31 March 2009

for better or worse i am becoming kind of obsessed with mr. taibbi...

[from rolling stone...]

Bush Apologizes: The Farewell Interview We Wish He'd Give

W. comes clean - on his dad, Condi's farts and the time Dick waterboarded the house boy


Posted Jan 22, 2009 11:45 PM

Despite a financial crisis for the ages, the catastrophic collapse of a Republican Party crippled by his political legacy, and the highest presidential disapproval rating in the history of American polling, outgoing commander in chief George W. Bush has not completely lost his sense of fun. When Rolling Stone caught up with him at the White House shortly after the holidays for what would turn out to be his final extended sit-down interview as president, the graying but still quite fit Texan had just finished his morning exercycle session in an eagle-emblazoned sweatsuit and was fiddling with a new toy.

"They call it a Wii, or a Mee, or something," Bush tells me, smiling as he waves a wandlike plastic device in front of a 54-inch plasma TV in the Treaty Room, a large, brightly lit chamber on the second floor of the Executive Residence that traditionally functions as the president's private study. The president is playing a friendly game of Major League Baseball — the Boston Red Sox against his cherished Texas Rangers — and a computer-rendered Daisuke Matsuzaka drills a hard slider right past him, down and in.

"Huh," says the president. "Might have to choke up a little."

Although now used as a game room, the Treaty Room still has a classic feel, with a century-old painting by Theobald Chartran depicting the signing of the peace treaty after the Spanish-American War, and a magnificent mahogany "treaty table" first used by Ulysses S. Grant. A bookshelf on the north wall displays standard-issue Americana such as Poor Richard's Almanack, but it also contains former swimsuit model Kathy Ireland's Powerful Inspirations: Eight Lessons That Will Change Your Life ("There's a lot of good life stuff in there, a lot of stuff about patience," the president says) and a well-worn copy of 101 Dumb Dog Deaths ("Makes me laugh every time, especially the one about cow-tipping").

Matsuzaka delivers again, but the president looks fastball when the pitch is a change. "Damn it!" he shouts, bouncing the Wii wand off an antique globe in the corner. "Goddamn motherfucking shit!" After collecting himself, he takes a seat at his desk and leans back in his grand leather easy chair, stirring the ice cubes in a glass of Diet Coke with a finger.

So are we meeting up here because Michelle Obama is measuring the Oval Office windows for drapes?
[Laughs] No. I just like it up here. Plus, people tend to get nervous in the Oval Office. Figured I'd make it a little easier on you by doing this here.

While I was waiting, one of your staffers told me a crazy story about a certain member of your Cabinet breaking wind in the Oval Office. Can you confirm that story?
Well, like I said, people get nervous down there. It's — [laughs] — I can't believe someone told you about that.

But you're leaving office in a couple of weeks. Come on. Throw us a bone. Just think, you finally get to talk about all of these things.
Look, I can't. Besides, it wasn't that big of a — OK, fine. It was Condi.

Condoleezza Rice farted in the Oval Office! When she was the national security adviser?
No, this was when she was State. Just after I appointed her. And it wasn't no little whistler, either. She's a little lady, but she let that baby rip. Nearly blew [White House chief of staff] Andy Card's ears off.

Was this in the middle of something important?
It was January 2005. We were meeting about the first State of the Union speech of my second term. I'm telling everyone about how I wanted to make a major statement about ending tyranny around the world and spreading liberty and freedom, and the so-called pragmatists in the office, especially Cheney, are flinching, telling me I should confine myself to achievable goals. It's a serious moment, and things were getting pretty heated. At one point I turn to Condi and I say, "So, Condi, what do you think?" And she's like, "Mr. President, I think you should — "

And that's when it happened. Ppppllllfft! It sounded like someone had started up a chain saw in there. We have this painting of the Rio Grande by an artist named Tom Lea in the Oval Office, and I swear to you that thing swung three inches sideways. She started looking around all innocent-like, like, "Gosh, who did that?" It was hilarious.

Doesn't she know that cover-ups never work?
That's what Cheney said: "Condi, that's what got Nixon in trouble. You try to hide that shit, it looks 20 times worse." I tell you, it was almost a year before she so much as smiled about that incident.

Let's talk about August 6th, 2001. That's the day you got a memo warning about plans for possible attacks by Osama bin Laden and Al Qaeda. What were you doing that day?
I'll be honest with you. I was at the ranch, on vacation. I was watching the Hall of Fame game on TV. First NFL preseason game of the year, hate to miss it, you know?

I'm the same way. It doesn't matter what teams are playing, I watch it.
Exactly. It's a long off-season, and you start to miss the game. So I'm watching it — I remember it was Miami and St. Louis. First time I ever saw Marc Bulger. He was just a backup to Warner then. I think he threw a touchdown in the fourth quarter. I thought to myself, "This guy looks pretty solid in the pocket. He might have a future in this league."

That's good foresight right there.
Anyway, it was right around then that they brought me my PDB [Presidential Daily Briefing], and it said something about bin Laden. I mean, we get these warnings about foreign terrorists all the time. How was I supposed to know he was going to attack in the United States?

Well, the memo was titled "Bin Laden Determined to Attack in U.S."
It was?

Yes, sir.
Well, nobody told me that.

But they wrote it to you.
But nobody told me that they wrote it to me.

Who's "they"?
I don't know. Whoever is in the room. Vice President Cheney. Don Rumsfeld. Rove. Sometimes there's some other guys. It kind of rotates.

Do you decide who "they" is?
No, they usually decide who they is. Or at least one of they does. Usually Cheney.

Interesting. What did they tell you they wrote to you about why America needed to invade Iraq?
Sometime in the fall of 2001, pretty soon after 9/11, Rumsfeld and Cheney handed me a piece of paper. I asked them what was in it. Rumsfeld says, "Mr. President, we've just written you a memo explaining that we need to invade Iraq." And I said, "OK. Why?" And Dick says to me, "Because of 9/11, Mr. President." [Silence]

Is that the whole story?
Yeah. Why?

I don't know. It kind of feels like there should be more there.
Well, later on, they explained that we had to attack Iraq before Saddam had a chance to give his weapons of mass destruction to other terrorists. George Tenet told me we had a solid case — a "slam-dunk," he called it.

But it wasn't.
That's not what they told me at the time.

Again with the "they."
OK, fine, fuck it — it was a stretch, all right? But we were trying all kinds of stuff back then. Just kind of winging it. It was an exciting time. You felt like you could say anything and people would just believe it. In those days I could have said the moon was made of string beans and CNN would have rushed it on the air [sighs]. Not like now.

The point is, it seems like you only talked to people who told you what you wanted to hear. If you didn't ever talk to anyone who would give you bad news, how was bad news supposed to get in?
That's unfair. If there was bad news, I certainly wanted to be part of it.

Really? What about the time you fired economic adviser Lawrence Lindsey after he predicted the war would cost $200 billion? Or had General Shinseki forced out after he predicted you would need several hundred thousand troops to occupy Iraq? Or demoted Richard Clarke when he insisted there was no connection between Saddam and Al Qaeda? You fired pretty much everybody who disagreed with you.
Well, that's stretching things. I didn't fire everyone who disagreed with me.

Can you name one person in your administration who disagreed with you in public and didn't get fired for it?
Sure, I can. Anthony Zinni, for instance.

The former Middle East Centcom commander? The guy who said the occupation of Iraq would require several hundred thousand troops, back when Rumsfeld was touting that whole "lean and mean fighting force" business?
Right. Him.

He was fired.
Really? They told me he was sick.

For five years?

Was there any dissension in the ranks after the war started? Did anyone at any time voice any disagreements?
Well, sure. Obviously you had the Powell-Rummy thing, which was just ongoing, never-ending. It got to be kind of a serious problem. Colin, you think he's this buttoned-up guy, but something about Rummy just made him nuts. Every time Don opened his mouth about anything in the Oval Office, I swear to God, Colin would be sitting there moving his lips and screwing up his eyes, pretending he was Rumsfeld talking. Like right in front of Rumsfeld. Don would suddenly stop talking in midsentence, just to catch Colin at it — but Colin would immediately stop moving his mouth. Then as soon as Rumsfeld started talking again, Colin would start back up. It drove Rummy crazy. One time Don got so pissed off that he jumps out of his seat and screams at Colin, like, "Fuck you, Colin! You're always fucking doing that!" And I swear to God, just at that moment, the top row of Rummy's dentures flies out of his mouth and lands on the carpet, right in the middle of the Oval Office. Like with a thud. None of us even knew he had dentures, and there they are, pink and covered in spit, just sitting there.

