|Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America|
|Publisher||Spiegel & Grau|
|Publication date||November, 2010|
|Media type||Print (Hardback)|
It argues that the crisis was not an accident of the free market but the result of a complex and on-going politico-financial process taking place in the United States whereby wealth and power is transferred to a super-rich "grifter class" that holds a grip on the political process. The book has been described as a "necessary ... corrective" of the assertion that bubbles are inevitable in the market system, and contests the notion that the greed of the American consumer was a primary cause of the problem.
||This article's plot summary may be too long or excessively detailed. (August 2011)|
Griftopia contains seven analytical essays, followed by an epilogue, and a note about the author’s sources.
The introductory chapter is focused on the Tea Party movement whose members are aiming for simple solutions with less government intrusion. Taibbi maintains that the real world is too complex, and the Tea Party adherents are being manipulated (and financed) to do the bidding of Wall Street. Dismantling of regulations and absence of control has been part of the problem of the recent fiasco. Taibbi sees the Tea Party as "top-down media con" initiated by CNBC's Rick Santelli when he denounced not the huge bailout of the banks but rather the relatively small bailout for people facing foreclosure.
Alan Greenspan, an Ayn Rand acolyte, is described as the major enabler of the bubble economy and financial crisis. Taibbi catalogues his string of economic prognostications that were "awful at best". He holds him accountable for fueling economic bubbles during his watch at the Federal Reserve by pushing money and abandoning traditional evaluations when advocating that "ideas" (not financial results) had become the new paradigm of financial evaluation. Greenspan is criticized for advising the public to use adjustable-rate mortgages (ARMs) in preference to fixed–rate mortgages shortly before his raising of interest rates. Taibbi accuses Greenspan of turning the Federal Reserve into a permanent bail-out system for the super-rich.
Taibbi dissects the housing bubble crisis as a complex scam involving players at many levels. Entry level assessments, income levels, and credit scores were falsified or neglected, allowing unqualified customers to acquire mortgages they could not carry. Taibbi maintains that ARMs and other "financial inventions" enlarged the pool of loans that could never be paid back, yet issuing agents and agencies were made rich by commissions. The real money, however, came in for the big banks that securitized these loans, that is to say, repackaged them as investment vehicles (and in the process took the loan originators off the hook). Collateralized debt obligations (CDOs) then cut these bundled loans into "tranches", where the statistically more likely to be paid-back tranche would be given a AAA rating (rating agencies depend on the banks for their living), remaining CDOs were tranched again, and the better part again AAA rated, and tranched further so that eventually most of the mortgages ended up in AAA-rated instruments. The "time-bomb mortgages" were insured by credit default swaps (CDSs) in an unregulated environment, so that neither sellers (such as AIG) needed capitalization, nor buyers needed to own the insured assets. Further, AIG's investment arm invested in CDOs as a collateral to lend-out stocks further exposing itself to financial calamity.
The commodities bubble of 2008 led to global food shortages and prompted the price of oil to rise over $140 per barrel. Taibbi depicts as its cause investment-bank led commodity speculation, after having convinced regulators to dismantle sensible regulations that had safeguarded the process of commodity trading, in place since the Great Depression. Goldman Sachs' invention was the Goldman Sachs Commodity Index inviting pension funds and other investors to speculate long in such index trading leading to higher prices for commodities that directly affect the livelihoods of people.
The sell-off of public assets is described in another essay with examples of frittering away assets under value to the detriment of future generations.
The health care reform by the Obama administration is described as a "grotesque give-away" to the health insurance industry and a betrayal of the public trust. Taibbi argues that the insurance industry unfairly continues to be exempted from anti-trust legislation.
Taibbi’s last chapter takes on Goldman Sachs (GS) in an updated version of his 2009 Rolling Stone article where he "famously" likened it to "a great vampire squid wrapped around the face of humanity". He describes GS as it was in the forefront of pushing Initial public offerings (IPOs) (most of which lost money) during the internet bubble, at the heart of the commodity crisis of 2008 (enabling speculation in oil and other essentials and driving up their prices), and was right at the center of the financial crisis of 2008 ongoing. Taibbi indicates that, in 2008, in spite of $2 billion earnings and $10 billion compensation and bonuses, GS only paid $14 million in taxes at an effective tax rate of 1%. Goldman Sachs, which Taibbi refers to as "a company of criminals," is seen as the "apotheosis of the Grifter Era" controlling rules and regulations through manipulation of the government by money, pressure, insider connections, and revolving door jobs as a "parasitic enterprise". The author asserts that "...in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy."
