Memo to Jackass, the Credit Card Industry Doesn't Need Anyone Standing Up for It

By Matt Taibbi, True/Slant. Posted May 8, 2009.

When the financial class nearly destroyed the American economy via the Savings and Loan crisis in the eighties, what was the punishment? Answer: we gave the people who did the fucking up $124 billion in taxpayer money. When currency speculators overbet the peso in 1994, what did we do? We bailed them out, with about $50 billion. Long Term Capital's punishment? A bailout. Emerging-markets speculators who went in the tank in the late eighties? They got bailed out in front and in back, through a variety of bailout programs.

How about the insane exuberance for the internet bubble economy? The same politicians and central bankers who felt that intervention was necessary to correct the market's irrational decision to wipe out Long Term and all those speculators in the economies of Southeast Asia and Russia -- the same people who felt that government intervention was needed to correct "irrational" declines in investment value -- saw no problem at all with the obviously overvalued, far more irrationally exuberant tech market. And when it all blew up, wiping out billions in value, Wall Street was "punished" with sweeping tax cuts, further deregulation, and massive cuts in the staff budgets of enforcement agencies like the SEC and the OTS (which saw its already-miniscule staff of 1200 slashed by 25% between the years 2001 and 2004).

Even after Enron and WorldCom and Tyco and a rash of similar accounting scandals that clearly indicated a widespread, endemic problem, the would-be dreaded response was the Sarbanes-Oxley Act, an incremental step toward greater financial disclosure so unfrightening to Wall Street that even Alan Greenspan loved it. Sarbanes-Oxley was supposed to inspire corporate responsibility, transparency, and stricter bookkeeping, but half a decade after its inception what Wall Street actually made of it was perhaps the most ineffectual and lax accounting environment the civilized world has ever seen, with one giganto-firm after another capsizing and sinking to the ocean floor under the weight of spiralling debts that often came as a complete surprise to shareholders, regulators, and sometimes even senior management as well.

We simply do not have a real functioning mechanism in American politics for converting public anger into tough government policy. The closest thing we have in that regard is the relationship between elected officials and the media: when TV news decides to flip out about something like the AIG bonuses for more than a day or two, we might sometimes see public officials do something about… something like the AIG bonuses. But that's about it. In point of fact the only significant "reforms" to date, even in the face of this most extreme financial crisis, have been moves instituted to restrict short-selling and a relaxation of mark-to-market accounting rules, both measures on the deregulatory wish list of the big firms.

More significantly, there has been almost nothing in the way of punishment of the major figures responsible for this crisis. If there were a real correlation between public anger and government policy, we'd have seen at least something in that area. Maybe there wouldn't have been public floggings, but there would have been some serious frog-marching of unscrupulous assholes to prison.

And this isn't about vengeance, it's about policy: if the "consequence" for blowing a $4 trillion hole in the economy is seeing masses of government officials line up to hurl billions of taxpayer dollars at you, that doesn't provide much of an incentive to fix your behavior. This is one area where there should have been a seamless melding of public outrage and government policy: we should have swooped in, rounded up 200 of the most guilty executives, hauled them before congress in a public trial, and packed them all off to a Supermax in Florence, Colorado to do real time with murderers, rapists and terrorists. Reality shows should have been quickly greenlighted to track their progress in the hole (can you imagine the ratings for a show called Project D-Block starring John Thain, Angelo Mozilo and Dick Fuld?).

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Matt Taibbi is a writer for Rolling Stone.

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