It Takes a Pillage: Behind the bailouts,bonuses, and backroom deals Hardcover – September 22, 2009
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We've all watched as packs of former Big Finance leaders commandeer posts in Washington and lavish trillions in bailouts to "save" big Wall Street firms that will use that money for anything and everything except to fill in Main Street's potholes.
Former Wall Streeter Nomi Prins has been watching, too, and she isn't going to let them get away with it. She knows all about Big Finance and big money and moving numbers - and in this book she exposes the fundamental follies of our economic system and the schemes of the bigwigs who have no intention of letting it change. Prins:
- Explains that the current crisis did not happen because ordinary citizens were able to borrow a little more than they could afford, but because Wall Street converted loans into assets that allowed it to borrow much, much more than it could afford.
- Reveals all the ways corporations inhaling bailout money have gamed the system to get the most money with the least oversight.
- Exposes the power-bankers that bagged more than $5 billion in compensation before and after their companies siphoned off more than a trillion dollars in federal bailout subsidies.
- Shows how the most egregious pillagers work at the Fed and Treasury department, detailing how Hank Paulson, Ben Bernanke, and Tim Geithner siphoned off $10.7 trillion from the public’s future for Big Finance’s present.
- Slams a financial system that will not change, if our government doesn't force it to change, no matter what happens in the so-called free market.
- Is a former managing director at Goldman Sachs, now a senior fellow at Demos, who writes regularly on corruption in Washington and Wall Street for news outlets ranging from Fortune to Mother Jones. It Takes a Pillage is her third non-fiction book.
Top Ten Ways Things Could Get Worse from Here
Amazon-exclusive content from author Nomi Prins
1. The actual bailout has quietly ballooned to $16 trillion dollars (not including over $3 trillion set aside for money market funds), most of it given out with no strings attached. Wall Street firms could continue to tout the myth that ‘talent’ must be paid for – now with stupid sums of bonus money, funded by the American People.
2. The stock market, which has rallied substantially since the government started giving out free money to the banking industry, could tank on the realization that if that money needed to be paid back any time soon, the banks wouldn’t be good for it.
3. Because bigger is better still seems to be Fed policy, JPM Chase could acquire Bank of America – Merrill Lynch, creating one of the largest, federally subsidized banking firms in the world.
4. Because the bigger just can’t help getting badder, JPM Chase could also acquire Citigroup, and we’d be living with a monopoly economy.
5. We could sink into the delusion that the Obama administration has actually done something to restrain Wall Street, lulling us into a false sense of security. Then the remaining big banks will screw us again.
6. Congress could continue to ignore history and never reinstate the Glass-Steagall Act. That act made banks smaller, more specialized, easier to regulate and less expensive to bail out. Repealing it lead to this mess, and there’s barely a whisper heard in Washington of bringing it back.
7. As a Fed approved bank holding company, Goldman Sachs could buy a lot of small banks just to get access to all the money in savings and checking accounts to gamble with. Plus they’d have that great $250,000 FDIC guarantee they get per account. This would make them the biggest bank in the country.
8. Every bank and government agency with access to some aspect of a federal bailout could max out their subsidies chips at once – pushing the full bailout cost to over $26 trillion.
9. Many mid-sized and smaller banks didn’t need a bailout and have been better at allowing consumers access to credit. The largest banks, flush with federal funding and a poor record of helping average Americans, could buy them all up.
10. The Fed could continue to operate in secrecy, despite multiple moves by Congress to push for a full audit of its largesse. Right now, only the Fed knows what the real worst case scenarios might actually be.
From the Inside Flap
In It Takes a Pillage, former Wall Street insider turned muckraking journalist Nomi Prins argues vehemently and convincingly that the current crisis has almost nothing to do with subprime mortgages and everything to do with a financial system that rewards people who move money instead of people who make things, operates outside of the media's gaze, is sheltered from governmental supervision, and uses leverage to turn risky deals into insanely risky deals.
You'll find out how the revolving door between Wall Street and Washington enabled and encouraged the disastrous behavior of large investment banks. You'll meet the Pillage People: the men who funneled trillions of dollars directly to the banks and the executives whose companies drained the American economy. You'll learn which of the Federal Pillage Triumvirate pirated the biggest part of a $10.7 trillion bounty—Hank Paulson, Ben Bernanke, or Timothy Geithner. You'll decide which private-sector pillager took the biggest share of spoils—Bank of America head Ken Lewis in his unholy alliance with former Merrill Lynch chief exec John Thain, who extracted $225 billion from the public; former AIG exec Joseph Cassano, who banked $315 million, leading the division that nearly drowned AIG before it hooked a $182 billion federal life raft; or Robert Rubin, whose public- and private-sector decisions decimated financial restraint and landed Citigroup in a $388 billion hole.
Prins also takes you on a harrowing tour of the Wall Street mind-set, in which making money is a game and colossal paychecks are a way of keeping score—and getting a huge bonus after churning out fabricated securities and taking out the entire world economy might be the biggest win of all.
