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'Griftopia': The Financial Crisis Easily Explained

by NPR Staff
Nov 6, 2010 (All Things Considered)

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In 2008, Rolling Stone contributing editor Matt Taibbi was hanging around with the rest of the press corps after one of John McCain's campaign speeches.

The Arizona senator and presidential candidate had railed about skyrocketing gas prices. "He was going into his whole drill-baby-drill routine," Taibbi recalls. "The press corps were all joking about it afterward."

As if the current price spike was a result of America's failure to drill in Gulf of Mexico, they laughed. "Do we actually know what's causing the spike in gas prices?" Taibbi asked. Silence followed. "Nobody knew the answer," he says. "I didn't know the answer."

"It occurred to me, here we are covering an exploding economy — and none of us have any idea about what actually caused any of it."

Since then, Taibbi's columns have been a destination for those trying to understand what happened in the aftermath of the financial meltdown. His new book, Griftopia: Bubble Machines, Vampire Squids and the Long Con That Is Breaking America, tries to make the subject even clearer in the colorful language Taibbi's readers know well.

"All these big institutional investors essentially got sold oregano when they thought they were buying weed," Taibbi tells NPR's Guy Raz.

Meet The 'Vampire Squid' Of The Financial Crisis

"What the mortgage bubble was all about was big banks like Goldman Sachs taking big bundles of subprime mortgages that were lent out largely to low-income, highly risky borrowers," Taibbi says, "and applying this kind of magic-pixie-dust math to these bundles of securities and slapping AAA ratings on them."

This wasn't the worst of it, of course. While Goldman Sachs was selling these bundles, "they turned around and placed massive bets against the mortgage market knowing that it was going to collapse."

"They took suckers like AIG, and they placed massive bets that this stuff was going to fail, and AIG stupidly took the bet and that's what ended up blowing them up," Taibbi says.

In Taibbi narrative, Goldman Sachs often plays the villain's role. "They had an extraordinary amount of political influence that was over and above the other banks," he says. "No other bank has the same record as Goldman Sachs does in terms of taking former executives and placing them in high-ranking positions in the government."

Or, as Taibbi put it in one of his early columns, "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."

A Financial Journalist For The Rest Of Us

Taibbi took a lot of heat for that column, particularly from financial journalists. He admits it was a difficult time.

"I was a complete neophyte in this world," he says. "When we started working on these pieces, I was starting almost from square one."

"I was worried that conceptually I had something wrong, that a person who worked in this business would read it and say, 'This guy doesn't know what he's talking about at all.'"

And that was exactly some of the criticism Taibbi received early on. But part of that conflict was cultural, from a realm of journalism that tends to reject outsiders, Taibbi says.

"It's a very closed, incestuous community," he says. "I think they very purposely don't cover Wall Street for people outside of Wall Street."

That's OK, Taibbi says, because financial professionals need expert reporting. Financial journalists are supposed to write for people who are in the business. But, "unless you do it for a living, you're not going to be able to penetrate most of these articles."

"There needed to be somebody who does it for the rest of us."

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

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