Last year, Matt Taibbi made huge waves when he wrote what were the most circulated articles on Wall Street. Now, he’s crystallized his thoughts into a new book Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America.
I caught up with Matt to hear what he’s learned while following Wall Street and Washington during these most extraordinary times...
Damien Hoffman: In your new book Griftopia, you talk about how Wall Street and Washington have ironically got middle class America to support their agenda. How is this happening? Will it last?
Matt Taibbi: The Grifters have been getting people to support Wall Street’s political agenda by seducing them with a [Ayn] Randian and pseudo-libertarian ideology. It’s always been around, but it’s just reaching a fever pitch now. And it’s the only way ordinary people can be convinced to endorse a deregulatory agenda. I think it’s going to last.
Damien: In your experience at the Tea Party events, do they understand the cosmic irony that they basically just got robbed because there were no sheriffs left in the Wild West, yet now they all stand for a movement that prefers to keep it that way?
Matt: No, they don’t see the irony at all. And interestingly, a lot of them are real law-and-order types. I mean, they’re really into Cops and putting people in jail for smoking a joint. But when it comes to a financial crime, they have absolutely no interest in that whatsoever.
Basically, government regulation is the kind of stuff a lot of them see on a day-to-day basis, but in a different form. If they’re a hardware store owner, they see a local health inspector or an ADA inspector coming by to make sure they’re in compliance with something. These are all little annoyances and costs that they see when they interact with government. Unfortunately, that’s what they think is financial regulation. They don’t get that it’s a completely different ball game when you’re talking about JP Morgan Chase (NYSE:JPM), Goldman Sachs (NYSE:GS), and that level of power requiring oversight.
Damien: So, can you explain how what you call the grifter class pulled off this magnanimous trick?
Matt: Well, there’s a very simple explanation for how they get away with this stuff: modern financial services is so unbelievably complicated that people will naturally strive for simple explanations. And when people like these Tea Party leaders come around offer a very simple explanation — regulation bad, deregulation good — people jump at the chance to believe because not believing means they must commit themselves to actually figuring it all out.
It’s so unbelievably intimidating to people to make the commitment to understand all this stuff, they will flee to any alternatives. And a viable alternative is to believe the idea that all this mess was caused by regulations and government meddling. That’s something people can understand.
Damien: So, do you think the U.S. is entering a new phase?
Matt: That’s a difficult question. We are transitioning to something new and it has less to do with the evolution of an individual country like the United States and more to do with the withering away of states in general. This is causing a corporate anarchy where there are really no rules or regulations for the game, and there are no physical borders.
I think across states and borders, these banks and financial companies are going to become more concentrated and more unaccountable. I think that process is irreversible. Unless something remarkable happens here in America, we’re just going to see more of that and a weaker state to deal with it.
Damien: Do you think we’re now just on the cusp of another situation where Wall Street is moving into the next big scam and the fallout is only years away?
Matt: Yes. I don’t think it’s any secret on Wall Street that there is another shoe that has to drop. I was just in a foreclosure court down in Florida and I watched a foreclosure lawyer come in with a stack of foreclosures that literally went above his head. Each one of those folders had faulty paperwork in it. That implies all those mortgage bank securities are still infecting the entire economic universe and there’s a place for those to fall too.
They are all probably going to blow up and there’s going to be a tremendous reckoning when that finally happens because we’re propping up that part of the economy. But there’s also evidence that suggests there’s bubble-like activity going on right now. We have a recovery without jobs, we have quantitative easing where they’re going to dump another ton of money through Wall Street — that’s just printing money out of thin air.
Clearly, there are going to be consequences for all of this. And when we balance the books and figure out how much everything is actually worth on our balance sheets, I think there’s going to be another problem.
Damien: Do you think there’s a realistic chance for widespread civil unrest?
Matt: If we have a massive tax increase or hyperinflation, I would imagine there could be some kind of unrest.
But the amazing thing is we just had this huge, seemingly like once in a generation financial crisis and we did not have a movement specifically directed at the people who caused it. So, it’s hard to predict whether social unrest will be coherent.
Damien: What kind of results do you think we can expect from the recent elections?
Matt: Well, the Democrats didn’t do a whole lot in the two years they had to try to fix all these problems. They did pass the Dodd-Frank Bill that does have some stuff in it that’s real.
However, I’m sure the Republicans will do everything in their power to roll back any reforms that have been enacted. I can guarantee there won’t be much in the way of further reforms in the next two years. Anything that’s going to happen in terms of fixing Wall Street won’t happen for the next two years – let’s put it that way.
Damien: Matt, I’m sure you finished the book relatively recently, but has anything changed since the book went to print?
Matt: Originally there was a chapter in the book, quite a long chapter, about foreclosure and about the documentation problem in the housing market. We left it out because we thought it was too arcane and difficult to follow. I’m kind of sad I didn’t leave that in.
Damien: Well, Matt, thanks for taking the time to share some of your insights from the campaign trail and what you learned while putting together your book. It’s been another great read.
Matt: Thank you very much, Damien. I appreciate it.