No oversight, with what amounts to the slickest, high stakes-full of shit con-men in the world at the financial companies, is what brings us up to the present day... The full article is well worth clicking over for and reading... if only to be shocked at amazed at the greed and duplicity.
The Big Takeover : Rolling Stone:
"...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.
...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 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...
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 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.
...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.
...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.
...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.
...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.
...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?""
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