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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.

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Bill Moyers: Reporting on it.

Matt Taibbi: Reporting on it. And the amount of raw anger that you see in these proceedings from people who have lost their homes, they have no illusions about who's to blame for the situation. They know exactly, you know, where the problem is. And I--

Bill Moyers: And it's where?

Matt Taibbi: It's with these banks that sold them these mortgages. And I think there's a growing awareness out there in the public, more and more people have had a personal problem on some front with Wall Street, whether it's credit card debt or a mortgage debt or they've lost their jobs. And I think there's anger and it's starting to become more organized.

Bill Moyers: Both of you trace this back to what you call fraudulent debt. Is that right?

Matt Taibbi: In the case of the mortgage markets, absolutely. I think what a lot of these, this was a fraud scheme. It's the same scam that you see here in the streets of New York when somebody's selling a phony Prada bag or a phony Rolex watch in the street. These banks were selling phony mortgages that were, they were selling them as triple A rated instruments when, in fact, they were essentially worthless.

They were highly risky, toxic instruments. And they knew it. They were buying, they were in cahoots with companies like Countrywide and Long Beach, these sort of fly-by-night mortgage operations who went out and they gave mortgages to everybody and everybody who had a pulse. They took these mortgages. They bundled them. They waved a whole bunch of phony hocus-pocus math over them and reconfigured them into triple A rated investments.

Then they went out into the world and they sold them to every customer all over the world, pensions, unions, foreign trade unions, foreign governments. And they--

Yves Smith: Trade councils in Australia. I mean, real know nothings.

Matt Taibbi: Everybody. Everybody bought this stuff. It all blew up like, everybody who was in on it knew it eventually would because they were betting against the stuff as they were selling it. And, and the, and that's why we have this, this situation that we're in now.

Yves Smith: Yeah, but even the most even if I'm giving Wall Street more credit than it deserves. But even if you take out the bad creation and selling of the product, you also have the fact that Wall Street basically demands an asymmetrical deal with contracts, that if you have a credit card deal or if you have a mortgage, if you make the tiniest, little violation, you know, we get to take our pound of flesh.

And yet if you're a union member, it's perfectly fine to break your contract. You know, our contracts count, but we can break all the other contracts in society to get our obligations honored. I mean, this is just crazy.

Matt Taibbi: But they genuinely think that they earn their money. And I think that was one of the illuminating things not only about the Dimon hearings but also the Lloyd Blankfein, slash, Goldman Sachs hearings a couple of years ago. These guys really think that they're, they have a unique and special genius that entitles them to earn the vast sums of money that they pay themselves, that somehow that they're creating all this wealth for themselves.

And they really genuinely don't think that they're getting their money-- from all of us. And to them it's irrelevant that they're getting all their money for free from the Fed and that they're lending it all out to us at five percent, 10 percent, 20 percent, you know, 25 percent. They think they deserve the money. And I think that's the scariest part.