And immediately, and I mean immediately, Barney — I've never been prouder of that animal — he jumps up from the corner, runs over, picks up the dentures like he's been waiting years for this moment and runs out the door. Everything's quiet, except you can hear the dog's tags clinking as he runs down the hall. Rummy is just staring at us in a rage with that leathery face of his and no teeth. He looked like one of those ghosts in Jacob's Ladder. I can guarantee you that was the best day of Colin's life. From that point on, every time he came into the Oval Office, he brought Barney a bag of beef snacks.

Still, you turned out to be totally unprepared for the insurgency in Iraq. Did you really tell Pat Robertson before the war, "We're not going to have any casualties"?
I may have. But if I did, I certainly meant it in the sense of "We're not going to have soldiers getting killed." Not in the sense that you're implying.

[Confused] What sense am I implying?
I don't know, but I think you're trying to make something negative about it.

Was everybody on board about rendition — your policy of kidnapping terrorist suspects and flying them to places like Egypt, where they could be tortured?
You bet. The only problem there was John [Ashcroft, former attorney general]. He was always trying to get religious at the wrong times. You remember when that story came out about that Canadian fella we snatched up?

Maher Arar? The guy you kidnapped at JFK Airport and took to Syria?
Exactly. Well, the press got on us pretty good about that. I mean, it doesn't look good when you take some Canadian guy, throw a bag over his head, kidnap him and spend a year beating his ass in some basement in Syria. We call a meeting to figure out how to deal with it. We're going over the options, and when it comes John's turn to suggest what we should do, he asks us to start praying for the guy! "Let's all bring it in," he's saying. And he takes Andy's and Condi's hands and starts asking the Lord to help ease the pain suffered by the guy's family, blah blah blah. Well, you should have seen the look on Rummy's face. He about shat. You have to remember, this is John's people who fucked this up in the first place — the FBI shouldn't have flagged the guy, given how little they had on him. So technically this is John's fault that we're all eating this mess. So Rummy says, "Hey, John — how come when we fuck up, you find all kinds of answers here on the planet Earth, but when Justice fucks up, it's God's will?"

Colin Powell says you guys had a little accident while you were working out the whole waterboarding protocol.
Yeah. We were actually right here in this room when that happened. Dick is going over what we can and cannot do legally to prisoners. Rummy is asking if we can stick hot pokers in their ears. "That works," he says, "I've done it to my kids." Dick's like, "No, I don't think so, I think they'll get us for that. But we've got this thing the Army uses in training, they call it waterboarding, which will hold up in court." Dick explains that it was invented by the Spanish Inquisition, but it was also used a lot by the Khmer Rouge. Rummy's eyes light up: "Oh, the Khmer Rouge." He likes the Khmer Rouge, is always talking about their management model. I've never heard of it, so I say, "I want to see it. Can we see it?"

Dick shrugs. Just at that moment, one of our houseboys comes in bringing coffees and some Mylanta for Rummy on a silver tray. He's a Laotian kid named Manny, nice boy, has a lazy eye, a stutter and a big mole on his neck. Apparently some guys at State took him in after one of his family's oxen stepped on an old land mine and blew up his mom and two of his sisters in the bush somewhere. I make sure to give him five dollars every Christmas because of that. So Rummy says, "Hey, Manny, can you do me a favor? Can you lie on this table?" And Manny is like, "Y-y-y-yes, Secretary R-r-r-rumsfeld."

So we put him on the table and Dick holds a napkin over his eyes and then starts pouring big gulps of ice water out of a pitcher into his nose and mouth. "C-c-c-can't b-b-b-reathe!" Manny gasps, and Dick is like, "We know, Manny, that's why we're doing this. Just relax." Next, Don starts pouring hot coffee in his ears and eyes, and Manny screams, at which point Dick says, "No, Don, it's not about temperature or burning, it's all about drowning." Rummy nods, and we go back to pouring the water up his nose. Manny is kicking and screaming, and Dick finally starts getting mad. "You're making a lot of noise, Manny. You're going to have to calm down."

But Manny is still screaming and Rummy is shaking his head, like he's not sure it's really working. "I still say it would work better if you could apply some heat," he says. "Here, try this." So he takes out his lighter and uses it to set Manny's ears on fire. "There, look at that," he says. Manny is really flailing around now, and Don looks totally engaged in the process.

"Mmm," Dick says. "I just don't think the law is going to let us do that." So they launch into an argument about it, and after a while we realize that Manny isn't moving anymore. There's a little streak of vomit coming out of his mouth and his little eyes have stopped blinking. Basically, he died. We had to get a new houseboy. One good thing about that is we made the decision not to set people's ears on fire.

Do you ever look back on the past eight years and think, "Maybe I shouldn't have let Dick Cheney run everything"?
All the time. I mean, I was here when my dad was president. Those old guys like Dick managed to do all the work back then without fucking absolutely everything up. I figured Dick would do the paperwork, and I would kiss the occasional baby and throw out the first ball at Camden Yards once a year. Instead, I'm, like, up to my eyes in bodies here. Dick was this quiet accountant type in my dad's administration, but for me he's been a cross between Ted Bundy and Rommel. Thanks to him, I can't even take a walk on the Liberty University quad without people throwing shit at me.

But he handled things smoothly for your dad?
Hell, my dad barely went through two sticks of deodorant his entire presidency. He and Mommy spent all of 1989 in a cribbage game. I remember walking in the Residence once and being like, "Communism just collapsed." And they're like, "Just a minute, son."

You often talked about how you didn't need to seek your father's advice as president, that you appealed to a "higher father." Why not call your dad every now and then?
Let me tell you something about my dad. When I was seven, my three-year-old sister, Robin, died of leukemia. You know how he told me? It was five days later. Robin's seat at the dinner table was empty. I'm like, "Daddy, where's Robin?" And he's like, "She's dead. Finish your peas."

Let's go back to the 2004 election. How confident did you feel about your re-election once you saw that John Kerry was the Democratic nominee?
We all felt pretty good. Karl especially.

I remember one scene in particular. It was the night Kerry won all those states on Super Tuesday and locked up the nomination. He's giving his acceptance speech right down the street in the Old Post Office building here in D.C., giving me all kinds of shit as usual, calling me arrogant, reckless, inept, all that shit. And as he's saying this stuff about me, the crowd is cheering like it's a World Series win, which is never something a politician likes to see. And I say to Karl, "Hey, Karl, what the hell? Are we vulnerable here?" And Karl says to me, calm as day, "Mr. President, this guy Kerry, every time he opens his mouth, it looks like it just had a cock in it. Don't worry, it's gonna be a walk."

You called Kerry that night, if I remember correctly.
Yeah. Karl was also on the line on another phone in the room, he had his hand over the mouthpiece. It was hilarious. My girl tells Kerry to hold for the president of the United States, and he's, like, trembling on the phone, you could almost hear it. So I come on and I'm like, "I'll have a large pie with ham and pineapple. And don't skimp on the pineapple."

Kerry, the tool, he doesn't know what to say, so he's like, "Uh, um, Mr. President, I look forward to a clean, honest campaign. I, uh, hope we have a spirited debate, blah blah blah." I look over at Karl, and Karl's nodding at me, like, Go for it. So I'm like, "And get me two Dr Peppers and a bag of those fucking garlic twists." And Kerry's like, "Mr. President. . . ." And I cut him off, and I'm like, "No, make it two bags. And don't forget the salt!" Karl's giggling like crazy. Then we hang up and tell the press that we just congratulated Senator Kerry on an "important victory." It was like that all year. We were two steps ahead of that clown the whole way.

