The great financial catastrophe of our times is still badly misunderstood, and led to grotesque consequences, including the election of Donald Trump.
By Matt Taibbi and cross-posted from Rolling Stone
Ten years ago, on Saturday, September 13th, 2008, the world was about to end.
The New York Federal Reserve was a zoo. Imagine NASA headquarters on the day a giant asteroid careens into the atmosphere. That was the New York Fed: all hands on deck, peak human panic.
The crowd included future Treasury Secretary Timothy Geithner, then-Treasury Secretary (and former Goldman Sachs CEO) Hank Paulson, the representatives of multiple regulatory offices, and the CEOs of virtually every major bank in New York, each toting armies of bean counters and bankers.
The asteroid metaphor fit. In the twin collapses of top-five investment bank Lehman Brothers and insurance giant AIG, Wall Street saw a civilization-imperiling ball of debt hurtling its way.
The legend of that meeting, as immortalized in hagiographic reconstructions like Andrew Ross Sorkin’s Too Big to Fail, is that the tough-minded bank honchos found a way to scrape up just enough cash to steer the debt-comet off course.
In Too Big To Fail, the “superstar” chief of Goldman, Lloyd Blankfein, along with “smart” Jamie Dimon of Chase, “fighter” John Mack of Morgan Stanley, and other titans brokered the deal of deals, just in time to stave off a Mad Max scenario for us all.
The plan included a federal bailout of incompetent AIG, along with key mergers – Bank of America buying Merrill, Barclays swallowing the sinking hull of Lehman, etc.
With respect to the fine actors in the film, the legend is bull.
There are more accurate chronicles of the crisis period, including the just-released Financial Exposure by Elise Bean of the Senate Permanent Subcommittee on Investigations, probably the most aggressive crew of financial detectives who sifted through the rubble over the past 10 years. Bean’s account of what went on at banks like Goldman, HSBC, UBS and Washington Mutual is terrifying to read even now.
But history is written by the victors, and the banks that blew up the economy are somehow still winning the narrative. Persistent propaganda about what happened 10 years ago not only continues to warp news coverage, but contributed to a wide array of political consequences, including the election of Donald Trump.
The most persistent myths about 2008:
Myth#1: The crash was an accident…