Economy  
comments_image Comments

Matt Taibbi and Yves Smith: How the Wall Street Mafia Holds America -- and the World -- Hostage

Yves Smith and Matt Taibbi join Bill Moyers to discuss our criminal global financial system.

Continued from previous page

 
 
Share
 
 
 

Yves Smith: And they also have what amounts to an oligopoly. I mean, for many of these services, you have a great deal of difficulty going beyond the five biggest banks, you know? This is-- it's the consequence of too big to fail is that when, you know, some of the smaller players, again, you know, like-- JPMorgan buying Bear Stearns.

In the crisis, when the smaller players got sick, they were merged into the bigger players. So now if you want-- for a lot of these services, there aren't that many players for you to go to. You really have no choice in-- other than to deal with the big banks.

Bill Moyers: Congress is paid to be informed and to hold these guys accountable. Why don't they ask the kind of questions you're dealing with here?

Matt Taibbi: People refuse to look at these banks and think of them as organized crime organizations.

They in their eyes, organized crime is always either the Italian mafia or the Irish mafia. This isn't what it looks like. But that is who they are. And I think that they're treated with a kind of deference and respect, because traditionally that's not who they were. They were these icons of finance who helped build this country.

But that's not who they are anymore. And I think, it's hard for people to wrap their heads around that and treat them the way they should be treated.

Yves Smith: Well, I think people don't want to think that there's something wrong with leaders. And CEOs are leaders of the business community. If you really believe that CEOs of businesses that are really fundamental to the economy are corrupt, you have to think of a very serious restructuring of the business and financial system.

And even if people kind of intellectually might be willing to contemplate that, they don't really want to go to what the implications are. So it's much easier for them to block out that thought.

Bill Moyers: Both of you have been writing a great deal lately about the crisis in Europe. So explain to us simply what hand Wall Street has in what's going on in Italy, Greece, and Spain today and why we should care.

Yves Smith: Well, I almost want to go one step of abstraction higher because people tend to focus on the immediate ways Wall Street was involved like Goldman Sachs helped Greece cover up how serious its deficits were.

Matt Taibbi: Which in the situation, it was very similar to Jefferson County, by the way.

Yves Smith: Right. But the more important story is much higher, which is that the reason the big reason that all, you have basically a sovereign debt crisis, that the governments in Europe, many of them had to borrow a tremendous amount of money in the wake of the crisis. And the euro zone is not well set up to adapt to that. I could go into technical reasons why, but it's not unlike a state.

You know, when a state has a budget problem that suddenly they have to think about, you know, cutting costs and doing all kinds of draconian measures. And while maybe a state or a city can do that, you can't have the biggest economy in the world. I mean, Europe is the biggest economy in the world doing that and not have it basically turn into a down spiral, that you cut spending and then that leads to less income.

And your deficits get worse rather than better. So, but the reason they had that problem is, in fact, very directly the result of the financial crisis. That you had countries that weren't running deficits, government deficits like Ireland and Spain, that were held up as poster children before the crisis of doing things right.