Matt Taibbi vs. The Plutocrats

Why do we love Matt Taibbi? Let us count the ways: 1. He hurled a horse-semen-spiked cream pie in the face of a New York Times Bureau Chief. 2. He flung a cup of coffee at a Vanity Fair reporter who called him redundant. 3. He wrote an article detailing "The 52 Funniest Things About the Upcoming Death of the Pope." 4. As both a Rolling Stone columnist and author of books like Smells Like Dead Elephants, he's attacked the purveyors of greed while making us laugh. In short, he's not only our favorite National Magazine Award winner, he's also one hell of a pastry chef. Below Taibbi serves us a few slices of rich creamy stuff.

conduit: Is America really in decline?

matt taibbi: There's a lot of money in this economy–people on Wall Street and in the financial services industry are making more than they've ever made. It isn't so much that our economy is declining as there is a major redistribution of wealth happening. It's being sucked out of the lower middle classes and moved upward. This process probably began in the early nineties when people were all but forced into the stock market because saving rates were so low and interest rates had such high returns. People moved to the stock market and got caught up in the tech bubble, and when that collapsed, a lot of them lost their wealth. Still, overall, Wall Street profited because it made money off of fees--and we've seen that pattern repeat itself a number of times since with the real estate bubble and the various commodity bubbles. People keep going to the casino, and as with any casino, they keep losing and the house keeps winning. In short, this particular sector of society is getting richer while ordinary people are getting poorer.

conduit: When you say, "this particular sector of society," do you mean people like Mitt Romney at investment firms like Bain Capital?

taibbi: Yes, Mitt Romney represents this phenomenon that people talk about on Wall Street . . . this financialization revolution. Before the eighties, wealth on Wall Street was mostly tied to the real economy, to a firm's investment in industrial companies that really grew and really made products. But in the eighties, you started to see this phenomenon where firms used new financial innovations to engineer ways to create money out of thin air. That began with junk bonds and progressed to derivatives, and now there are all these different ways to make money by essentially playing casino games with existing investments and assets. These guys are really smart. They've got a lot of different ways to create money out of nothing. And the ability to do that is what allowed people like Mitt Romney and the fictional Gordon Gekko to suddenly become captains of industry. You couldn't do that before. It just wasn't possible to instantly conjure the kind of financing that you needed to go on a string of acquisitions and buy up major industrial companies. Now CEOs can jump on the nuclear-power-version of junk bonds–derivative-based instruments–and conjure as much money as they want almost instantaneously. This allows them to eat up the market share in almost any industry. So again, Mitt Romney represents this new phenomenon perfectly, because while his dad, George Romney, was a traditional industrialist who built a real product–cars–Mitt doesn't really make anything. He just has a clever way of extracting money from existing companies.

conduit: Romney claims that the U.S. has fallen behind China because it's no longer manufacturing products, yet in reality he's part of the problem. He's not making anything other than a series of bets.

taibbi: Exactly. America produces financial products. That's the major product that we're still making here–fancy bets on things like mortgages and grain prices. Guys like Romney complain that places like China, India and Latin America are taking away America's financial power by making the things we no longer make. But we financed their ability to do that. Who do you think builds capital for the construction of all those factories in India and China? Companies like Goldman Sachs and Bain Capital. These guys want a percentage in moving the labor force to places where there are fewer regulations and you don't have to pay anybody as much and you don't have to worry about environmental laws. They financed that whole outsourcing revolution. But it wasn't just guys like Romney buying companies and slashing jobs. It was big banks going into deals with countries like China to build factories and move the entire American manufacturing sector to the Third World. They did it with their eyes wide open. So I think it's a joke when they complain about it.


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