Episode 20: Matt Taibbi
AML Talk Show host Stephen Platt with guest speaker Matt Taibbi, Rolling Stone reporter and author.
AML Talk Show Hosted by Stephen Platt
Transcript
Stephen Platt
Good afternoon folks and welcome to this KYC360 AML Talk Show, with me Stephen Platt. Thank you very much for joining me once again. Today, I'm super excited to be joined by acclaimed journalist and author Matt Taibbi. Matt is an American author, journalist and podcaster. He's reported on finance, media, politics and sports. He's a contributing editor for Rolling Stone Magazine, author of several books, and the cohost of Useful Idiots, and publisher of a newsletter on Substack. In 2008, Matt won a national magazine award for three columns that he'd written for Rolling Stone. In 2019, he launched the podcast Useful Idiots.
He's known for his very brazen style, having branded Goldman Sachs a "vampire squid," in a 2009 article, a term which is still in common use. I confess, if not for that reason, but for others, that I've been a fan of Matt's writing ever since I picked up a copy of his book The Divide, when I was in New York a few years back, and between JFK and Heathrow, I was completely absorbed. It is a phenomenally powerful polemic that contrasts the treatment of financial institutions for breeches of the law for which they're responsible with the treatment of the poorest members of American society by the criminal justice system. It really is a hell of a sobering read and if I were you, if you haven't read it, I'd put it on your Christmas list, because you won't be disappointed.
Stephen Platt:
Good afternoon folks and welcome to this KYC360 AML Talk Show, with me Stephen Platt. Thank you very much for joining me once again. Today, I’m super excited to be joined by acclaimed journalist and author Matt Taibbi. Matt is an American author, journalist and podcaster. He’s reported on finance, media, politics and sports. He’s a contributing editor for Rolling Stone Magazine, author of several books, and the cohost of Useful Idiots, and publisher of a newsletter on Substack. In 2008, Matt won a national magazine award for three columns that he’d written for Rolling Stone. In 2019, he launched the podcast Useful Idiots.
Stephen Platt:
He’s known for his very brazen style, having branded Goldman Sachs a “vampire squid,” in a 2009 article, a term which is still in common use. I confess, if not for that reason, but for others, that I’ve been a fan of Matt’s writing ever since I picked up a copy of his book The Divide, when I was in New York a few years back, and between JFK and Heathrow, I was completely absorbed. It is a phenomenally powerful polemic that contrasts the treatment of financial institutions for breeches of the law for which they’re responsible with the treatment of the poorest members of American society by the criminal justice system. It really is a hell of a sobering read and if I were you, if you haven’t read it, I’d put it on your Christmas list, because you won’t be disappointed.
Stephen Platt:
So, you can hardly wait I’m sure, Matt, to hear what you have to say after that rousing introduction by me, but thank you for taking the time to talk to me. I know how busy you are. You’re talking to me from New York and how are you and how are things over there?
Matt Taibbi:
I’m terrific and thank you so much for that incredibly generous introduction. That was very kind.
Stephen Platt:
Well all of it true. Matt, if I may, we’ve got a limited time together and I know that I could willingly take up a great deal more of your time if I had the chance, but I really want to get as much bang as I can for the buck in the time that we’ve got. Can we kick off by you telling us a little bit about your background, because a theme that runs through most of your writing, is injustice, corruption? Where does your passion for examining these particular issues come from?
Matt Taibbi:
Well, I grew up in a family of journalists. My father was an investigative reporter who started in the business when he was 18 years old. I was born when he was just 20. So I grew up around investigative journalism. I think it’s a combination of that and I knew from a very young age, if you talk to people who become chess players, they talk about how the first time they saw a chess board it just made sense to them. I feel kind of the same way about writing. I just love it. I couldn’t imagine doing anything else. I knew from the time I was 11 years old that that was what I wanted to be when I grew up.
Matt Taibbi:
And in terms of these issues, I think what motivates a lot of people who go into journalism and this kind of journalism in particular, is just this kind of urge always to unmask people who are lying about things and to kind of stick it to them. It’s something that’s a common personality trait in a lot of great journalists that I’ve met. People like Sy Hersh. I hope that that’s part of what’s going on with me too. I think I have a little bit of that. Maybe not as much as them, but a little bit of that too.