Was the Swift-boat thing your idea?
No, that was Karl too. You have to remember, the thing about Karl — what he always told me is that you don't hit a guy where he's weak, you hit him where he thinks he's strong. He said the thing about Kerry is that everywhere he goes, he's, like, pulling his medals out and showing them off, like a guy trying to get laid in a bar at three in the morning. So we figured we'd put it out there like he didn't really earn them or whatever. And, hey, maybe that was a low blow, but the reason it worked is that he was so freaking touchy about it. Every time he squawked about it, I'd just pick up the phone and order up a whole new round of 527 ads giving Kerry shit about his medals. I was like, "Waitress, double that order!" That guy . . . he just wasn't serious.

Let's talk about some of the low points of your second term. Why did you make such a big deal out of intervening in the whole Terri Schiavo thing?
Well, Jeb calls me up one day and says, "A bunch of Jew lawyers are trying to pull the plug on some broad down here. I think we can spin it that they're doing it because she's Christian." I ask him what he means, and he tells me the story. I tell Karl, and Karl says to me, "Mr. President, I am fully erect. This is a winner all the way." He says we can jam up Bill Nelson down there for his Senate race by forcing him to take sides with the husband in the story, who's like this Mike Ditka-looking atheist guy who wants to starve his wife to death while he's running around knocking up other chicks. Politics is all about forcing people to make simple choices, that's what my dad always told me, and this one was an A+ choice for us. Karl, you should have seen him, he was on the phone day and night, telling every news director in the country that he wanted to see that Schiavo lady's face "on every channel, like it's the State of the Union address." So sure enough, we're watching TV later that night, and CNN just has her and her drooling-ass, doped-up smile on this endless loop. Karl is literally jumping up and down with excitement at the sight of her. "She's the best thing since Old Yeller," he's saying. "I want to see every liberal in the country on Larry King campaigning to yank her feeding tube. Get Ben Affleck on there, Sean Penn. Show them side by side with her looking fat and helpless with those dead-fish eyes of hers, split-screen. She'll get us 10,000 votes an hour."

Too bad she died.

Yeah. Karl was almost inconsolable when she passed. He kept looking for a replacement. Karen Hughes called it his "vegetable hunt." He'd call long lists of registered Democrats, asking if they had a brain-dead wife they wanted to pull the plug on.

About five months later, Hurricane Katrina hit. With all due respect, Mr. President, what went wrong?
Yeah, that was a bad scene. As you know, the storm coincided with a vacation I had planned. The first leg of it wasn't really a vacation — I had to go to Arizona to stroke John McCain on his birthday. Then I had to do some hug-the-old-lady deals in Arizona and California for some Medicare thing we were pushing. After that, I turn in for the night. Nobody says anything to me.

Next day, I'm working a crowd at the Coronado Naval Base with a famous country-and-western singer — I won't say who. As we're coming off stage he says to me, "So, Mr. President, what are you going to do about all those niggers in the Superdome?" And I'm like, "You mean the Saints?" And he says, "No, Mr. President. New Orleans got hit by this huge hurricane, and now there's, like, 3 million of them people camped out in the Superdome, braining each other with aluminum bats." I just figured it was some crazy-ass hillbilly nightmare he was spewing.

It wasn't until the next morning, when I was back at Crawford chain-sawing some brush trees, that Karl comes running out in his suit at full speed. He's moving so fast, his tits are nearly knocking his eyes out. He's like, "You've got to go on TV in 10 minutes. There's been a terrible disaster in New Orleans. The whole city is underwater." So that's the first indication I had from my own people that anything really serious had happened.

Tell me how Michael Brown ended up in charge of that situation.
I knew we had a problem about three weeks before Katrina, when I visited him at his home in Oklahoma. Brownie has stables, because he used to run some kind of association for Arabian horses before he worked for us. Anyway, he's showing me some of his animals, and he comes to this big stallion that he's named after himself. I mean, the stallion's name is "Mike Brown." He's talking to it in little baby talk, too, like, "Oh, what a good boy you are, Mike Brown! You're such a good boy!" Then he leans over, grabs the horse by the schlong — the horse is hung literally to the barn floor — and says to me, "Just look at the cock on this one, Mr. President. You can touch it if you want."

And I'm like, "Uh, no, that's OK, Brownie, I can see it from here." And he's like, "Yeah, I know you can see it from there. You could probably see it from Tulsa."

So I tell Andy and Karl to get rid of the guy. I mean, guy names a horse after himself and fondles its balls — who needs that? Rummy promises to stick him in Gitmo, let him read the Koran and shit through a hole in the floor for a few dozen years.

But then how did you end up saying . . .
I'm getting to that. When I fly to Mobile after Katrina to give a speech, I walk into this big airplane hangar where the whole emergency management team is waiting. There are cameras everywhere, and who's standing right in front but — Mike Brown! I'm thinking, "What is this guy doing still alive? I thought we fixed this problem!" It turns out that we forgot to disappear him. Karl thought Andy was doing it, Andy thought Karl was doing it. I panicked. That's when the whole "Heckuva job, Brownie" thing came out.

We're now in the middle of the worst economic crisis since the Great Depression. Do you feel any responsibility for what's happening?
Hey, markets is markets. Whatever happens in a market is what's supposed to happen. You're not supposed to interfere. That's why they call the market the hidden hand. If I can see your hands, it's communism.

Are you saying that what's happening is good?
I'm saying if you hand a retard a pistol and he shoots himself, that's the market. And markets are good.

So when it comes to the economy, your policy was to hand out pistols to retards.
All I'm saying is that if you did hand him a pistol, he might shoot himself and he might not. But if he does, that's capitalism, and that's the system we live by. It's America.

You forget, I was elected to this office twice by the people of this country. They trusted my sense of right and wrong. That's what they elected me for, to protect these basic values of right and wrong, freedom and unfreedom. And if that isn't always enough — well, you might not like it, but that's the way things work in this democracy we have. I was elected and I did the best job that I could.

Mr. President, it almost sounds to me like you're saying that it's not your fault that we elected you.
It isn't.

But it is your fault you ran, isn't it?
Why shouldn't I run? I have every right to run.

Sure you do. It's a free country. But if you weren't qualified for this office, you also had a responsibility not to run.
[Somberly] Yeah. Well. I did wonder about that once or twice.

When? What happened to make you think of that?
It wasn't anything specific. It's just sometimes, the way people looked at me. Laura.

Laura said something to you?
Not exactly. We were in bed one night, watching TV, and we saw this thing on the news about some poll in the Middle East showing that I was the most hated man in the Arab world, getting three times as many votes as the second-place guy, who was Ariel Sharon. And I said to her, "Jeez, what the fuck did I do to deserve that?"

And she said?
She didn't say anything. She just kind of gave me this look. Like she was sad. My dad does it too, sometimes. Like there's something they want to say to me, but won't.

I think there are a lot of people who feel that way.
Really? What do they want to say?

Do you really want to know?

OK, here it is. You're the child of two emotionally absent aristocrats who denied you any kind of love and affection from an early age. You grew up resentful and lacking completely in natural gifts or curiosity and by early adulthood found yourself desperate to fulfill the expectations your parents by then mostly had only for your much more competent brother, Jeb. You failed every test you ever faced as a young man and were unable to hold any job at all until the age of 45 or so, at which time you decided to try to win some self-respect by going into the family business. You were aided in this quest by a bunch of narrow-minded lackeys and holdovers from your father's administration who every step of the way manipulated your obvious Oedipal resentments to their advantage, enriching themselves and their friends. All you wanted was a pat on the back and a few accomplishments of your own to hang your hat on, but instead you're about to spend the rest of eternity pondering your now-official legacy as the worst and most pigheaded leader in the history of Western democracy, a man who almost single-handedly sank the mightiest nation on Earth by turning the presidency into a $50 trillion therapy session that ended in two disastrous wars, a financial crisis that threatens the entire system of international capitalism, and a legacy of corruption on a scale not seen since the Borgias or maybe Nero.

That, Mr. President, is what they're thinking and not saying to you.

Jeez. I thought you guys were a music magazine.

We are. You have any album recommendations?
Sure, I thought you might ask that. I like —

Just kidding. Time's up. Sorry.
No, really, I do have one more thing to say.

What's that?
I'm sorry?

You're sorry? For what?
[Sighs] I, uh . . . you know, I remember back in 1989, I was thinking about buying a couple of Sizzler franchises in Lubbock.

You should have done it.
And I told my dad what I was thinking, and you know what he said?

No. What?
He said, "Good idea, son. It's hard to fuck up steak."

