BY MATT BROWN, Multimedia Director.
The lecture theater buzzed with many murmurs. Hurried footsteps rushed to any available opening. Community members packed nearly every seat in room G160 in preparation for Delta College’s President Speakers series.
Matt Taibbi, a longtime editor at Rolling Stone magazine spoke about his new book: “The Divide: American Injustice in the Age of the Wealth Gap.”
“The Divide” explores the growing income inequality and its impact on the American criminal justice system.
Taibbi paced to the podium and began quickly describing his time as a political journalist. Specifically, he was detailing his tour in the 2008 McCain campaign and the aftermath of the “Drill baby, drill” speech.
“Making fun of politicians is the national sport of journalists,” Taibbi jokes. So when McCain suggested that drilling at the Gulf Coast would affect gas prices, Taibbi and the other journalists tore into his stupidity.
However, when Taibbi said he rose his hand and asked the other journalists why the gas prices were rising, “It was like one of those cartoons where you hear the crickets,” and Taibbi found that disturbing.
The turning point in Taibbi’s career was in the midst of the 2008 financial crisis, when Rolling Stone asked him to write an article on the causes. During research, Taibbi noticed that, “the news outlets were all mysteriously silent, and when the media is not telling you what to think that is a bad sign.”
Polling other journalists, Taibbi still came up short. “Here we are, allegedly the cream of the crop covering politics in this country, and not one of us in the room had the faintest clue on why the economy was blowing up.”
Answers were found when Taibbi reached out to a disgruntled banking employee turned cartoonist, who was churning out illustrated stabs at his bosses.
Meeting in New York for lunch, the contact set Taibbi straight. “Look,” he said, “Your problem is that you’re trying to cover this as an economics story, it’s a crime story, and once you understand that the whole thing will become simple.”
The contact said, pointing to a person selling counterfeit Prada from the trunk of their car, “That right there is exactly what is happening with this financial crisis, except that instead of phony handbags, they are selling phony AAA-rated mortgage backed securities.”
Taibbi began seeing the bankers no different from mobsters, pulling elaborate schemes on their clients.
Taibbi says what the banks were doing is mechanically complicated, profitable and evil. It is not unlike, “An auto-dealer selling a lot full of cars with no brakes.” What makes it worse is that they bet against their own products, extending the metaphor to, “selling cars with no brakes and then taking life-insurance policies on the drivers.”
Additionally when AIG went bankrupt, the bankers went to the government and asked for a bailout. Taibbi described this metaphorically as “a bunch of people at a roulette table bet more money than the house had, and when they hit big, the house demands everyone pays their bill.”
Taibbi found that, “In the broad strokes it is just an elaborate street crime,” and that the only difference is that, “It’s just fraud committed by a different group of people with a different set of mechanics.”
Taibbi uncovered, “One of the largest financial crimes ever committed,” which was like, “an expanded version of a common Mafia scam of price fixing, but we called it something else because they were bankers.”
The London Interbank Offered Rate, or LIBOR, “Worked to monkey around with world interest rates,” and this affected, “as much as $4 trillion financial products and virtually every currency on the planet.”
“Hong Kong and Shanghai Banking Corporation (HSBC) admitted to the largest instance of laundering money for a drug trafficking organization in the world, and there was no individual consequences,” only a $1.9 billion fine on the company, “which was tax deductible.”
Financial executives were laundering money for people on terrorist watch lists, people violating human rights violations and even for the Sinaloa drug cartel in South America. According to Taibbi this was, “hardcore crime, not even a financial crime anymore, but narco crime.”
Investigative journalists, like Taibbi, needed to know how this happened. How could HSBC, one of the world’s largest banks, located in Europe, “openly wash cash for the worst narco-terrorists in the country, and nothing.”
Taibbi began asking law enforcement about the more general issue of why are these people not going to jail, and Taibbi was told that, “these aren’t ‘crime’ crimes.” When Taibbi asked what was meant by ‘crime’ crimes, the individual responded with, “you know what I mean.”
“I decided to write a book on the whole topic of ‘you know what I mean,’ ” said Taibbi, “and I started to find the most amazing rationalizations from federal officials on why they weren’t pursuing this kind of crime.”
Michael Stevens, Inspector General of the Federal Housing Finance Agency (FHFA), has pursued high ranking officials in the past, and explains that they, “could not handle the shock of prison.”
So, “even though the crime warrants jail, [they] are going to pursue some other remedy.” On the flipside, Taibbi continues, “a man [in New York City] was sentenced 40 days in Rickers for having a joint in his pocket.”
Having a joint in your pocket is decriminalized in NYC, however stop and frisk forces someone to empty their pockets, exposing the joint to the open, and you can then be cited for possession.
“This is a person who is at the very bottom of the drug pyramid and is doing 40 days in one of the most violent prisons in the country, and yet you can launder millions of dollars at the top of pyramid and not even be indicted.”
Taibbi shared the contrast in that, “It is quite common to have law enforcement officials all over poor neighborhoods, but Wall Street enforcement agencies’ staffs are being cut and budgets are going down.”
Legally, something must have been tagged to the bankers, but Taibbi found that the, “Lobbyists from the financial industry have successfully carved out exceptions,” and like in the Commodity Futures Modernization Act of 2000, it was, “so exactly like gambling, that they had to carve into a federal law to make it explicitly legal so Wall Street could not be prosecuted.”
Additionally, then Justice Department official Eric Holder urged staff in an internal memo to think of the, “collateral consequences, and pursue non-criminal remedies,” rendering the corrupt banks “too big to fail.”
“Now we just can’t prosecute these companies who are caught up in these scandals because we are afraid it will melt down the economy,” says Holder.
Finally, Taibbi urges that, “We have to worry about this,” and that, “People are committing exactly similar crimes, but they are committed by different people, in different circumstances, and the punishments are exactly different, and we just automatically know that one person goes to jail for a really long time, and the other has another resolution and we don’t think about it and that is scary.”