In the epilogue Taibbi takes a look at the events after 2008. He addresses the issue that bankers in Financial Crisis Inquiry Commission (FCIC) hearings laid the blame of the financial crisis on "lazy poor people living in too much house", a view Republicans embraced as a failure of mixing private enterprise and social engineering, while the Obama administration continues to let Wall Street run the economic policy of the White House. Much of the backroom dealing that resulted in the massive and selective bail-out has not seen the light of day. Taibbi addresses his critics of the 2009 Rolling Stone article who did not argue his facts, but instead took fault with him for not understanding that the bail-out was necessary. Taibbi finally points out that, after 2008, the financial landscape is more concentrated than ever, and efforts at its regulation have been watered down.
Taibbi names most sources he interviewed, however, in some instances sources remained anonymous for their protection. Other sourcing is self-evident from publicly known material.
Taibbi, a reporter for Rolling Stone, uses a journalistic style that incorporates R-rated language, similar to the salty language he encountered in some of his interviews. While it makes the book readable and "engaging", miles away from the dry tone people may expect when matters financial are discussed, the tone of the book has also been criticized as “playing dirty” and as distracting. As the New York Times states:
Words and phrases like “bloviating,” “utterly insane” and “moron” all get vigorous workouts. Taibbi refers to A.I.G.’s “impending ratings holocaust.” And not content to excoriate the former Federal Reserve chairman Alan Greenspan for his near-cultish reverence for unsupervised markets, Taibbi calls him a liar, adding that he “castrated the government as a regulatory authority, then transformed himself into the Pablo Escobar of high finance, unleashing a steady river of cheap weight into the crack house that Wall Street was rapidly becoming.” Mixed metaphors aside, this sort of hyperventilation makes Taibbi’s legitimate accusations seem flimsy, as if the facts alone were not sufficient cause for consternation.
Griftopia has been described as a "relentlessly disturbing, penetrating exploration" as well as a "provocative exploration" of the events leading to the financial crisis. Although Taibbi is not an economist, blogger Stefan Fergus credits him with providing the "clearest book to describe the financial crisis". Journalist Felix Salmon has noted that Griftopia is not a partisan book in the traditional sense as Taibbi dishes out criticism at both Republicans and Democrats. Taibbi views the color of the US not red and blue but rather "puke green", but, as Salmon says, "if muck is going to be raked, you want Taibbi to be doing the raking." Sheelah Kolhatkar has stated that Taibbi has "legitimate targets" and a "right to be angry", as most of the "perpetrators of the financial crisis have escaped more or less unscathed", and while "the worse things get for average Americans, the better off (are) the top 1 percent".
Jay Palmer and Ann Logue have criticized the book for failing to offer any solutions and for some of its language.
- Peter S. Goodman (December 24, 2010). "Thieves' Paradise". The New York Times. Retrieved December 29, 2010. (Archived by WebCite at http://www.webcitation.org/5vTBoVFxL)
- Time Special. "25 People to Blame for the Financial Crisis.". Time Magazine. Retrieved December 29, 2010.(Archived by WebCite at http://www.webcitation.org/5vTC62ewa)
- Matt Taibbi. Griftopia. Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America. Spiegel & Grau, 2010. p. 33. ISBN 978-0-385-52995-2.
- Los Angeles Times (November 11, 2011). Editor's picks: Books. Retrieved January 2, 2011.(Archived by WebCite at http://www.webcitation.org/5vTBxspYH)
- Matt Taibbi, ibid. p.210
- Matt Taibbi, ibid. p. 206
- Brian Lynch (December 7, 2010). "Book review: Giftopia by Matt Taibbi". Straight.com (Vancouver). Retrieved December 29, 2010.(Archived at Webcite at http://www.webcitation.org/5vT7h6hgX)
- Sheelah Kolhatka (November 18, 2010). "Interview with a Vampire". Businessweek.(Archived by WebCite at http://www.webcitation.org/5vT7uNgd5)
- Stephan Fergus (November 9, 2010). ""Griftopia", by Matt Taibbi (Spiegel & Grau)". Civilian Reader. Retrieved January 2, 2011.. (Archived by WebCite at http://www.webcitation.org/5vT81BOp3)
- Felix Salmon (DEC/JAN, 2011). "Giant Sucking Sound". Book Forum. (Archived by WebCite at http://www.webcitation.org/5vT88qsq3)
- Alex Altman (November 8, 2010). "The Skimmer". Time Magazine. Retrieved December 29, 2010.(Archived by WebCite at http://www.webcitation.org/5vT8HaXCX)
- Jay Palmer, Ann C. Logue (October 2, 2010). "Return of the Vampire Squid". Barrons.(Archived by WebCite at http://www.webcitation.org/5vT8NnTIi)