We get it. Your father was a dick. So what? Buy a puppy or something. That's what everyone else does.
Yeah. [A single tear rolls down his cheek.] I guess I fucked up, huh?

Big-time. Can we have the world back now?
Sure, I guess. I really am sorry.

Gotta run. Later.
[Whimpering] I'm sorry. I'm sorry.


25 March 2009

this is one of the single greatest things i've ever read...

[from rolling stone...]

The Big Takeover

The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution


Posted Mar 19, 2009 12:49 PM

It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.


The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people's money would make his dick bigger.

That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington's deregulation of the Wall Street casino. "It's all about the regulatory environment," says a government source involved with the AIG bailout. "These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that."

The mess Cassano created had its roots in an investment boom fueled in part by a relatively new type of financial instrument called a collateralized-debt obligation. A CDO is like a box full of diced-up assets. They can be anything: mortgages, corporate loans, aircraft loans, credit-card loans, even other CDOs. So as X mortgage holder pays his bill, and Y corporate debtor pays his bill, and Z credit-card debtor pays his bill, money flows into the box.

The key idea behind a CDO is that there will always be at least some money in the box, regardless of how dicey the individual assets inside it are. No matter how you look at a single unemployed ex-con trying to pay the note on a six-bedroom house, he looks like a bad investment. But dump his loan in a box with a smorgasbord of auto loans, credit-card debt, corporate bonds and other crap, and you can be reasonably sure that somebody is going to pay up. Say $100 is supposed to come into the box every month. Even in an apocalypse, when $90 in payments might default, you'll still get $10. What the inventors of the CDO did is divide up the box into groups of investors and put that $10 into its own level, or "tranche." They then convinced ratings agencies like Moody's and S&P to give that top tranche the highest AAA rating — meaning it has close to zero credit risk.

Suddenly, thanks to this financial seal of approval, banks had a way to turn their shittiest mortgages and other financial waste into investment-grade paper and sell them to institutional investors like pensions and insurance companies, which were forced by regulators to keep their portfolios as safe as possible. Because CDOs offered higher rates of return than truly safe products like Treasury bills, it was a win-win: Banks made a fortune selling CDOs, and big investors made much more holding them.

The problem was, none of this was based on reality. "The banks knew they were selling crap," says a London-based trader from one of the bailed-out companies. To get AAA ratings, the CDOs relied not on their actual underlying assets but on crazy mathematical formulas that the banks cooked up to make the investments look safer than they really were. "They had some back room somewhere where a bunch of Indian guys who'd been doing nothing but math for God knows how many years would come up with some kind of model saying that this or that combination of debtors would only default once every 10,000 years," says one young trader who sold CDOs for a major investment bank. "It was nuts."

Now that even the crappiest mortgages could be sold to conservative investors, the CDOs spurred a massive explosion of irresponsible and predatory lending. In fact, there was such a crush to underwrite CDOs that it became hard to find enough subprime mortgages — read: enough unemployed meth dealers willing to buy million-dollar homes for no money down — to fill them all. As banks and investors of all kinds took on more and more in CDOs and similar instruments, they needed some way to hedge their massive bets — some kind of insurance policy, in case the housing bubble burst and all that debt went south at the same time. This was particularly true for investment banks, many of which got stuck holding or "warehousing" CDOs when they wrote more than they could sell. And that's were Joe Cassano came in.

Known for his boldness and arrogance, Cassano took over as chief of AIGFP in 2001. He was the favorite of Maurice "Hank" Greenberg, the head of AIG, who admired the younger man's hard-driving ways, even if neither he nor his successors fully understood exactly what it was that Cassano did. According to a source familiar with AIG's internal operations, Cassano basically told senior management, "You know insurance, I know investments, so you do what you do, and I'll do what I do — leave me alone." Given a free hand within the company, Cassano set out from his offices in London to sell a lucrative form of "insurance" to all those investors holding lots of CDOs. His tool of choice was another new financial instrument known as a credit-default swap, or CDS.

The CDS was popularized by J.P. Morgan, in particular by a group of young, creative bankers who would later become known as the "Morgan Mafia," as many of them would go on to assume influential positions in the finance world. In 1994, in between booze and games of tennis at a resort in Boca Raton, Florida, the Morgan gang plotted a way to help boost the bank's returns. One of their goals was to find a way to lend more money, while working around regulations that required them to keep a set amount of cash in reserve to back those loans. What they came up with was an early version of the credit-default swap.

In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage to the Pope for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the Pope can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the Pope's mortgage if he defaults. In theory, Bank A is covered if the Pope goes on a meth binge and loses his job.

When Morgan presented their plans for credit swaps to regulators in the late Nineties, they argued that if they bought CDS protection for enough of the investments in their portfolio, they had effectively moved the risk off their books. Therefore, they argued, they should be allowed to lend more, without keeping more cash in reserve. A whole host of regulators — from the Federal Reserve to the Office of the Comptroller of the Currency — accepted the argument, and Morgan was allowed to put more money on the street.

What Cassano did was to transform the credit swaps that Morgan popularized into the world's largest bet on the housing boom. In theory, at least, there's nothing wrong with buying a CDS to insure your investments. Investors paid a premium to AIGFP, and in return the company promised to pick up the tab if the mortgage-backed CDOs went bust. But as Cassano went on a selling spree, the deals he made differed from traditional insurance in several significant ways. First, the party selling CDS protection didn't have to post any money upfront. When a $100 corporate bond is sold, for example, someone has to show 100 actual dollars. But when you sell a $100 CDS guarantee, you don't have to show a dime. So Cassano could sell investment banks billions in guarantees without having any single asset to back it up.

Secondly, Cassano was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A for its mortgage on the Pope — it turns around and sells protection to Bank C for the very same mortgage. This could go on ad nauseam: You could have Banks D through Z also betting on Bank A's mortgage. Unlike traditional insurance, Cassano was offering investors an opportunity to bet that someone else's house would burn down, or take out a term life policy on the guy with AIDS down the street. It was no different from gambling, the Wall Street version of a bunch of frat brothers betting on Jay Feely to make a field goal. Cassano was taking book for every bank that bet short on the housing market, but he didn't have the cash to pay off if the kick went wide.

In a span of only seven years, Cassano sold some $500 billion worth of CDS protection, with at least $64 billion of that tied to the subprime mortgage market. AIG didn't have even a fraction of that amount of cash on hand to cover its bets, but neither did it expect it would ever need any reserves. So long as defaults on the underlying securities remained a highly unlikely proposition, AIG was essentially collecting huge and steadily climbing premiums by selling insurance for the disaster it thought would never come.

Initially, at least, the revenues were enormous: AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion; Cassano himself pocketed at least $280 million in compensation. Everyone made their money — and then it all went to shit.


Cassano's outrageous gamble wouldn't have been possible had he not had the good fortune to take over AIGFP just as Sen. Phil Gramm — a grinning, laissez-faire ideologue from Texas — had finished engineering the most dramatic deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. For years, Washington had kept a watchful eye on the nation's banks. Ever since the Great Depression, commercial banks — those that kept money on deposit for individuals and businesses — had not been allowed to double as investment banks, which raise money by issuing and selling securities. The Glass-Steagall Act, passed during the Depression, also prevented banks of any kind from getting into the insurance business.

But in the late Nineties, a few years before Cassano took over AIGFP, all that changed. The Democrats, tired of getting slaughtered in the fundraising arena by Republicans, decided to throw off their old reliance on unions and interest groups and become more "business-friendly." Wall Street responded by flooding Washington with money, buying allies in both parties. In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup. The move did away with the built-in protections afforded by smaller banks. In the old days, a local banker knew the people whose loans were on his balance sheet: He wasn't going to give a million-dollar mortgage to a homeless meth addict, since he would have to keep that loan on his books. But a giant merged bank might write that loan and then sell it off to some fool in China, and who cared?

The very next year, Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities. Commercial banks — which, thanks to Gramm, were now competing directly with investment banks for customers — were driven to buy credit swaps to loosen capital in search of higher yields. "By ruling that credit-default swaps were not gaming and not a security, the way was cleared for the growth of the market," said Eric Dinallo, head of the New York State Insurance Department.