The scariest part is that for all the trillions that have been spent or committed to the bloated stalwarts of Wall Street, our economic system remains in disarray. Prins demonstrates that this failure stems from flaws not in these institutions, but in the banking system itself. She shows how irresponsible deregulation whetted both individual and institutional appetites for short-term gain, and produced an addiction to greed and power that still rules the markets even after nearly destroying them.
Complete with a savvy and well-developed proposal for extracting ourselves from this downward financial spiral and stabilizing the economy, ItTakes a Pillage is packed with all the information you need to understand the financial crisis and identify policies that will solve the problem, rather than make it more severe.
In an Amazon-exclusive letter, author Nomi Prins reveals potential market hazards to watch out for.
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I have three warnings to potential readers:
1) Prepare to be outraged about the corruption in government and the banking industry.
2) Get ready to search for ways to preserve your hard earned assets that does not rely on the US govt or US dollars.
3) Question whether the trillions of bank-bailout dollars are still sloshing around the world corrupting public institutions.
Well written; not your average business/investment book. Makes the subject matter and storyline interesting and exciting even though you know the ending. How we got there is a story never told until Prins tackled this complex issue.
While movies like the Big Short are entertaining while giving you a glimpse into the Casino of Wall St, Prins rips the doors off the whole charade we all are paying and will pay more to be part of this cycle of corruption and egocentric politicians and bankers.
She's an excellent investigator and writer with great financial acumen. I bought her other works based on this reading. 5Stars...on Wall St, I'd give it Six:-)
Whereas Klein fashionably follows her political line (e.g. in ignoring the fact that Chinese manufacturing has lifted 400 million+ Chinese out of poverty), Prins approaches the subject of Wall Street involvement in the credit crisis in a much more open minded way. Perhaps she is rather light on what the consequences would have been of a non-bailout, or the extent to which property speculators stoked the demand for credit, but she explains very clearly the way in which middle America was robbed (indebted) by a group of Wall Street - Washington insiders.
In admirably researched detail she shows how Wall Street found a way to make enormous profits in the first years of the new millennium by misusing free market liberal arguments to demolish the legal barrier separating commercial and investment banking (Glass Steagall Act 1933) and in 2004 gain SEC approval for an official increase in leverage from 12:1 to 30:1. The way was open for the placing of massive bets on an extended capital base linked to sub-prime mortgages with a new government guarantee should anything go wrong.
Of course it did go wrong as sub-prime mortgages defaulted and the leverage went into reverse with the nasty twist that the repeal of Glass Steagall had produced banks that were "too big to fail" and which enjoyed newly extended guarantees.
I feel that Prins (ex Goldman Sachs managing director) is one of the few people that really understand the extent of the damage. The media certainly doesn't as they continue to talk about the TARP and its possible repayment as the end of the crisis. She shows the real facts to be that the government provided $13 trillion in federal bailouts and loans of which TARP was only $700 billion (5%) with full system wide hidden losses possibly in the region of $140 trillion.
The book finishes with a valuable section entitled "Some Solutions" that puts forward structural legal protections to society along the lines of a modernized Glass Steagall Act and a requirement that all debt be quantifiable and in clear view (no more off-book debt) with government guarantees only applying to normal commercial banking. If investment banks speculate then they do so without a government guarantee. As she says, "People at the top could still get rich, just not as rich - and not at the cost of ravaging the general population and generations to come."
Unfortunately this is closing the stable door after the horse has bolted and the author doesn't have much to say about how middle America is going to pay off the debt so cynically handed to it by Wall Street and Washington.
The next chapter of the story.
Thank you, Ms. Prins. Five gold stars. Nothing less for an excellent book.
This book chronicles how our politicians have given more money to Wall Street since 2008 than The United States has spent on all wars since it became a country. This books must be read with the sequel, written 4 years later, entitled All The Presidents' Bankers.
Top international reviews
TARPを金融機関救済の為に使うか住宅差し押さえ回避援助に使うかというので揉めていたなあと記憶にある人はいらっしゃるだろう。財務省とFDICの間で確執があったらしいことも。しかし相当のニュース好きでもない限り、｢その後｣の追加救済やらナントカ保証やらのニュースを逐一追っていた方は少ないはず。しかしTARPなんてのは氷山の一角、議会をスルーして利用出来るFRBのバランスシートを使いつつあの手この手で16兆ドル（MMファンド保証の３兆ドルを除き）もの税金が金融システム救済というブラックホールに呑み込まれていったのである、我々が知らぬ間に、と著者は粘着質の語り口で明細書を提示していく。そして｢そのカネは絶対に返ってこない｣｢金融機関は返せない｣｢ウォールストリートが私腹を肥やすだけのことだ｣と断言する。ハンクとティムとベンの三人衆を大悪人として指さしつつ、｢これは危機を逆手に取った未曽有の『富の略奪』である｣と訴える。よって｢It takes a pillage｣のタイトルだ。