A Crush on Matt Taibbi and a Pox on Both Their Houses
I admit itâ€¦ Iâ€™m no different that most everyone elseâ€¦ Iâ€™ve got a crush on Matt Taibbi of Rolling Stone.Â In case youâ€™re unaware, Matt writes about many of the same topics I tackle on Mandelman Matters, except heâ€™s younger than me, gets to swear like a sailor in his articles when he wants to, shows up on Bill Maherâ€™s show now and again, lives in or near Hoboken, New Jersey, which is right across the Hudson River from Manhattan, and in general appears to have my dream job.
His recently published book, Griftopia, was one of my favorites of the past yearâ€¦ after reading the first seventy pages while in bed, I threw my copy onto my bed and said out loudâ€¦ to no one but myselfâ€¦ damn it, he might just be funnier than me.Â And for a moment, I questioned why I would ever write another word now that Matt was on the job.Â Iâ€™ve since reconsidered, however, coming to the conclusion that while he is in fact clever, and occasionally even laugh-out-loud funny, heâ€™s not definitively funnier than I am, and never breaks into show tunes in the middle of articles on the financial crisis that Iâ€™ve seen, so Iâ€™m going to continue my soirĂ©e with the printed word.
Mattâ€™s also a relative newcomer to the financial and foreclosure crises, at least compared with me, but he does what he does for a living and obviously has resources that allow him to do some real investigative reporting, so when a reader of mine emailed me an excerpt from one of his recent articles, and the headline spoke of Wall Street â€śhousewivesâ€ť receiving $220 million from the Federal Reserve during the now infamous rich-guy-and-banking-buddy-bailout, wellâ€¦ I felt compelled to take a look at what Matt was describingâ€¦ and I now wish more than anything that I hadnâ€™t.
Just a few short days back from vacation and after reading Mattâ€™s article, all I want to do is scream at the top of my lungs until I pass out.
You see, Congress has recently forced the Federal Reserve to at least partially open its books and allow the American people to see where some of the trillions in â€śbailout dollarsâ€ť actually went.Â As Matt says in his Rolling Stone article of April 12th:
â€śIt is as though someone sat down and made a list of every individual on earth who actually didÂ notÂ need emergency financial assistance from the United States government, and then handed them the keys to the public treasure. The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loanseachÂ to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses.â€ť
Well isnâ€™t that just great to hear?Â Our government officialsâ€¦ our best and brightest, one would certainly hopeâ€¦ spent a relative dollar ninety-five on stopping the foreclosure crisis that continues to stalwartly impede any sort of economic recovery from mattering to anyone but our Wall Street bankers, and about as much to stimulate job creation to any significant degree.
But, we did help out the rich people and propped up our financial institutions, not to the point of their being able to re-start any real amount of consumer lending, but at least to the point where the Streetâ€™s bonuses are as egregious as ever.Â Absolutely crackerjack work is all I can think of to say, now can we please start making sense again?
Well, Mattâ€™s story is titled, The Real Housewives of Wall Street, and it asks the question:
â€śWhy is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?â€ť
Hereâ€™s an overview of what Mattâ€™s referring to, youâ€™ll have to read his article in order to really become near suicidal or prone to acts of random violence.
Apparently, back in 2009, Morgan Stanleyâ€™s CEO, John Mack and his wife decided to purchase a $13.5 million property located on Manhattanâ€™s tony Upper East Side, a 107 year-old limestone carriage house with an indoor 12-car garage, recently sold by the Mellon family of Robber Baron fame.Â At the time, Mr. Mack was earning just $800,000 a year in salary, and was declining to award himself a bonus in what was the midst of the worst financial crisis in 70 years.
Now, I assume Mack had plenty of cash with which to buy the property, although I really donâ€™t know the details of the transaction, but Iâ€™m thinking $800,000 a year isnâ€™t enough income to shoulder a $13.5 million mortgage.Â No matter, John Mack and his wife Christy together did purchase the inner-city estate so good for them. Â (That’s it, just below.)
Matt Tiabbi describes Christy Mack as being: â€śâ€¦ thin, blond and rich â€” a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of palm healing.â€ť
Hereâ€™s where it gets positively surrealâ€¦
Two months before the Macks purchased their Manhattan carriage house with indoor parking for 12 cars, it seems that Christy and her friend Susan, neither of which appear to have any background or education in finance, launched a new investment enterprise that would invest in student loans and commercial real estate, calling it â€śWaterfall TALF.â€ť
The two Wall Street wives put up $15 million to set things up, and then they received $220 million in CASH from the bailout programs being offered by the Federal Reserve, most of which they used to buy student loans and commercial mortgages.
The loans from the Fed provided that Christy and Susan would keep 100 percent of any gains on their investments, while the Fed and the Treasuryâ€¦ as in, taxpayersâ€¦ would cover 90 percent of any losses. Â The arrangement was made as part of a bailout program that was sold as being designed to help Main Street by stimulating consumer lending.
So, the strategy now seems quite clear: Our government decided to address the financial crisis and economic meltdown by handing out hundreds of millions to the wives of Wall Street executives so they could invest in student loans and commercial mortgages on a risk-free basis.
Seeâ€¦ when you say it like that it doesnâ€™t sound nearly as stupid as it did a few minutes ago.Â NOâ€¦ WAIT A MINUTEâ€¦ yes it doesâ€¦ itâ€™s the dumbest idea in the history of the world, a complete abrogation of our democracy, and if thereâ€™s any justice in the world, those involved will be violently gang raped in prison every day for 50 years, or stricken with palsy.
The TALF bailout program was created just after Obama was elected with the stated purpose of stimulating consumer lending, but instead of just lending the money to consumers, our governmentâ€¦ and yes, Iâ€™m talking about the Obama Administration hereâ€¦ decided to give the money to the same irresponsible greedy bastards that caused the crisis in the first place so they could lend it to consumers at a huge profitâ€¦ essentially risk-free.
And the real beauty of TALF is that it doled out dough in the firm of NON-RECOURSE LOANSâ€¦ the kind you donâ€™t really need to pay back, unless itâ€™s profitable to do so.Â You get your money from the Fed, you buy your student loans and commercial mortgages, which you transfer to the Fed as collateral for the loan you just got from the Fed.Â If your investments go down in value, you donâ€™t re-pay the Fed, you just walkaway from the loans you invested in and send the bill to the taxpayer.
Of course, it should go without saying that if your investment increase in value, why then you take your investments and cash them in, repay the TALF loan you got from the Fed, and pocket the difference.Â Neat-O, donâ€™t you think?
While all of this financial engineering has been going onâ€¦ accomplishing nothingâ€¦ people are losing their homes to foreclosure every day and in record-breaking number because servicers are inept and uncaring on a scale historically reserved for our enemies during times of war.
Our governmentâ€™s incompetence in dealing with the foreclosure crisis has become so apparent and consistent that essentially no one believes that the administration or the legislature has the slightest idea whatâ€™s happening, why itâ€™s happening, or what to do about it.
And yet, as I write thisâ€¦ we donâ€™t even have a program on the drawing board that could potentially stop the free fall in the housing markets that continues to erase roughly $10 trillion in consumer wealth each year.
But, I think it was last week or the week before that our government was consumed by a debate about a miniscule amount of federal funding for Planned Parenthood, and now weâ€™re about to start another 18 months of presidential election circus politics, during which time nothing substantive will be accomplished and millions more will lose homes, leaving behind nothing but vacant and rotting structures emblematic of losses all around.
Is this state of affairs okay with anyone?