The blanket exemption meant that Joe Cassano could now sell as many CDS contracts as he wanted, building up as huge a position as he wanted, without anyone in government saying a word. "You have to remember, investment banks aren't in the business of making huge directional bets," says the government source involved in the AIG bailout. When investment banks write CDS deals, they hedge them. But insurance companies don't have to hedge. And that's what AIG did. "They just bet massively long on the housing market," says the source. "Billions and billions."

In the biggest joke of all, Cassano's wheeling and dealing was regulated by the Office of Thrift Supervision, an agency that would prove to be defiantly uninterested in keeping watch over his operations. How a behemoth like AIG came to be regulated by the little-known and relatively small OTS is yet another triumph of the deregulatory instinct. Under another law passed in 1999, certain kinds of holding companies could choose the OTS as their regulator, provided they owned one or more thrifts (better known as savings-and-loans). Because the OTS was viewed as more compliant than the Fed or the Securities and Exchange Commission, companies rushed to reclassify themselves as thrifts. In 1999, AIG purchased a thrift in Delaware and managed to get approval for OTS regulation of its entire operation.

Making matters even more hilarious, AIGFP — a London-based subsidiary of an American insurance company — ought to have been regulated by one of Europe's more stringent regulators, like Britain's Financial Services Authority. But the OTS managed to convince the Europeans that it had the muscle to regulate these giant companies. By 2007, the EU had conferred legitimacy to OTS supervision of three mammoth firms — GE, AIG and Ameriprise.

That same year, as the subprime crisis was exploding, the Government Accountability Office criticized the OTS, noting a "disparity between the size of the agency and the diverse firms it oversees." Among other things, the GAO report noted that the entire OTS had only one insurance specialist on staff — and this despite the fact that it was the primary regulator for the world's largest insurer!

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death."

When AIG finally blew up, the OTS regulator ostensibly in charge of overseeing the insurance giant — a guy named C.K. Lee — basically admitted that he had blown it. His mistake, Lee said, was that he believed all those credit swaps in Cassano's portfolio were "fairly benign products." Why? Because the company told him so. "The judgment the company was making was that there was no big credit risk," he explained. (Lee now works as Midwest region director of the OTS; the agency declined to make him available for an interview.)

In early March, after the latest bailout of AIG, Treasury Secretary Timothy Geithner took what seemed to be a thinly veiled shot at the OTS, calling AIG a "huge, complex global insurance company attached to a very complicated investment bank/hedge fund that was allowed to build up without any adult supervision." But even without that "adult supervision," AIG might have been OK had it not been for a complete lack of internal controls. For six months before its meltdown, according to insiders, the company had been searching for a full-time chief financial officer and a chief risk-assessment officer, but never got around to hiring either. That meant that the 18th-largest company in the world had no one checking to make sure its balance sheet was safe and no one keeping track of how much cash and assets the firm had on hand. The situation was so bad that when outside consultants were called in a few weeks before the bailout, senior executives were unable to answer even the most basic questions about their company — like, for instance, how much exposure the firm had to the residential-mortgage market.


Ironically, when reality finally caught up to Cassano, it wasn't because the housing market crapped but because of AIG itself. Before 2005, the company's debt was rated triple-A, meaning he didn't need to post much cash to sell CDS protection: The solid creditworthiness of AIG's name was guarantee enough. But the company's crummy accounting practices eventually caused its credit rating to be downgraded, triggering clauses in the CDS contracts that forced Cassano to post substantially more collateral to back his deals.

By the fall of 2007, it was evident that AIGFP's portfolio had turned poisonous, but like every good Wall Street huckster, Cassano schemed to keep his insane, Earth-swallowing gamble hidden from public view. That August, balls bulging, he announced to investors on a conference call that "it is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing $1 in any of those transactions." As he spoke, his CDS portfolio was racking up $352 million in losses. When the growing credit crunch prompted senior AIG executives to re-examine its liabilities, a company accountant named Joseph St. Denis became "gravely concerned" about the CDS deals and their potential for mass destruction. Cassano responded by personally forcing the poor sap out of the firm, telling him he was "deliberately excluded" from the financial review for fear that he might "pollute the process."

The following February, when AIG posted $11.5 billion in annual losses, it announced the resignation of Cassano as head of AIGFP, saying an auditor had found a "material weakness" in the CDS portfolio. But amazingly, the company not only allowed Cassano to keep $34 million in bonuses, it kept him on as a consultant for $1 million a month. In fact, Cassano remained on the payroll and kept collecting his monthly million through the end of September 2008, even after taxpayers had been forced to hand AIG $85 billion to patch up his fuck-ups. When asked in October why the company still retained Cassano at his $1 million-a-month rate despite his role in the probable downfall of Western civilization, CEO Martin Sullivan told Congress with a straight face that AIG wanted to "retain the 20-year knowledge that Mr. Cassano had." (Cassano, who is apparently hiding out in his lavish town house near Harrods in London, could not be reached for comment.)

What sank AIG in the end was another credit downgrade. Cassano had written so many CDS deals that when the company was facing another downgrade to its credit rating last September, from AA to A, it needed to post billions in collateral — not only more cash than it had on its balance sheet but more cash than it could raise even if it sold off every single one of its liquid assets. Even so, management dithered for days, not believing the company was in serious trouble. AIG was a dried-up prune, sapped of any real value, and its top executives didn't even know it.

On the weekend of September 13th, AIG's senior leaders were summoned to the offices of the New York Federal Reserve. Regulators from Dinallo's insurance office were there, as was Geithner, then chief of the New York Fed. Treasury Secretary Hank Paulson, who spent most of the weekend preoccupied with the collapse of Lehman Brothers, came in and out. Also present, for reasons that would emerge later, was Lloyd Blankfein, CEO of Goldman Sachs. The only relevant government office that wasn't represented was the regulator that should have been there all along: the OTS.

"We sat down with Paulson, Geithner and Dinallo," says a person present at the negotiations. "I didn't see the OTS even once."

On September 14th, according to another person present, Treasury officials presented Blankfein and other bankers in attendance with an absurd proposal: "They basically asked them to spend a day and check to see if they could raise the money privately." The laughably short time span to complete the mammoth task made the answer a foregone conclusion. At the end of the day, the bankers came back and told the government officials, gee, we checked, but we can't raise that much. And the bailout was on.

A short time later, it came out that AIG was planning to pay some $90 million in deferred compensation to former executives, and to accelerate the payout of $277 million in bonuses to others — a move the company insisted was necessary to "retain key employees." When Congress balked, AIG canceled the $90 million in payments.

Then, in January 2009, the company did it again. After all those years letting Cassano run wild, and after already getting caught paying out insane bonuses while on the public till, AIG decided to pay out another $450 million in bonuses. And to whom? To the 400 or so employees in Cassano's old unit, AIGFP, which is due to go out of business shortly! Yes, that's right, an average of $1.1 million in taxpayer-backed money apiece, to the very people who spent the past decade or so punching a hole in the fabric of the universe!

"We, uh, needed to keep these highly expert people in their seats," AIG spokeswoman Christina Pretto says to me in early February.

"But didn't these 'highly expert people' basically destroy your company?" I ask.

Pretto protests, says this isn't fair. The employees at AIGFP have already taken pay cuts, she says. Not retaining them would dilute the value of the company even further, make it harder to wrap up the unit's operations in an orderly fashion.

The bonuses are a nice comic touch highlighting one of the more outrageous tangents of the bailout age, namely the fact that, even with the planet in flames, some members of the Wall Street class can't even get used to the tragedy of having to fly coach. "These people need their trips to Baja, their spa treatments, their hand jobs," says an official involved in the AIG bailout, a serious look on his face, apparently not even half-kidding. "They don't function well without them."


So that's the first step in wall street's power grab: making up things like credit-default swaps and collateralized-debt obligations, financial products so complex and inscrutable that ordinary American dumb people — to say nothing of federal regulators and even the CEOs of major corporations like AIG — are too intimidated to even try to understand them. That, combined with wise political investments, enabled the nation's top bankers to effectively scrap any meaningful oversight of the financial industry. In 1997 and 1998, the years leading up to the passage of Phil Gramm's fateful act that gutted Glass-Steagall, the banking, brokerage and insurance industries spent $350 million on political contributions and lobbying. Gramm alone — then the chairman of the Senate Banking Committee — collected $2.6 million in only five years. The law passed 90-8 in the Senate, with the support of 38 Democrats, including some names that might surprise you: Joe Biden, John Kerry, Tom Daschle, Dick Durbin, even John Edwards.

