Wednesday, July 1, 2009

The Madoff Follies

No one will argue that Bernie Madoff didn’t deserve to go to prison. However, let’s take a moment to consider why Bernie is going to jail while the Banks That Broke The World, the architects of the derivatives fraud and the real estate bubble fraud, and Hank Paulson, the architect of the nation’s biggest ever government sanctioned money laundering operation are still free. I have a couple ideas.

First off, Bernie stole from rich people. This was very stupid. I believe it’s written in the Handbook of the Nauseatingly Rich and Privileged to the Point of Being Morally Handicapped that you can only exploit, cheat and steal from regular people. It might have taken a bit more work and a bit more time but he would have got away with it and his poor wife wouldn’t have to sell her mansion, her vacation home AND her $50,000 fur coat and live on only 2.5 million in cash in the meantime. As I watch the masses sit back and wait quietly for the next supreme reaming, it’s kind of heartwarming to see a group of folks come together in a time of crisis and eat one of their own. The Banks stole from lots and lots of regular people, twice. First they inflated home values using easy credit and then they gave huge adjustable rate mortgages to rocks and frogs. I do not believe a single mortgage originator has been sent to jail for fraud never mind the CEO of a single bank that bought in. Then there is the derivatives fairytale that gave fuel to the real estate bubble. Although it seems to me that CDO's and CDS's incorporate lying, cheating and stealing, no one seems to be on the hook for that one, either. Henry Paulson stole from lots and lots of regular people. He got the government to turn over 350 billion dollars to buy toxic assets (bad loans) and instead funneled that money to the insolvent bank’s creditors one of whom is Paulson’s former employer Goldman Sachs who, surprisingly, just posted their most profitable year EVER. So the banks got a huge capital injection without one iota of federal control or interference in business as usual and the foreclosure crisis; which was sold as the reason for all of this to begin with; is still in full swing and building momentum everyday as the banks refuse to renegotiate terms on the at best predatory and at worst fraudulent loans they wrote.

Bernie left a long, stinking, gelatinous trail that a blind person could have followed with ease. Seriously, the authorities must have been actively involved in trail maintenance laying down 2x4’s to step over that thing. His operation was also pretty incestuous; he rigorously fished the same small pond over the life of the scam. What a dummy! What the Banks did was on an enormous scale through thousands of agents and under the guise of rigorous government oversight. Now, the Banks didn’t exactly hide what they were doing but when the shit hit the fan they had the ENTIRE WORLD ECONOMY as a hostage. I do not for one second believe the world would have ended if Shitty Bank and Shank of America had been allowed to fail. Our economy certainly would have shrunk (like it is anyway)and there would have been economic disruption (like there is anyway) but the brunt of the fall would have been held by shareholders aka Voluntary Risk Takers in the Casino of Finance. They would have been totally wiped out. I know, I know, the 401ks of “innocent” people would have been depleted as well. Sadly, we have all bought into this myth of easy street through investing (never mind the myth of inflation being natural or necessary) and have been compelled to do so through pre-tax vehicles like 401ks and IRA’s (the only show in town for pretax dollars, what a fucking racket). As it stands we’ll ALL be paying for it in the form of inflation and fewer services along with higher taxes at best. At worst, we’ll remain mired in state of shocking hyperinflation and underemployment that accelerates our evolution into a two class society. Tell me again how the Banks are paying? Henry Paulson didn’t tell anyone where he sent the 350 billion dollars and no one seems to care to force the issue but it wouldn’t be hard to crunch the numbers and figure it out. At least if you trust those numbers. And you are a drooling imbecile if you do.

The long and short of it is, we can’t go after the Banks or Paulson like we went after Madoff because they can’t be painted as rouge operators. If we find fundamental fault with them then we have to find fundamental fault with the whole shabang. The underlying sickness at the heart of all 3 cons is that we believe we can get something for nothing. As The Daily Show’s Senior Ponzologist John Oliver puts it: “for the price of few cigarettes, prisoners can just sit back and live in a world of non-stop hand jobs”. Finance is risky and any system that tells you that you must risk your money in order to succeed is corrupt at its core. If you can’t build a secure future by being frugal and being cautious and by working hard at some meaningful endeavor then it’s the wrong system. Madoff is going to prison until well after his death because 1. he’s guilty and 2. because putting him away doesn’t necessitate we change a goddamn thing. We can just sit back, and for the price of a few cigarettes…

Update:
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The Great American Bubble Machine

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