Matt Taibbi is a fantastic journalist. He started out covering what he could get to on foot within his means, and thanks to that he's written up one of the best examples of journalism that came out of the 2003 A.N.S.W.E.R march, likely one of the largest demonstrations to occur in America since the civil rights era, and published to Counter-Punch (hardly the most read journalism online). From there he evolved, moving through his time at The Daily Beast to eventually land a job at Rolling Stone. Rolling Stone has never shied from the political as some people reading this might be old enough to remember the lifetime of Hunter S. Thompson who got his feet wet writing for The Nation before eventually moving into writing for Rolling Stone. Taibbi's writing is a lot like Thompson, and thanks to the increase in resources he has with his more "establishment" position at Rolling Stone he's been able to go out and do more investigative journalism that requires the most important thing every activist usually lacks - money.
With that Taibbi has written powerful stuff - and I do mean powerful. Right after the 2010 mid-term election Taibbi joined with a roundtable at Rolling Stone, including the vaunted right-wing neoliberal David Gergen, where both Taibbi and Gergen get into a little spat over whether or not Taibbi is right in calling the Tea Party crazy. I liked that writeup not only for Taibbi's political foresight - as we all know now that the Tea Party is crazy enough to hold the US hostage in what amounted to political/economic terrorism to get what they wanted or they'd crash the US economy into an iceberg - but also because the way Taibbi argued with the rest of them was just comical. The comedy from that article sticks out to me because I was waiting at a pharmacy for my scripts to be filled, and despite running a fever and feeling of death I was laughing so hard I thought I was going to lose my lungs amidst a cacophany of coughing and laughing in a completely empty Walgreens at 2am.
So suffice to say that Taibbi has become a bit of an established pundit that likes to throw hard punches: from his blog to his normal journalism to his books - Taibbi has established a name for himself. I'm quite happy for the man, he's not going to win any awards for looks so GQ is never going to call him up to try to sell him as the "sexy and smart" journalist of today - he gets by doing what journalists are supposed to do to everyone: ask questions, catch mistakes, and tell the goddamned story. It'd bring a tear to my eye if they weren't blocked shut with years of cynicism.
All of the above is to exemplify that I believe Matt Taibbi to be a source of considerable veracity. I like the way he writes and I know he checks his sources before he puts his name on anything to be published. For that reason I'm enjoying his new article on the SEC, which I'll just take some quotes from for you.
In at least one case, according to Flynn, investigators at the SEC found their desire to investigate an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating. In another case, the agency farmed out its inquiry to a private law firm – one hired by the company under investigation. The outside firm, unsurprisingly, concluded that no further investigation of its client was necessary. To complete the bureaucratic laundering process, Flynn says, the SEC dropped the case and destroyed the files.
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Even a cursory glance at a list of the agency's most recent enforcement directors makes it clear that the SEC's top policemen almost always wind up jumping straight to jobs representing the banks they were supposed to regulate.
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Imagine the LAPD politely asking a gang of Crips and their lawyers to issue a report on whether or not a drive-by shooting by the Crips should be brought before a grand jury – that's basically how the SEC now handles many preliminary investigations against Wall Street targets.
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The evolution toward this self-policing model began in 2001, when a shipping and food-service conglomerate called Seaboard aggressively investigated an isolated case of accounting fraud at one of its subsidiaries. Seaboard fired the guilty parties and made sweeping changes to its internal practices – and the SEC was so impressed that it instituted a new policy of giving "credit" to companies that police themselves. In practice, that means the agency simply steps aside and allows companies to slap themselves on the wrists. In the case against Seaboard, for instance, the SEC rewarded the firm by issuing no fines against it.
According to Lynn Turner, a former chief accountant at the SEC, the Seaboard case also prompted the SEC to begin permitting companies to hire their own counsel to conduct their own inquiries. At first, he says, the process worked fairly well. But then President Bush appointed the notoriously industry-friendly Christopher Cox to head up the SEC, and the "outside investigations" turned into whitewash jobs. "The investigations nowadays are probably not worth the money you spend on them," Turner says.
[...]
But even if SEC officials manage to dodge criminal charges, it won't change what happened: The nation's top financial police destroyed more than a decade's worth of intelligence they had gathered on some of Wall Street's most egregious offenders. "The SEC not keeping the MUIs – you can see why this would be bad," says Markopolos, the fraud examiner famous for breaking the Madoff case. "The reason you would want to keep them is to build a pattern. That way, if you get five MUIs over a period of 20 years on something similar involving the same company, you should be able to connect five dots and say, 'You know, I've had five MUIs – they're probably doing something. Let's go tear the place apart.'" Destroy the MUIs, and Wall Street banks can commit the exact same crime over and over, without anyone ever knowing.