The act helped create the too-big-to-fail financial behemoths like Citigroup, AIG and Bank of America — and in turn helped those companies slowly crush their smaller competitors, leaving the major Wall Street firms with even more money and power to lobby for further deregulatory measures. "We're moving to an oligopolistic situation," Kenneth Guenther, a top executive with the Independent Community Bankers of America, lamented after the Gramm measure was passed.

The situation worsened in 2004, in an extraordinary move toward deregulation that never even got to a vote. At the time, the European Union was threatening to more strictly regulate the foreign operations of America's big investment banks if the U.S. didn't strengthen its own oversight. So the top five investment banks got together on April 28th of that year and — with the helpful assistance of then-Goldman Sachs chief and future Treasury Secretary Hank Paulson — made a pitch to George Bush's SEC chief at the time, William Donaldson, himself a former investment banker. The banks generously volunteered to submit to new rules restricting them from engaging in excessively risky activity. In exchange, they asked to be released from any lending restrictions. The discussion about the new rules lasted just 55 minutes, and there was not a single representative of a major media outlet there to record the fateful decision.

Donaldson OK'd the proposal, and the new rules were enough to get the EU to drop its threat to regulate the five firms. The only catch was, neither Donaldson nor his successor, Christopher Cox, actually did any regulating of the banks. They named a commission of seven people to oversee the five companies, whose combined assets came to total more than $4 trillion. But in the last year and a half of Cox's tenure, the group had no director and did not complete a single inspection. Great deal for the banks, which originally complained about being regulated by both Europe and the SEC, and ended up being regulated by no one.

Once the capital requirements were gone, those top five banks went hog-wild, jumping ass-first into the then-raging housing bubble. One of those was Bear Stearns, which used its freedom to drown itself in bad mortgage loans. In the short period between the 2004 change and Bear's collapse, the firm's debt-to-equity ratio soared from 12-1 to an insane 33-1. Another culprit was Goldman Sachs, which also had the good fortune, around then, to see its CEO, a bald-headed Frankensteinian goon named Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascend to Treasury secretary.

Freed from all capital restraints, sitting pretty with its man running the Treasury, Goldman jumped into the housing craze just like everyone else on Wall Street. Although it famously scored an $11 billion coup in 2007 when one of its trading units smartly shorted the housing market, the move didn't tell the whole story. In truth, Goldman still had a huge exposure come that fateful summer of 2008 — to none other than Joe Cassano.

Goldman Sachs, it turns out, was Cassano's biggest customer, with $20 billion of exposure in Cassano's CDS book. Which might explain why Goldman chief Lloyd Blankfein was in the room with ex-Goldmanite Hank Paulson that weekend of September 13th, when the federal government was supposedly bailing out AIG.

When asked why Blankfein was there, one of the government officials who was in the meeting shrugs. "One might say that it's because Goldman had so much exposure to AIGFP's portfolio," he says. "You'll never prove that, but one might suppose."

Market analyst Eric Salzman is more blunt. "If AIG went down," he says, "there was a good chance Goldman would not be able to collect." The AIG bailout, in effect, was Goldman bailing out Goldman.

Eventually, Paulson went a step further, elevating another ex-Goldmanite named Edward Liddy to run AIG — a company whose bailout money would be coming, in part, from the newly created TARP program, administered by another Goldman banker named Neel Kashkari.


There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.

The people who have spent their lives cloistered in this Wall Street community aren't much for sharing information with the great unwashed. Because all of this shit is complicated, because most of us mortals don't know what the hell LIBOR is or how a REIT works or how to use the word "zero coupon bond" in a sentence without sounding stupid — well, then, the people who do speak this idiotic language cannot under any circumstances be bothered to explain it to us and instead spend a lot of time rolling their eyes and asking us to trust them.

That roll of the eyes is a key part of the psychology of Paulsonism. The state is now being asked not just to call off its regulators or give tax breaks or funnel a few contracts to connected companies; it is intervening directly in the economy, for the sole purpose of preserving the influence of the megafirms. In essence, Paulson used the bailout to transform the government into a giant bureaucracy of entitled assholedom, one that would socialize "toxic" risks but keep both the profits and the management of the bailed-out firms in private hands. Moreover, this whole process would be done in secret, away from the prying eyes of NASCAR dads, broke-ass liberals who read translations of French novels, subprime mortgage holders and other such financial losers.

Some aspects of the bailout were secretive to the point of absurdity. In fact, if you look closely at just a few lines in the Federal Reserve's weekly public disclosures, you can literally see the moment where a big chunk of your money disappeared for good. The H4 report (called "Factors Affecting Reserve Balances") summarizes the activities of the Fed each week. You can find it online, and it's pretty much the only thing the Fed ever tells the world about what it does. For the week ending February 18th, the number under the heading "Repurchase Agreements" on the table is zero. It's a significant number.

Why? In the pre-crisis days, the Fed used to manage the money supply by periodically buying and selling securities on the open market through so-called Repurchase Agreements, or Repos. The Fed would typically dump $25 billion or so in cash onto the market every week, buying up Treasury bills, U.S. securities and even mortgage-backed securities from institutions like Goldman Sachs and J.P. Morgan, who would then "repurchase" them in a short period of time, usually one to seven days. This was the Fed's primary mechanism for controlling interest rates: Buying up securities gives banks more money to lend, which makes interest rates go down. Selling the securities back to the banks reduces the money available for lending, which makes interest rates go up.

If you look at the weekly H4 reports going back to the summer of 2007, you start to notice something alarming. At the start of the credit crunch, around August of that year, you see the Fed buying a few more Repos than usual — $33 billion or so. By November, as private-bank reserves were dwindling to alarmingly low levels, the Fed started injecting even more cash than usual into the economy: $48 billion. By late December, the number was up to $58 billion; by the following March, around the time of the Bear Stearns rescue, the Repo number had jumped to $77 billion. In the week of May 1st, 2008, the number was $115 billion — "out of control now," according to one congressional aide. For the rest of 2008, the numbers remained similarly in the stratosphere, the Fed pumping as much as $125 billion of these short-term loans into the economy — until suddenly, at the start of this year, the number drops to nothing. Zero.

The reason the number has dropped to nothing is that the Fed had simply stopped using relatively transparent devices like repurchase agreements to pump its money into the hands of private companies. By early 2009, a whole series of new government operations had been invented to inject cash into the economy, most all of them completely secretive and with names you've never heard of. There is the Term Auction Facility, the Term Securities Lending Facility, the Primary Dealer Credit Facility, the Commercial Paper Funding Facility and a monster called the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (boasting the chat-room horror-show acronym ABCPMMMFLF). For good measure, there's also something called a Money Market Investor Funding Facility, plus three facilities called Maiden Lane I, II and III to aid bailout recipients like Bear Stearns and AIG.

While the rest of America, and most of Congress, have been bugging out about the $700 billion bailout program called TARP, all of these newly created organisms in the Federal Reserve zoo have quietly been pumping not billions but trillions of dollars into the hands of private companies (at least $3 trillion so far in loans, with as much as $5.7 trillion more in guarantees of private investments). Although this technically isn't taxpayer money, it still affects taxpayers directly, because the activities of the Fed impact the economy as a whole. And this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.

No one knows who's getting that money or exactly how much of it is disappearing through these new holes in the hull of America's credit rating. Moreover, no one can really be sure if these new institutions are even temporary at all — or whether they are being set up as permanent, state-aided crutches to Wall Street, designed to systematically suck bad investments off the ledgers of irresponsible lenders.

"They're supposed to be temporary," says Paul-Martin Foss, an aide to Rep. Ron Paul. "But we keep getting notices every six months or so that they're being renewed. They just sort of quietly announce it."

