Fraud Creates the Market

In his latest post about Goldman Sachs, Matt Taibbi points out that the investment bank has developed a record now of recommending that its clients buy various financial products at the same time that Goldman Sachs – coincidentally – is selling those products from out of its own accounts.  Inevitably, Goldman Sachs’s turns out to have been wrong and those financial products tank . . . but Goldman Sachs makes out like a bandit by moving those assets off of its own books before they tank.

Taibbi’s post reminded me of something I’ve been meaning to write about for a while now, something that occurred to me when Goldman Sachs and the rest of the Big Money Boyz showed up a year or so ago to testify before Congress as to why their selling mortgage backed securities that they knew to be “shitty” wasn’t unethical.  To a one, they all pointed out (i) that the people they were dealing with were “sophisticated investors” who “knew what they were doing,” (i) that these were “arm’s length transactions,” and therefore (iii) they had no responsibility to advise their customers that they personally considered these instruments to be “shitty.”

It always seemed to me that this defense rested on the investment banks’ fundamental unwillingness to acknowledge the real role they played as the creators of those mortgage-backed instruments:  the role of the “market gatekeeper.”

What is 'Occupy Wall Street' Doing?

I cross-posted my critique of Occupy Wall Street's First Official Statement at Daily Kos over the weekend and it generated a good deal of commentary.  The vast majority of comments fell into two groups:  (i) people who agreed that the First Official Statement was not particularly well-crafted, and (ii) people who took exception to my “armchair quarterbacking” and told me that I had to “trust the process.”  Almost nobody defended the Statement itself, though -- instead they ended up defending “the process” that had produced the Statement.

More below the fold.

The Sociopathy of Banksters and Slaveowners

About six years ago Digby penned a piece entitled The Resentment Tribe. She was following up on a prior post in which she had asked the question: "Why are [Conservatives] so angry?" Digby proposed that what we see from the increasingly batty right-wing is something we have seen demonstrated throughout our history -- namely, a worldview that not only cannot brook dissent, but that so resents any expression of disagreement by others that it demands their complete and utter extirpation. Digby argued that this worldview "ha[d] its genesis in the original sin of slavery and . . . . the best way to understand this is to go right to the heart of the beast and quote . . . Abraham Lincoln at the Cooper Union in New York in 1860."

In that speech, Lincoln spoke to "the Southern people's" threat to break up the union unless their legal right to practice slavery was "at once admitted to as a conclusive and final rule of political action[.]" (emphasis added). Pointing out that the South's right to own slaves already had been legally adjudicated in its favor by the Supreme Court, Lincoln demanded:

[W]hat will satisfy them? Simply this: We must not only let them alone, but we must, somehow, convince them that we do let them alone. This, we know by experience, is no easy task. We have been trying to convince them from the very beginning of our organization, but with no success. In all our platforms and speeches we have constantly protested our purpose to let them alone; but this has had no tendency to convince them. Alike unavailing to convince them, is the fact that they have never detected a man of us in any attempt to disturb them.

These natural, and apparently adequate means all failing, what will convince them? This, and this only: cease to call slavery wrong, and join them in calling it right. And this must be done thoroughly -- done in acts as well as in words. Silence will not be tolerated -- we must pledge ourselves avowedly with them. Senator Douglas' new sedition law must be enacted and enforced, suppressing all declarations that slavery is wrong, whether made in politics, in presses, in pulpits, or in private. We must arrest and return their fugitive slaves with greedy pleasure. We must pull down our Free State constitutions. The whole atmosphere must be disinfected from all taint of opposition to slavery, before they will cease to believe that all their troubles proceed from us. (emphasis added).

In short, it was insufficient that the Southern States be left alone to continue the barbaric institution of slavery; what they demanded from their neighbors to the North was not mere tolerance of this institution, but active approval. Because they were unable to convince their Free State cousins that they should be lauded for buying, selling, and mercilessly exploiting other human beings for personal profit, they felt they had no choice but to go to war.

That excerpt from Lincoln's speech has stayed with me ever since I read it for the first time over at Digby's. I think of it every time I'm confronted by people with whom I disagree and who seem to take it as a personal insult that I might disagree with them. And I think about it when I see political actors -- like the banksters on Wall Street -- who would seem to have more than even the most self-regarding, greedy bastard imaginable might ever want, but who also seem to be perpetually whining that people aren't being nice enough to them.