Getting the picture I take it? So lets put this into the context of this blog where I said in my prior post that the SEC was investigation S&P, and that I didn't think it was a conspiracy to ruin S&P's reputation, but rather an actual investigation. True, the Bloomberg article I cited doesn't clarify whether it's a "matter under inquiry" or an actual "investigation" - it might just be the former, which meant the Bloomberg article is just a means to make S&P pay its bribes to the SEC and hire off a few of the top dogs; however, if it really is an investigation, then who knows. S&P could just be made a patsy for all sorts of financial wrongs - when it's fairly obvious from a forensic accounting viewpoint that pretty much all of Wall Street was neck-deep in financial wrongs for at least a decade - but that's just speculation since the SEC hasn't properly investigated a damned one of them.
The point, broadly speaking, is that more stuff is coming out at just how inept the "commanding heights" of America's economy is. "Commanding heights" is a term coined by Lenin to describe the most important aspects of a nation's economy - for him it was the coal mines, the ironworks, all the basic things from which production sprang - but for a globalized deindustrialized service economy called America the "commanding heights" are the skyscrapers of Wall Street. It explains why the US Treasury department and the SEC so weakly enforce them, like the point the movie Syriana made with the remark that "corruption is why we win" and it had a good point. If you only have minor fluctuations from day to day, but everyone is "in the know" that the system is generally protected by lots of backroom quasi-legal off-the-record deals then you have a lot less to worry about. The lead up to the 2007 crisis was seen as no big deal because, surely, the Federal Reserve wasn't about to let Wall Street go down due to their own attempts to leverage profits to levels so high the mind can't comprehend them without aid of some multi-variate calculus and differential equations. The 2007 crash was a result of a systemic crisis where everything had been pushed too far, rather than just one bad firm the whole system was bad - or as Alan Greenspan put it himself:
I made a mistake in presuming that the self-interest of organizations, specifically banks and others, for such is that they were best capable of protecting their own shareholders.
So Greenspan is willing to admit that companies really won't protect their shareholders in their search for profit. Banks were willing to take extreme risks knowing that they could buy off SEC enforcement, and that even in the event that they egregiously failed the Federal Reserve would either buoy them for as long as they needed (as they're doing right now with QE1, QE2, and now near-0 interest and probably QE3 when the Hooverism comes home to roost from the Tea Party's hostage taking) or the Federal Reserve would force other banks to support them. They expected law enforcement to be able to be bribed away and for the system's quasi-legal backroom deals to protect them regardless.
I was reading an interview Der Spiegel did with former General Secretary of the USSR Mikhail Gorbachev where he had these apt words to describe the problem he was trying to solve in the 1980s with the USSR - "The party establishment didn't need perestroika. Each of them had it made."
Sounds kinda familiar doesn't it? Sounds kinda like the way the top levels of the SEC works when it comes to enforcing law violations by banks. Sounds kinda like the way the revolving door of pretty much every part of the US government works, not just federal but state and even local, where the best answer to getting ahead in life is to make it into the "good ole' boy" club and ride the coattails of cronyism as far as you can. The difference between the USSR and the USA is that the USSR was stuck with the Socialism in One Country ideology, whereby the USSR had to make it on its own, but the USA is exporting its problems while sucking in capital from every part of the world. Not just in the way that the US demanded debt repayment post-WW2 that led to the burgeoning economic growth in the post-war era, but how that was extended way past it's "neoclassical discipline" structure by the introduction of credit cards, then securitization, and then derivatives - and every other thing you can think up.
Modern America's "commanding heights" are maintained by its so-called "financial engineers," trying anything to keep it going, and right now the only thing doing that is the fact that the world quite likely would be in very dire straits if its biggest consumer suddenly stopped consuming. So despite it being bad for them in the long run, it'd be even worse in the short run - so they keep buying US Treasuries - and it's the same story for America's domestic investors.
Edit: The bureaucracy argument actually works better than you'd think as a recent Gallup poll showed only the District of Columbia actually believing the US economy was improving.
Edit 2: In a follow up to this this Wall Street Journal's "MarketWatch" is reporting, via Senator Chuck Grassley, that the SEC may have destroyed as many as 9,000 documents. I'm well aware how questionable the WSJ can be, especially their op-ed section that's always been very pro-status quo and after the Murdoch buyout that's bled over into their political news reporting; however, the WSJ still does some good market news stuff from time to time - and it's nice to have other sources corroborate people like Taibbi. The WSJ did a fantastic, and I do mean absolutely jaw-droppingly fantastic, article on the nature of California's police in the Great Recession - and how they're neglecting basic policing duties like robberies and even homicides - all so they can catch people with cannabis to be able to seize their property and resell it to keep the police departments funded amidst budget cuts.
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