None other than disgraced senator Ted Stevens was the poor sap who made the unpleasant discovery that if Congress didn't like the Fed handing trillions of dollars to banks without any oversight, Congress could apparently go fuck itself — or so said the law. When Stevens asked the GAO about what authority Congress has to monitor the Fed, he got back a letter citing an obscure statute that nobody had ever heard of before: the Accounting and Auditing Act of 1950. The relevant section, 31 USC 714(b), dictated that congressional audits of the Federal Reserve may not include "deliberations, decisions and actions on monetary policy matters." The exemption, as Foss notes, "basically includes everything." According to the law, in other words, the Fed simply cannot be audited by Congress. Or by anyone else, for that matter.


Stevens isn't the only person in Congress to be given the finger by the Fed. In January, when Rep. Alan Grayson of Florida asked Federal Reserve vice chairman Donald Kohn where all the money went — only $1.2 trillion had vanished by then — Kohn gave Grayson a classic eye roll, saying he would be "very hesitant" to name names because it might discourage banks from taking the money.

"Has that ever happened?" Grayson asked. "Have people ever said, 'We will not take your $100 billion because people will find out about it?'"

"Well, we said we would not publish the names of the borrowers, so we have no test of that," Kohn answered, visibly annoyed with Grayson's meddling.

Grayson pressed on, demanding to know on what terms the Fed was lending the money. Presumably it was buying assets and making loans, but no one knew how it was pricing those assets — in other words, no one knew what kind of deal it was striking on behalf of taxpayers. So when Grayson asked if the purchased assets were "marked to market" — a methodology that assigns a concrete value to assets, based on the market rate on the day they are traded — Kohn answered, mysteriously, "The ones that have market values are marked to market." The implication was that the Fed was purchasing derivatives like credit swaps or other instruments that were basically impossible to value objectively — paying real money for God knows what.

"Well, how much of them don't have market values?" asked Grayson. "How much of them are worthless?"

"None are worthless," Kohn snapped.

"Then why don't you mark them to market?" Grayson demanded.

"Well," Kohn sighed, "we are marking the ones to market that have market values."

In essence, the Fed was telling Congress to lay off and let the experts handle things. "It's like buying a car in a used-car lot without opening the hood, and saying, 'I think it's fine,'" says Dan Fuss, an analyst with the investment firm Loomis Sayles. "The salesman says, 'Don't worry about it. Trust me.' It'll probably get us out of the lot, but how much farther? None of us knows."

When one considers the comparatively extensive system of congressional checks and balances that goes into the spending of every dollar in the budget via the normal appropriations process, what's happening in the Fed amounts to something truly revolutionary — a kind of shadow government with a budget many times the size of the normal federal outlay, administered dictatorially by one man, Fed chairman Ben Bernanke. "We spend hours and hours and hours arguing over $10 million amendments on the floor of the Senate, but there has been no discussion about who has been receiving this $3 trillion," says Sen. Bernie Sanders. "It is beyond comprehension."

Count Sanders among those who don't buy the argument that Wall Street firms shouldn't have to face being outed as recipients of public funds, that making this information public might cause investors to panic and dump their holdings in these firms. "I guess if we made that public, they'd go on strike or something," he muses.

And the Fed isn't the only arm of the bailout that has closed ranks. The Treasury, too, has maintained incredible secrecy surrounding its implementation even of the TARP program, which was mandated by Congress. To this date, no one knows exactly what criteria the Treasury Department used to determine which banks received bailout funds and which didn't — particularly the first $350 billion given out under Bush appointee Hank Paulson.

The situation with the first TARP payments grew so absurd that when the Congressional Oversight Panel, charged with monitoring the bailout money, sent a query to Paulson asking how he decided whom to give money to, Treasury responded — and this isn't a joke — by directing the panel to a copy of the TARP application form on its website. Elizabeth Warren, the chair of the Congressional Oversight Panel, was struck nearly speechless by the response.

"Do you believe that?" she says incredulously. "That's not what we had in mind."

Another member of Congress, who asked not to be named, offers his own theory about the TARP process. "I think basically if you knew Hank Paulson, you got the money," he says.

This cozy arrangement created yet another opportunity for big banks to devour market share at the expense of smaller regional lenders. While all the bigwigs at Citi and Goldman and Bank of America who had Paulson on speed-dial got bailed out right away — remember that TARP was originally passed because money had to be lent right now, that day, that minute, to stave off emergency — many small banks are still waiting for help. Five months into the TARP program, some not only haven't received any funds, they haven't even gotten a call back about their applications.

"There's definitely a feeling among community bankers that no one up there cares much if they make it or not," says Tanya Wheeless, president of the Arizona Bankers Association.

Which, of course, is exactly the opposite of what should be happening, since small, regional banks are far less guilty of the kinds of predatory lending that sank the economy. "They're not giving out subprime loans or easy credit," says Wheeless. "At the community level, it's much more bread-and-butter banking."

Nonetheless, the lion's share of the bailout money has gone to the larger, so-called "systemically important" banks. "It's like Treasury is picking winners and losers," says one state banking official who asked not to be identified.

This itself is a hugely important political development. In essence, the bailout accelerated the decline of regional community lenders by boosting the political power of their giant national competitors.

Which, when you think about it, is insane: What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking pool of Bigger Fish. To fix this problem, the government should have slowly liquidated these monster, too-big-to-fail firms and broken them down to smaller, more manageable companies. Instead, federal regulators closed ranks and used an almost completely secret bailout process to double down on the same faulty, merger-happy thinking that got us here in the first place, creating a constellation of megafirms under government control that are even bigger, more unwieldy and more crammed to the gills with systemic risk.

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.In other words, it's AIG's rip-roaringly shitty business model writ almost inconceivably massive — to echo Geithner, a huge, complex global company attached to a very complicated investment bank/hedge fund that's been allowed to build up without adult supervision. How much of what kinds of crap is actually on our balance sheet, and what did we pay for it? When exactly will the rent come due, when will the money run out? Does anyone know what the hell is going on? And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren't such a nightmare.


The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored and the general public can have a say in things or whether the new financial bureaucracy will remain obscure, secretive and hopelessly complex. It might not bode well that Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company. Neither did it look good when Geithner — himself a protégé of notorious Goldman alum John Thain, the Merrill Lynch chief who paid out billions in bonuses after the state spent billions bailing out his firm — picked a former Goldman lobbyist named Mark Patterson to be his top aide.

In fact, most of Geithner's early moves reek strongly of Paulsonism. He has continually talked about partnering with private investors to create a so-called "bad bank" that would systemically relieve private lenders of bad assets — the kind of massive, opaque, quasi-private bureaucratic nightmare that Paulson specialized in. Geithner even refloated a Paulson proposal to use TALF, one of the Fed's new facilities, to essentially lend cheap money to hedge funds to invest in troubled banks while practically guaranteeing them enormous profits.

God knows exactly what this does for the taxpayer, but hedge-fund managers sure love the idea. "This is exactly what the financial system needs," said Andrew Feldstein, CEO of Blue Mountain Capital and one of the Morgan Mafia. Strangely, there aren't many people who don't run hedge funds who have expressed anything like that kind of enthusiasm for Geithner's ideas.

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

Good luck with that, America. And enjoy tax season.


21 March 2009

"the overarching question is not: why is there so much public rage? the overarching question is: why has there been so little?"

[from salon...]

The virtues of public anger and the need for more

With lightning speed and lockstep unanimity, opinion-making elites jointly embraced and are now delivering the same message about the public rage triggered this week by the AIG bonus scandal: This scandal is insignificant. It's just a distraction. And, most important of all, public anger is unhelpful and must be contained or, failing that, ignored.

This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing.

It makes perfect sense that those who are satisfied with the prevailing order -- because it rewards them in numerous ways -- are desperate to pacify public fury. Thus we find unanimous decrees that public calm (i.e., quiet) be restored. It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments.

While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok. We've had far too little public rage given the magnitude of this rot, not an excess of rage. What has been missing more than anything else is this: fear on the part of the political and financial class of the public which they have been systematically defrauding and destroying.

* * * * *

These endless lectures from sober, rational pundits about the relative quantitative insignificance of the AIG bonuses are condescending straw men. Nobody thinks that $165 million in bonuses for the people who destroyed AIG is what has caused the financial crisis. Nobody thinks that recouping those bonuses or having prevented them in the first place would solve or even mitigate systemic collapse. The amounts are miniscule in the context of the broader economic issues. Everyone is aware of that; nobody needs to have that pointed out. As Armando astutely observed, the attempt now to dismiss the anger over the AIG bonuses as the by-product of simple-minded ignorance and/or ideological rigidity (class warfare! crass populism!) is quite similar to how anti-war arguments were stigmatized before the attack on Iraq : ignore the screeching pacifists and let the sober Experts make the decisions, for they know best.

