On 19 March 2009, Matt Taibbi (in overly salty prose) wrote The Big Takeover (provocatively subtitled ‘The global economic crisis isn’t about money – it’s about power; how Wall Street insiders are using the bailout to stage a revolution’) in Rolling Stone Magazine. He describes some of the internal workings at AIG’s Financial Products subsidiary in London which was responsible for AIG’s credit default swap (CDS) business. He describes the lax (and, sometimes, non-existent) regulatory oversight of the business, and some of the deregulation history. He bemoans the repeal of the Glass-Steagall Act engineered by Senator Phil Gramm and enacted in the waning days of the Clinton administration. And he expresses concern over whether the Obama administration will be able to assert appropriate control over the financial services industry.
The article is long but intriguing, going into some details of AIG-FP that I had not heard before.
Note: Rolling Stone has now truncated the version of this article on its website. However, Alternet is mirroring the full article.
I had heard a lot about this story over the past few days, but had not bothered to read it.
Now that Richard has predigested it for us so that we know what we would be getting into, I for one have finally read it.
I strongly do not want to believe what I have read. If this story is true and isn’t being blown up way out of proportion, then the swindle is far larger than anything that I have imagined.
I no longer know whom to trust. I no longer know how we will protect ourselves from the outcome. I wonder if John Maynard Keynes ever dreamed of “economics” like this?