Monday, October 19, 2009

Vampire Capitalism

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

So Matt Taibibi famously described the chief remaining player in that big multi-billion dollar casino that passes itself off as the financial industry in the pages of Rolling Stone.
It turns out there really is a vampire squid. Here it is.

It's pretty frightful looking. It has spikes where most other cephalopods have suckers. It has intense blue eyes with powerful light reflectors that appear to glow in the dark. It doesn't necessarily drink blood. Like most cephalopods, it eats all of its prey. Fortunately, it is very small and lives in very deep waters. It is mostly a menace to sardines and herring.

Paul Krugman comments this morning on the relative prosperity of the share trading part of the financial industry (the Casino that wrecked the economy in the first place), and the continuing ill health of the lending part of the financial industry. Economist Duncan Black at Eschaton regularly documents bank takeovers by the Federal government. Almost all of them are small local or regional banks, the ones not "too big to fail." Those small banks did the basic business of banks, financing businesses and purchases, providing the capital for the productive part of the economy. The wheeler dealers of the Big Casino are pulling out all stops to lobby against any meaningful financial reform. I'm afraid the political moment for such reform has passed. The Casino is no longer on the ropes gasping for breath as it was a year ago.

Like a vampire, the Casino sucks the life out of all the rest of us to sustain its multi-billion dollar gambles. The Casino produces nothing. It doesn't even finance the people who do produce. It makes huge piles of money by doing nothing more than moving money around. It has politicians on all levels on its pay-rolls, thanks to our system of legalized corruption. A new and more perilous speculative bubble inflates even as we speak. It is all the rest of us who will again have to bear the losses when it bursts.

The Casino and the insurance industry (another vampire) goad the crazy people on the far right into campaigning against any kind of regulatory reform as an infringement on personal liberty. The Casino and Big Insurance are convinced that they can exploit and control the folks on the far right. They count on the automatic deference the Washington mandarin class gives to right wing views after 30 years of conditioning by right wing rule (something that Jon Stewart and Stephen Colbert parody regularly).
But I wonder. Glenn Beck is no more friendly to corporate interests than Matt Taibibi. About 80 years ago, European plutocracies were convinced that they could exploit and control far right movements in order to head off any populist campaigns for reform (especially labor), to defeat and destroy left wing movements, and to head off the big threat that they really feared, Stalin. They woke up one morning to find that, on the contrary, it was they who were being played by the far right, and they were the ones under control, their money being used to further extremist agendas.


It looks like the Casino, rescued with public money, flim-flamed local governments and college endowments from coast to coast. Jefferson County, Alabama is facing the biggest financial collapse of any municipal government in history. Hat tip to Atrios.

Jefferson County’s debacle is a parable for billions of dollars lost by state and local governments from Florida to California in transactions done behind closed doors. Selling debt without requiring competition made public officials vulnerable to bankers’ sales pitches, leaving taxpayers to foot the bill for borrowing gone awry.

Swaps Blew Up

Under Langford’s stewardship, the county bet on interest- rate swaps, agreements that a representative of New York-based JPMorgan Chase & Co. told commissioners could reduce their interest costs. Instead, the swaps -- covering more than $5 billion in all -- blew up during the credit crisis after ratings for the county’s bond insurers fell.

Further addendum:

Toujoursdan points out that while economists and executives (and the media) are breaking out the champagne, homeless shelters are groaning under the strain of a huge new population created by the continuing real estate credit crisis.

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