The AIG scandal is significant and has resonated so powerfully because it is a microscope that enables the public to see what and who has wreaked the destruction that threatens their security and future and, most important of all, to realize that these practices haven't ended and the perpetrators haven't been punished. The opposite is true: those who caused the crisis continue to exert control over what happens and continue to have huge amounts of public money transferred in order to enrich them.

Eliot Spitzer is absolutely right that, even at AIG, there are far larger scandals than the bonuses, such as the undiscounted compensation of AIG's counter-parties such as Goldman Sachs (and just by the way: it is indescribably symbolic that Spitzer has been punished and disgraced for his acts of consensual adult sex while the targets of his prescient Wall St. investigations, who basically destroyed the world economy, remain protected and empowered). But the bonus scandal is illustrative of why the crisis happened, who caused it to happen, and the ongoing political dominance of the perpetrators. It is, as Robert Reich put it, "a nightmarish metaphor for the Obama Administration's problems administering the bailout of Wall Street."

The financial crisis has merely unmasked the corruption and rot in our establishment institutions that are staggering in magnitude and reach. Just as the Iraq War was not the by-product of wrongdoing by a few stray bad political and media actors but instead was reflective of our broken institutions generally, the financial crisis is a fundamental indictment on the way the country functions and of its ruling class. What would be unhealthy is if there weren't substantial amounts of public rage in the face of these revelations.

* * * * *

Matt Taibbi's new Rolling Stone article perfectly summarizes what the AIG scandal reveals about our political and economic system, and should be read in full. In sum: financial elites own the Government and both political parties. Their money drowns Washington and their lobbyists control it. They used that ownership of Government to abolish decades-old legal and regulatory protections which previously constrained what they could do. In the lawless environment which they literally purchased from our political leaders, they were able to pillage and pilfer and steal without limit. And even now that everything has come crashing down, they continue to dictate what the Government's response is, to ensure that they -- the prime authors of the disaster -- are the prime beneficiaries, at the public's expense, of the "solutions," solutions which preserve their ill-gotten gains and heighten even further their power and influence. Taibbi:

The real question from here is whether the Obama administration is going to move to bring the financial system back to a place where sanity is restored and the general public can have a say in things or whether the new financial bureaucracy will remain obscure, secretive and hopelessly complex. It might not bode well that Geithner, Obama's Treasury secretary, is one of the architects of the Paulson bailouts; as chief of the New York Fed, he helped orchestrate the Goldman-friendly AIG bailout and the secretive Maiden Lane facilities used to funnel funds to the dying company. Neither did it look good when Geithner — himself a protégé of notorious Goldman alum John Thain, the Merrill Lynch chief who paid out billions in bonuses after the state spent billions bailing out his firm — picked a former Goldman lobbyist named Mark Patterson to be his top aide.

In fact, most of Geithner's early moves reek strongly of Paulsonism. He has continually talked about partnering with private investors to create a so-called "bad bank" that would systemically relieve private lenders of bad assets — the kind of massive, opaque, quasi-private bureaucratic nightmare that Paulson specialized in. Geithner even refloated a Paulson proposal to use TALF, one of the Fed's new facilities, to essentially lend cheap money to hedge funds to invest in troubled banks while practically guaranteeing them enormous profits.

God knows exactly what this does for the taxpayer, but hedge-fund managers sure love the idea. "This is exactly what the financial system needs," said Andrew Feldstein, CEO of Blue Mountain Capital and one of the Morgan Mafia. Strangely, there aren't many people who don't run hedge funds who have expressed anything like that kind of enthusiasm for Geithner's ideas.

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. . .

Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

The story of Goldman Sachs -- its tentacles entrenched in every aspect of the Government and the blindingly favorable treatment it therefore continues to receive -- demonstrates, just standing alone, how pervasive the oligarchical decay is.

Atrios has been writing a version of the same key observation virtually every day for weeks -- that almost every plan to "solve" the financial crisis involves nothing more than transfers of enormous amounts of public money into the pockets of the same unchanged system and the same people who caused the collapse in the first place:

The issue is that [Geithner] and friends never distinguished between bailing out the system and bailing out the players. There was a way to do that, and they didn't do it.

In condemning Geithner's "bank rescue" plan, Paul Krugman notes that -- yet again -- it enables great benefits for the richest investors, with the public protecting them from the risk of losses (privatize gains; socialize losses), and concludes: "The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system." When it comes to its primary challenge, the administration elected on a platform of "change" is, above all else, viciously devoted to preservation of the status quo. Read John Cole's summary of expert reaction to Geithner's banking plan.

That is why the AIG scandal, rightfully so, is producing so much public outrage -- because it demonstrates what the political and economic system really is, a system which the Government continues to prop up and embrace. Brian Beutler put it this way:

It's not that the success of the bailout depends on what happens to these $160 million, but that these $160 million strongly suggest that some very rich, and, perhaps, very bad men have leveraged their way into control of the whole bailout process and the government's now following their lead. And their incentives are, to say the least, not in line with the best interests of the vast majority of taxpayers. . . .

It's simply not the case that Geithner and other high-level economic officials were so concerned with the bigger picture that they outsourced the question of compensation to Congress entirely. On the contrary, they were extremely involved in resolving that very question. They were opposed to strict compensation limits. . . .

But clearly they also thought that letting executives take home big fat piles of government money was either a matter of expedience or a matter of necessity. And either way it has huge implications for the success or failure of one of the most expensive and urgent government programs in the country's history.

The AIG scandal vividly reveals how corrupt and self-interested are the people who are still exerting primary control over this process, which is why our establishment class is so eager to demand that everyone look away. For months, Americans have been told that they must sacrifice and trust the Government to engage in extraordinary actions if they want to stave off another Great Depression, only to watch as hundreds of billions of dollars fly to the very people who are the prime culprits. As Jane Hamsher put it: "The 'populist rage' that the pundits find so unseemly is actually the appropriate response."

* * * * *

We saw this week the benefits which unbridled and intimidating public rage can produce. The retroactive, confiscatory tax on bonuses imposed by the House is, to be sure, a crude and troubling (and arguably unconstitutional) response. But the virtues of that episode easily exceed its vices: Congress sought to seize those bonuses because, for once, they were afraid of simmering public fury and responded to it rather than to the dictates of the corporate and lobbyist class that owns them and which they serve. Whatever marginal "unfairness" that tax might produce pales by many, many magnitudes when set aside the decade-long (and ongoing) pillaging of America's financial security and the future of its middle class by the financial owners of our political system.

And that's the point: only this true, intense, and -- yes -- scary public rage can serve as a check on ongoing pilfering by the narrowed monied factions who control our Government for their own interests and who otherwise have no reason to stop. Who else is going to impose those checks? The bought-and-paid-for, incomparably subservient, impotent and inept Congress? The establishment-loyal, vapid political press? An executive branch run by the very people who are most vested in, dependent on, and loyal to the financial system that produced these disasters? Only a healthy fear of the populace -- exactly what has been missing -- can achieve that.

Obviously, mass rage can entail its own excesses and, and if unchecked, can lead to mob rule, a form of majoritarian tyranny (as Armando notes, its isolated, unrepresentative excesses (death threats!) are already being exaggerated to discredit the underlying anger itself). But we are far, far, far away from the point where unchecked public sentiment plays too great of a role in how our political institutions function. Rather: we're a country that, for the last decade, acquiesced meekly and quietly as our Government transferred huge amounts of national wealth to a tiny elite; launched a devastating war based on purely false pretenses; tortured, spied on us and literally claimed the right to invalidate law and the Constitution; and turned itself over to the highest bidders.

The overarching question is not: why is there so much public rage? The overarching question is: why has there been so little? A political establishment that can function without any fear of the citizenry will inevitably trample on its interests. That is what has been happening more than anything else. And it is why we need far more public outrage, and fear of that outrage more deeply implanted in the minds of our political and financial elites.

-- Glenn Greenwald