According to Matt Taibbi, Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy -- they're up to their necks in the same kind of high-risk gambling as before and are by that means re-creating the conditions for another crash.
What follows here is an abridgement of Matt's recent and rather lengthy new Rolling Stone article, which can be downloaded in its entirety at either of the following two sites:
On January 21st, Lloyd Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman's role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses -- meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried. After all, the country was broke, 14.8 million Americans were standing in unemployment lines, and Barack Obama and the Democrats were trying to recover the populist high ground (after their b*tch-whipping in Massachusetts) by calling for a "bailout tax" on banks. So maybe this wasn't the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. "In a year that proved to have no shortage of story lines," he said, "I believe very strongly that performance is the ultimate narrative." Translation: We made a sh*tload of money last year because we're so amazing at our jobs, so to hell with all those people who want us to reduce our bonuses.
Goldman wasn't alone. The nation's six largest banks -- all committed to this strategy of flagrantly gorging themselves as America goes hungry -- set aside a whopping $140 billion (every penny of it a direct transfer from the taxpayer) for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America's populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a sh*t. The rich, after all, have always made way too much money; what's the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is that there's still a widespread misunderstanding of how exactly Wall Street "earns" its money, with emphasis on the quotation marks around "earns." The question everyone should be asking, as one bailout recipient after another posts massive profits is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like the hundreds of hollowed-out ghost ships at the bottom of the Great Lakes, where in the hell did Wall Street's eye-popping profits come from, exactly? Did Goldman go from "bailout city" to $13.4 billion in the black because, as Blankfein suggests, its employee "performance" was just that awesome? A year and a half after they were minutes away from bankruptcy, how can it be that these a**holes are not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
In fact, they're back conniving and playing speculative long shots in force -- only this time with the full financial support of the U.S. government. In the process, they're rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.
That's why this bonus business isn't merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of hustles and cons that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There's even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a "mark" so he doesn't call the cops is known as the "Cool Off."
To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and "making scores," and to realize that the profits these banks are posting don't so much represent national growth and recovery, but rather something much closer to the losses one would report after a theft or a car crash.
Therefore, a brief history of the most outrageous 18 months of con artistry this country has ever seen: