Author Matt Taibbi

Rolling Stone contributing editor and Griftopia author demystifies the inner workings of Wall Street and critiques why the U.S. should not have bailed out big banks.

Matt Taibbi is a contributing editor for Rolling Stone and the author of five books, including the best seller The Great Derangement and, his latest, Griftopia—an account of the ongoing political and financial crisis in the U.S. Taibbi previously held various editorial positions and won a National Magazine Award for commentary. He also played pro basketball in Mongolia, was one of the first Americans to play pro baseball in Russia and worked as a sports editor for the Moscow Times. The Huffington Post named Taibbi one of its 2010 Game Changers.

TRANSCRIPT

Tavis: Matt Taibbi is a contributing editor for “Rolling Stone” and best-selling author of books like “The Great Derangement.” His latest is called “Griftopia: Bubble Machines, Vampire Squids and the Long Con that is Breaking America – ” great title. He joins us tonight from San Francisco. Matt, good to have you on the program, sir.
Matt Taibbi: Thanks for having me, Tavis.
Tavis: Let me start with that quote of a couple of years ago, I guess a year or so ago now, that really was the impetus for the book, and the quote says, and I read, “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.”
You said that a year ago – over a year ago, now – in “Rolling Stone” and it becomes again, as I said, the impetus for the actual book. I recall when that quote came out it was, as you will recall, there was much commentary, conversation about that quote and whether or not journalists should be saying things, writing things so harsh. So take me back to the quote and what you recall about the controversy about it.
Taibbi: Well, the first thing that was really funny about that quote is that it almost actually didn’t get into the magazine because the fact-checkers called me up the night before we went to bed on that issue and they were all a-twitter over the fact that squids don’t have blood funnels. (Laughter) So we very nearly got into a factual problem and I tried to explain to them that that was part of the joke.
But yeah, no, we did that – I was trying – this is very difficult material, this Wall Street stuff. It’s very dense, it’s boring to a lot of people, and we had to use some narrative techniques, some fiction-writing techniques to try to get people excited in the material.
I kind of turned Goldman Sachs into a James Bond-style villain, and that helped focus people’s attention, I think, on some of the issues. Now, I didn’t have to make anything up in order to do that. As they say, this had the advantage of being true. But we did use some of those techniques, and some of that language.
I thought it was a way to get people interested in material that otherwise they wouldn’t have paid attention to.
Tavis: Before I come back to the material specifically, the book, “Griftopia,” it occurs to me now that you work for a publication that over the last year or so has had a great deal to say about the very serious issues that many of us are wrestling with as Americans.
This magazine, “Rolling Stone,” is given credit for bringing down a top-notch general, or a top general, I should say; maybe the “notch” part is debatable. But certainly a top general was brought down by a piece in “Rolling Stone.” You’ve taken on Goldman Sachs and generated a lot of controversy around your reporting about the financial collapse.
Talk to me about the power of magazines these days like “Rolling Stone” to have real stuff to say about real issues.
Taibbi: Well, I think we’re kind of a dying breed in this profession. The print magazine and print journalism industry is obviously in a great deal of trouble, and one of the things that happened when this business started to give way to the Internet and to broadcast television is that a lot of organizations started cutting specifically investigative journalism and they also started cutting fact-checkers. Those were two of the places they cut first.
So there’s very few places left in the journalism business where somebody like me has the luxury of spending two or three months, or Michael Hastings, who did the McChrystal piece, spending two or three months on a single story or traveling to Afghanistan and not producing something every single day.
That’s a tremendous rarity in our business nowadays. But I think it’s still valuable. I think there still is a place for that, and as we’ve seen, it can still have an impact if we allow journalism to do that kind of thing.
Tavis: What is, then, back to the book, “Griftopia,” what is the griftocracy?
Taibbi: Well, what I’m really talking about in this book is a small group of politically connected banks that really have become too big to fail, and they’ve become intertwined with government to a point where they’re completely immune from capitalist consequence.
It’s really interesting that we’ve had this great Tea Party movement that is all about restoring free market capitalist values, but what they completely fail to understand is that what we’ve got now is a situation where there is a small class of gigantic financial companies that have put themselves above capitalism.
They’ve now been able to rig the game so that they’re going to win no matter what happens, and no matter how stupid they act, which – and of course they did in the financial crisis act incredibly stupidly, and they not only didn’t die out, they ended up ascendant and making more money than ever before.
Tavis: Well, many of them did die out. A couple of them were let go, number one.
Taibbi: Well, that’s true, a few, yeah.
Tavis: A few were let go, and these others – I understand the point you’re making, but I just want to push you a little bit – a few did die out. Lehmann comes to mind immediately, of course.
Taibbi: Bear and -
Tavis: Bear, exactly. But there are others, though, who only survived – what you talk about in the book – because we, the American taxpayer, bailed them out. So they’re not necessarily – so explain to me more what you mean when you say “above capitalist consequence,” since we had to bail them out of the mess they got themselves into.