The Stock Market is Bad for America

One of my pet peeves about financial and political reporting is that the stock market is often looked to as an economic indicator.  If the stock market is up, then this is claimed as evidence the economy is doing well.  Indeed, I remember listening just a few years ago to a radio interview with W.’s labor secretary, Mrs. Mitch McConnell Elaine Chao, who said the stock market’s performance is the only economic indicator anyone should ever be concerned with.  And this was the Secretary of Labor, forgawdsake!

Now I’ll admit that there may once have been a reason the stock market could legitimately be thought of as a valid indicator for how well the national economy was doing.  Basically, the idea was that stock prices reflect the market’s estimation of companies’ future profitability.  So if the market believed the economy was doing well or (more accurately) was going to do well in the future, then companies were expected to realize greater future profits.  Greater profit meant the companies would be worth more, and this would be reflected in their stock prices.  So if market investors were bullish on the American economy, then they were bullish on the stock market as well.

But there are two important things to note about this model.  First, the performance of the stock market doesn’t actually predict the nation’s economic future so much as it reflects what investors already think that future looks like.  Second – and more importantly – looking to the stock market to tell you how the United States economy is doing only makes sense if the value of the companies traded in that market does in fact depend on the U.S.’s national economy.

It is becoming increasingly clear that not only is Wall Street not dependent on the nation’s economy, its goals run directly contrary to the nation as a whole.  It has gotten to the point that when I see the Dow Jones has ticked up a notch I immediately think to myself, “I guess we’re all about to get screwed just a little harder.”

Wall Street and the Teabaggers: Buyer's Remorse

If I could maintain the right level of detachment -- say, the kind that comes with depersonalization disorder -- I think I might be capable of enjoying a bit of schadenfreude at the expense of the House Republicans right now.  It appears that the Wall Street Republicans are trying to get some kind of deal done to raise the debt ceiling, and the Teabaggers are determined not to let them get away with it.

As TimF at Balloon-Juice observed about two week ago, this may be "a truly existential moment -- [the GOP] has to decide who is in charge, and halfway measures won't do. Does the party serve wealthy people, who mostly want low taxes and stability, or does it serve tea party anarchists?"

What makes it all the more delicious -- provided you can ignore the Sword of Damocles hanging over our heads -- is that it wasn't supposed to be this way.  So many people have been repeating and listening to the same Teabagger rhetoric for more than two years now that the idea the Teabaggers were supposed to be "anti-Wall Street" has seeped into our collective psyche.  But if you go back to the beginning of the movement it is clear that the Teabaggers were really created simply to do the bidding of their Wall Street Masters.  

Unfortunately, the Big Money Boyz created a monster too stupid not to be brainwashed by its own propaganda and now it is running amok and threatening to tear down the castle.  I'd laugh, but I don't think that's an appropriate response when watching a horror movie.

One More Thought re: Debt Limit Negotiations

Over at Balloon Juice TimF has a post up about the debt limit negotiations and he raises an interesting point:

It looks like [the GOP] has arrived at a truly existential moment -- it has to decide who is in charge, and halfway measures won't do. Does the party serve wealthy people, who mostly want low taxes and stability, or does it serve tea party anarchists? The issue here is quite similar to the GOP dilemma on immigration in that the party utterly depends on two factions whose demands are not just misaligned but diametrically opposed. The Chamber of Commerce not only wants but in fact depends on undocumented immigrants for more jobs than most people realize, while redneck racists will do almost anything to clean the brown people out of their towns and states.

[snip]

As recently as the mid-Bush administration Republican initiatives still served the CoC at least as much as they catered to racist Bubbas. Can you imagine that now? Of course you can't. Leading edge GOP policies like Arizona's SB1070 and the Georgia law that left their unpicked fruit harvest to rot make it look an awful lot like angry, stupid Bubbas have a solid grip on the steering wheel.

Boehner and his business lobby could still rally and put armageddon back in snooze mode for a few more months. If they do it would count as one hell of an upset against a raging 'roided-up faction that has won every intra-party battle so far.

I wonder if the debt ceiling impasse might not lead the financial Powers That Be to start backing Obama and the Dems again. Despite all of the Wall Street whining about Obama once referring to them as "Fat Cats" the banksters have done very, very well under Obama's watch. The markets are up and bankster compensation is through the roof. Sure Obama and the Dems want to raise their taxes, but at least the Democratic party is still capable of acting rationally to prevent a complete financial meltdown. If the Republicans have been as thoroughly captured by their insane Teabagging base as it now appears, then the Republicans pose a much more fundamental threat to business-as-usual in this country than do the Dems -- and therefore a much more fundamental threat to the CoC and the Wall Street banksters.