MAPLEWOOD, NJ - Author Matt Taibbi spoke at WORDS Bookstore on Friday, and anyone interested in understanding who winds up going to jail in the U.S., and who doesn't, should read Taibbi's gut-wrenching new book, "The Divide: American Injustice in the Age of the Wealth Gap." In this fascinating investigation, he explores such questions as why not one single Wall Street executive or banker has gone to jail since the financial meltdown of 2008 that wiped out 40% of the world's wealth.
This is serious fare for Taibbi, who in 2008 was a snarky reporter writing humorous pieces for Rolling Stone and the NY Press. It was while he covering Sarah Palin's breakout speech in September of that year that the news started rolling out the financial crisis. And none of the world class reporters he was working with could tell him what it meant. That was the beginning of his quest to understand what was going on in the markets.
Taibbi started reading up on economics and the economy. He interviewed various Wall Street experts. Yet he felt he still wasn't getting anywhere. That all changed when he met a former Credit Suisse trader for lunch in Chinatown.
"Within five minutes, he had solved all of my problems," said Taibbi. "He told me, 'Your problem is you're trying to cover this as an economics story. It's not an economics story. It's a crime story.'"
Baffled by the mortgage backed securities market? He puts it in terms the layman can understand. He explains that in the old days, one had to prove one's income to a bank to qualify for a mortgage. The bank only wanted to insure that they would get their money back and therefore make money off the loan. But then banks started selling the mortgages to Wall Street, where the mortgages were bundled them together and shares were sold. Investors loved them -- not only in the U.S. but all over the world.
The demand became so high that sometime in 2003, anyone who qualified for a mortgage, got one. But demand still grew, and soon you didn't need to prove your income, you just needed to 'state' it, and the banks didn't verify it. The brokers started looking for people to sell mortgages to. "I meet a guy who's method of getting applicants was to go to the local 7-11 and hang around the beer cooler," Taibbi said.
Then came No Income No Assets (NINA). You could borrow money without having to prove or even 'state' anything. All you needed to have in order to get a mortgage was a credit score. "They didn't care. As long as they could pay their loans for 90 days," Taibbi said, explaining that they were making a fortune selling them back to the banks.
Nobody was prosecuted for those actions. Yet on the other side of the coin, people who seemingly committed no crime were arrested. Taibbi explores how people in New York City were getting arrested at 1a.m. in front to their own homes for 'blocking pedestrian traffic.' He reports that the police in NYC randomly pick people off the streets, usually young Black and Hispanic men, for stop and frisk. Some may have warrants or be carrying a weapon but most are just caught up in the numbers games police need to make. Police, he explains, have to dispense a pad of tickets every month, and bring in a certain number of 'suspects.' Taibbi describes a state of affairs where, in fact, being poor is becoming the crime. A tough truth in a real page-turner of a book.