Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

  In any case, Emanuel’s open bullying of Obama fan-club groups like MoveOn and Unity ’09 explains in large part why throughout 2009 there was virtually no left flank in the health care debate educating the public about the ramifications of things like the individual mandate.

  “One of the big reasons there was no public outcry about a lot of this stuff is that people didn’t hear about it. People aren’t getting the e-mails from those groups, so they don’t know anything’s wrong,” says Firedoglake blogger Jane Hamsher, who herself was involved with a March 2009 ad campaign against “obstructionist” Democrats that the White House largely succeeded in spiking.

  That particular movement, led by the Campaign for America’s Future, had originally targeted that caucus of conservative Democrats, led by Indiana senator Evan Bayh, who were arguing against their own right to use the reconciliation process.

  The CAF originally opposed those Democrats’ positions on a variety of issues, including their stance on reconciliation and also their stance against cramdown legislation (which would have allowed mortgage holders in bankruptcy to negotiate to keep their homes).

  They announced the campaign on the morning of Tuesday, March 24. By that same afternoon, after hearing objection from the White House, the CAF had backed down and scaled it back.

  The largely successful muffling of the progressive opposition meant there was never an organized grassroots protest run to match the amazingly energetic antisocialist yell-off whipped up by the right-wing talk-radio crowd, who that summer proved once again that unlike a lot of Democrats, politics for them isn’t just about wearing a T-shirt.

  That absence of popular protests from their base certainly made it easier for Democrats to vote for the bill—but even so, some members needed one last push to bite the bullet. On both ends of the spectrum, wavering Democratic Caucus members took historically massive pork payouts and other concessions in exchange for their votes for H.R. 3590. The craziest of these involved Nelson and the aforementioned Mary Landrieu, who each agreed to vote for the bill in exchange for, respectively, a $100 million exemption from Medicaid payments and $300 million in extra federal spending.

  Deals like this increased the obligation of the average taxpayer under Obamacare to a triple ultimatum: many of us would now have to (1) buy our own private health insurance, (2) pay taxes to subsidize the insurance of low-income citizens across the country, and (3) pay still more taxes to subsidize the ordinary Medicaid payments for the citizens of the state of Nebraska, which thanks to Nelson and the White House would not have to pay its own share. That was the original deal, anyway.

  Some of these pork bribes were of a type analysts had never seen before: David Williams of Citizens Against Government Waste calls the people behind these deals “pork entrepreneurs.”

  “In the past what we’ve seen is silly little projects—a teapot museum, the Tiger Woods Foundation, and so on,” says Williams. “But what we’re seeing here is the government tweaking the Medicaid rate to the tune of hundreds of millions or billions of dollars. It has the same corrupting influence as the pork we’re used to seeing every day, but it’s on a scale we’ve never seen before.”

  A hundred million dollars appeared to be the going rate for the vote. Nelson got his $100 million in Medicaid exemptions; Daniel Inouye got the same amount in aid for Hawaiian hospitals. And somebody in Connecticut got $100 million for a “Health Care Facility … at a Public Research University in the United States That Contains a State’s Sole Public Academic Medical and Dental School.”

  “We don’t even know if it was for Dodd or for Lieberman,” says Williams. “It might have been for both.”

  Thus in the end the health care drama played out almost entirely within the Democratic Party. It was a multistage process.

  Stage one involved the election campaign of a magnetic, personable intellectual named Barack Obama who corralled millions of voters into his camp by promising health care reform with a public option that would reduce costs without being an open giveaway to the drug and insurance industries.

  Stage two: after getting elected, Obama invited said industries to the White House early on in the process and cut a private deal to reverse virtually all of his campaign promises in exchange for their support of the bill.

  Stage three then involved pretending the deal hadn’t been made (the White House to this day denies that the PhRMA deal that Tauzin admitted to took place) and insisting instead that the bill Obama supported was not an industry giveaway but simply good policy—and to prove it, they moved to stage four, which was repeatedly citing the research of an MIT economist who received nearly a million dollars from the federal government.

  Stage five involved bullying their own ranks to lay off conservative Democrats and get in line behind a public relations campaign against a totally idiotic and irrelevant Republican-led protest movement.

  Stages six through eight were blaming the Senate for taking all the good stuff out of the bill, buying off the remaining recalcitrant members for $100 million apiece, and then sauntering off into the sunset atop a multitrillion-dollar corporate welfare program that might further wreck an already wrecked system for a generation, but will keep Rahm Emanuel rolling in campaign contributions for, well, the next two electoral cycles.

  And then of course there was stage nine—losing Ted Kennedy’s seat and having to use the reconciliation process after all, but not taking advantage of that process to improve the bill in any significant way.

  ———

  To say that this monstrous bill was all the work of the Democrats is not entirely accurate, of course. The truth is that a scam on this scale required the negative assistance from all ends of the DC zoo, with the seemingly irrelevant Republicans playing an important part.

