranoid. I am correct.