Taibbi: But we shouldn’t have bailed them out. That’s the whole point. Goldman Sachs and Morgan Stanley and Citigroup, a lot of these companies would not have survived in September of 2008 had these companies not been able to call up in some cases their former coworkers in government, the great example being Goldman Sachs, which was able to call up Hank Paulson, the former head of Goldman Sachs, and not only have him green light the AIG bailout, which resulted in $13 billion that went straight to Goldman Sachs, but they also approved, for instance, the overnight transition from Goldman from an investment bank to a commercial bank.
They got permission from the government to do that, which freed them up to borrow billions and billions of dollars from the Federal Reserve at 0 percent interest. I think without the ability to reach out to the government at a time of need and get enormous amounts of bailout money and all these special favors, a lot of these companies would have fallen flat on their face or gone bankrupt, and they didn’t do that.
Tavis: Juxtapose for me, Matt, your terminology of government as a “slavish lapdog” to these financial institutions versus the Obama administration and Democrats in Congress telling us that what they gave us a few months ago was financial reform that had teeth in it.
Taibbi: Well, obviously they’re going to say that, but most of the people that I talked to on Wall Street, they’ll all tell you that what was passed, the Dodd-Frank bill, while it had some good things in it – most notably, the ban on proprietary trading, the so-called Volcker rule, really there wasn’t anything done to change the essential problems that led to the financial crisis.
The biggest problems again being that these banks are simply too big now. The main problem is that we cannot let these banks fail, no matter how irresponsible we are, and there were efforts early on in the Dodd-Frank process to try to break up some of these companies and make them smaller. But we failed to do that, and that’s an important problem that we didn’t address.
Tavis: Is it just the banks, or is this broader than the banks? I raise that because, as I’ve said many times on this program, while this is going on, the healthcare debate, that is, the stock of the healthcare industry went through the roof the week it was announced that they had cut this deal with the Obama administration.
So clearly, they were happy. If there was going to be healthcare reform, they were happy with what they got, again, to the point that their stock went up. So is it just the financial industry that has government by the throat, or does it move beyond that?
Taibbi: No, actually, I included a whole chapter in this book about the healthcare reform specifically to point that out. In fact, the insurance industry, they were able to survive this entire healthcare reform effort without having anybody touch their antitrust exemption.
Not many people know that insurance companies are legally allowed to collude and set prices. All the things that movie “The Informant” with Matt Damon in it, which sort of villainized a group of agricultural companies for getting together and setting the prices of a certain kind of corn product, people don’t realize that that’s legal in the health insurance industry.
That antitrust exemption was preserved throughout this entire process because just as you say, the insurance companies were able to meet with the Obama administration and cut back room deals and create and craft something they called healthcare reform that didn’t touch the essential subsidy of their industry.
Tavis: What happens now to the griftocracy now that Republicans will be running things in the House, now that the Tea Party has made a statement, whatever that might have been, just days ago on the election. What happens to the griftocracy now?
Taibbi: Well, clearly there hasn’t been a whole lot of difference between the Democrats and the Republicans with regard to the policy towards Wall Street. If anything, the Democrats have really been worse over the last 15 years or so. The two major deregulatory actions that led to the financial crisis, which were the repeal of the Glass-Steagall Act in 1998 and the Commodity Futures Modernization Act in 2000, which deregulated derivatives, those were both done under Bill Clinton’s watch.
But the Republicans are very much anxious to do the bidding of Wall Street and in fact the day after the elections last week one of the first things they announced was their intention to try to roll back the Volcker Rule, that very thing I just mentioned – the one thing in the Dodd-Frank rule that Wall Street guys tell me was a good idea, this ban on proprietary trading, this risky gambling for the bank’s own accounts.
That was the first thing that they decided to do, was to try to roll back the Volcker Rule, and that tells you a lot about where their priorities are. I think a lot of ordinary Tea Partiers don’t realize that they elected these guys with a mandate to end bailouts and end subsidies of Wall Street, but the reality was that one of the first things they did was try to reach out and do a favor for Wall Street.
Tavis: I got just 30 seconds here left, Matt. You say, to my read, at least, you saved some of your harshest criticism or critique for Alan Greenspan.
Taibbi: Mm-hmm. Yeah, what I was trying to do there is show this sort of mentality, this incredible contradiction in Greenspan’s personality. Because on the one hand he symbolized this ideology that is very popular now, this notion that government has no place in business, there should be no regulation whatsoever.
He very publicly advocated that kind of ideology, but at the same time he was building this gigantic welfare state for Wall Street by continually bailing these guys out with lower interest rates and cheap Federal Reserve money every time they blew themselves up in a speculative crisis.
So there’s this incredible contradiction between no regulation on the one hand, no government, and total government welfare state on the other hand, and that’s really where we are right now.
Tavis: It’s a great deconstruction of what happened when this crisis hit. It’s written by Matt Taibbi. The book is called “Griftopia: Bubble Machines, Vampire Squids and the Long Con that is Breaking America.” I just love saying it. Matt, good to have you on the program, and all the best to you.
Taibbi: Thanks for having me on.
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Last modified: April 26, 2011 at 12:28 pm