  The moronic and absurdly hypocritical objections of stammering jerks like John Boehner and Mitch McConnell about Obamacare ultimately served to discredit any progressive criticism of the legislation and helped further soil this historically corrupt bill by ensuring that the Congressional Record will forever show that it was passed in a romper room of overgrown children seemingly barely old enough to keep from peeing on themselves.

  Instead of spearheading a real cogent opposition to the genuine and obvious flaws in the bill, in particular those areas that corrupt their fetishized free-market principles, the Republicans disgraced themselves by spitting out one easily debunked lie after another and in the final hours reducing congressional procedure to something very like a breath-holding contest.

  Despite the fact that the bill’s passage seemed a foregone conclusion and the Democrats had their sixty votes wrapped up, McConnell and Co. tried to rerun Mr. Smith Goes to Washington live on C-SPAN by attempting one filibuster after another and then insisting on the full thirty hours of debate each time their filibusters were broken.

  These pointless stall tactics resulted in five consecutive days of post-midnight votes in the week before Christmas, with two sessions ending at dawn, one at midnight, and two at 1:00 a.m., including the final vote on Christmas Eve. With the Christmas holidays of virtually every staffer in Washington thus ruined, the Republicans then turned around and wailed to the media about how the Democrats were trying to do dirt in the middle of the night.

  “It’s obvious why the majority has cooked up this amendment in secret, has introduced it in the middle of a snowstorm, has scheduled the Senate to come in session at midnight, has scheduled a vote for one a.m., is insisting that it be passed before Christmas—because they don’t want the American people to know what’s in it,” said Tennessee’s Lamar Alexander.

  And once that drum started being beaten, the inevitable Fox/Murdoch idiot parade chimed in, with junior-Goebbels-in-heels Michelle Malkin railing against the Democrats’ “Vampire Congress”—apparently forgetting that that term was originally invented to describe the Republican-run Congresses of Tom DeLay and David Dreier, who one year pushed 78 of 191 bills through the Rules Committee after 8:00 p.m., with 21 coming i
n as late as seven in the morning.

  Thus in the end this awful bill not only threatened to screw us all out of billions a year for decades to come, it treated us to the spectacle of our elected representatives behaving at their very best, reducing the Senate chamber to a screeching apeararium on Christmas and ensuring at least a few years more of pointless deadlock and legislative pissing contests as our nation bumbles its way through a cratering economy and two losing wars.

  There will be a lot to say about health care for years to come, but the most important thing about it is that it proved the government’s utter helplessness to police whole sectors of society. Forget about fixing the health care industry; what President Obama proved to America is that his government couldn’t even win back the right to truly regulate this massive industry, even with a historic mandate at his back and after giving away everything he had to trade, conceding even the power to tax. There is a universe under which the passage of Obamacare leads to future legislative tinkering that drives prices down and chips away at the industry’s antitrust exemption. But it’s equally possible that the passage of the bill presages a revolutionary new vision for America’s industrial economy—one in which companies compete not on price and quality but in political influence, and earn profits not by attracting customers with good service, but by using the power of the state to protect markets and force customers into the fold.

  The mistake our politicians so often make with these industry leaders is in thinking they are interested in, or respectful of, the power of government. All they want is to keep stealing. If you can offer them the government’s seal of approval on that, they’ll take it. But if you can’t, well, they’ll take that too.

  *Lott’s weepy My house! They took my fucking house! speech on March 7, 2007: “It wasn’t until after Hurricane Katrina that I gained a true understanding of the fact that the insurance industry had a blanket exemption from our antitrust law. And as I witnessed the reprehensible behavior of the insurance industry in their response to Katrina, I became curious about the history, rationale, and wisdom of such a broad exemption from federal oversight.”

  7

  The Great American Bubble Machine

  During the winter of 2008–9, when I was just feeling my way through the first story I was writing for Rolling Stone about the financial crisis, I started to notice something amusing. One of the keys to talking to sources about any subject is clicking with their sense of humor, and I was noticing that with a lot of the financial people I was calling, I was missing laugh cues whenever anyone mentioned the investment bank Goldman Sachs. No one ever just referenced “Goldman”; they would say, “those motherfuckers” or “those cocksuckers” or “those motherfucking cocksucking assholes at Goldman Sachs.” It was a name spoken with such contempt that you could almost hear people holding the phone away from their faces as they talked, the way you do with the baggie you have to pick up curbing your dog on the streets of New York.

  After a few months I also started to notice that every time someone wanted to provide an example of some sordid scam the investment banking community was into, they used Goldman as an example. The bank was also continually held up as a model for how certain firms used their connections with government to buffer business risk—Goldman, I was told, was expert at using campaign contributions as a kind of market insurance to hedge their investments. Many of the people I talked to were from firms that didn’t get particularly advantageous treatment from the government during the bailout season, and so I assumed their take on the crisis, and Goldman, was colored by that.

  After writing one story on the crisis that was mostly about AIG, I suggested to my editors at the Stone that we do a piece on Goldman that we could use as a window into the whole world of investment banking and what it’s been up to for the past few decades. We did the story; in retrospect we left out quite a lot, a problem I’ve tried to rectify here by adding some to the original text.

  But perhaps as interesting as the actual material in the original piece was what happened after we ran it, as the magazine and I got sucked into a public relations firestorm that was both bizarre and educational. My initial reaction to being blasted in the media by commentators from CNBC (“Stop Blaming Goldman Sachs!” read Charlie Gasparino’s rant; another on-air talent called me a “lunatic”), the Atlantic, and other outlets was that this was just typical media turf-war stuff: a bunch of insiders angrily piling on someone who didn’t have any background in their area of expertise (which I did not) and yet was not-so-subtly indicting them for falling asleep on the job.

  That was part of the story. If Goldman Sachs really was, as we’d described, little more than an upscale version of a boiler-room pump-and-dump operation, then that definitely was an indictment of the financial press, which almost universally praised the bank as a pillar of economic genius. If financial journalists like the Charlie Gasparinos and Megan McArdles out there took it that way, good—I meant it that way.

  But when the uproar continued for more than a month—an eternity in news cycle time—it was clear that there was something else at work. Looking back now, what I experienced in the wake of the Goldman piece was a lesson in a subtle truth about class politics in this country.

  Which is this: you can pick on the rich in an ironic, Arrested Development sort of way, you can muss Donald Trump’s hair, you can even talk abstractly about class economics using clinical terms like “income disparity.” But in our media you’re not allowed to just kick the rich in the balls and use class-warfare language. The taboo isn’t so much the subject matter, the taboo is the tone. You’re allowed to grimace and shake your head at their shenanigans, but you can’t call them crooks and imply that they haven’t earned their money by being better or smarter than everyone else, at least not until they’ve been indicted or gone bankrupt.

  Goldman was the ultimate embodiment of this media privilege. The most valuable item in all the bank’s holdings was its undeserved reputation for brilliance and efficiency. The narrative that Goldman had always enjoyed was a sort of ongoing validation of the Ayn Rand/Alan Greenspan fairy tale, in which their riches and power sufficed as testimony to their social value. They made lots of money, they were good at whatever it is they did, therefore they were “producers” and should be given the benefit of the doubt. This fairy tale was deeply ingrained in the financial press, to the point where any suggestion to the contrary had to be attacked, regardless of the substance of that suggestion.

  The abuse I was taking after my Goldman story came out wasn’t so much a media turf war as a defense of The Narrative. I believe now that there’s real fear of what happens once The Narrative blows up—because once we’ve ripped the rich to shreds, what we’re left with is a whole bunch of broke people wondering where the hell their money went, without even a soothing fairy tale to help them get to sleep at night.

  People in the financial community who actually worked in that world, the traders and the bankers themselves who joked with me about “those motherfuckers,” did not have these illusions. You’re not going to be good at making money if you need there to be a halo around the moneymaking process. The only people who really clung to those illusions were the financial commentators, right up to the point where those illusions became completely unsustainable. Within six months after this article came out, it was de rigueur even for wire services to reference Goldman’s “vampire squid” reputation. But by then the executives at Goldman weren’t worrying all that much about their plummeting reputation—and that, in the end, turned out to be the most interesting part of this story. But more on that at the end of this updated version of the original piece,* which I’ve saved for last in this book because the history of Goldman—a company that has developed a reputation as the smartest and nimblest of corporate enterprises—is the story of the great lie at the center of our political and economic life. Goldman is not a company of geniuses, it’s a company of criminals. And far from being the best fruit of a democratic, capitalist society, it’s
the apotheosis of the Grifter Era, a parasitic enterprise that has attached itself to the American government and taxpayer and shamelessly engorged itself on us all.

  THE FIRST THING you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

  Most of us know the major players: Henry Paulson, George Bush’s last Treasury secretary, who used to run Goldman and was the architect of a suspiciously self-serving plan to funnel trillions from the Treasury to a small list of his old friends on Wall Street. Bob Rubin, Bill Clinton’s former Treasury secretary, spent twenty-six years at Goldman and later went on to become chairman of Citigroup—which in turn got a $300 billion taxpayer bailout from Paulson.

  There’s John Thain, the asshole chief of Merrill Lynch who bought a $28,000 set of curtains and an $87,000 area rug for his office as his company was going broke; this former Goldman banker got a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. And Robert Steel, Goldmanite former head of Wachovia, who scored himself and his fellow executives $225 million in golden parachute payments as the company was imploding. The heads of the Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange, the current chief of staff of the Treasury, the last two heads of the New York Federal Reserve Bank (which incidentally is now in charge of regulating Goldman), and on and on.