Stephen Platt:
So sticking it to them is part of the motivation.
Matt Taibbi:
A little bit.
Stephen Platt:
A little bit, which is interesting. Now, in The Divide, which I confess, was a very, very influential book in terms of my own thinking. In that book, you argued that America’s unequalled wealth is producing unequalled outcomes in criminal justice. You illustrated that very very powerfully with specific reference to Wall Street bankers. Why?
Matt Taibbi:
Well, for a variety of reasons. I mean, it would take a long time to explain all of it. I think that the easiest way to look at it is first on the enforcement end with white collar crime, where the influence of money is readily apparent throughout the system. If you look at the revolving door system of who the regulators are, first of all, if you are a senior enforcement official in an agency like the SEC, the Securities and Exchange Commission, it’s a little bit like being a star basketball player in high school. You know that the moment you leave the government, there is going to be a multi million dollar job waiting for you in a corporation defense firm somewhere. So that affects the psychology of everybody that works in white collar enforcement. They know that there is a million dollars or two million, or six million waiting for them the moment they leave the office. That skews their attitude toward their future clients very powerfully, I think.
Matt Taibbi:
Because of that, what you end up getting with white collar enforcement is a completely different kind of system where rather than having prosecutors that are motivated to put the bad guys away in jail forever, which is what goes on in street crime, you get a bunch of lawyers who are mainly like minded people, who socially are the same people and they’re motivated to work things out by getting in a room and coming up with a solution that everybody’s happy with. So the money is a very powerful factor in all of it. Then of course the absence of money is what is the driving factor for the people who are the subjects of criminal justice on the other side.
Stephen Platt:
That’s a really, really fascinating point. I want to come back to that and explore it in a bit more detail. Now, in the run-up to the ’08-’09 crisis, you had written, in common with a number of other journalists, about the rampant corruption on Wall Street, and what we now know was seriously reckless behaviour. A lot of people lost a lot of money. People lost jobs, were forced out of their home and there are hundreds of thousands. Yet, no senior officers of any of those major financial institutions who were responsible in large part for that crisis were held to account. Now, that was something that enraged you. It enraged many many other people. In the 10 years since, has the system changed? Do you think that any lessons have been learned?
Matt Taibbi:
I don’t think so. I think it was a test of the system and it responded the way it always has. In fact, it responded worse than it had previously. That’s one of the themes that kind of I explored in The Divide, which was we’ve had similar scandals in the past where a loop hole or a political development would present itself, that allows for certain kinds of mass fraud schemes, and the government has always responded to those by at least making some symbolic prosecutions and making sure that somebody went to jail. If you look back at the S&L crisis, which is very similar, of course not nearly as large in scale, but similar in the ’80s, they actually prosecuted upwards of 1,800 people and put 800 people in jail during that time. In the accounting control scandals, the Enron type scandals, even the Bush administration made sure that there were some high profile prosecutions.
Matt Taibbi:
What happened in this case is that the propaganda successfully told the public that this was really not a crash that was caused by crime, but rather just sort of by a change in the financial weather. There wasn’t the political pressure to do something about it until it was too late. So there was really no serious enforcement that took place. I think that had a profound effect American politics. I think it was at least a part of the … It drove some of the anger that led to the trump and the Sanders movements in 2016.
Stephen Platt:
There seems to me to be a slight irony in that. I mean, I-
Matt Taibbi:
Huge irony, yeah.
Stephen Platt:
Yeah, a huge irony. But, I agree that it seems, I think, that there just is an accountability vacuum, right? You illustrated that extremely well in The Divide. Of course there was a reaction to the crisis, which was almost administrative. Banks have to have bigger capital buffers and so on. I always felt like that was really like putting more fire hydrants into a building full of arsonists. We just weren’t addressing the real issues. Why is it that they keep lighting the fires? At the time, there were really powerful movements like Occupy Wall Street that emerged. Do you think looking back, that they were just a flash in the pan, or do you think they’ve had any lasting effect?
Matt Taibbi:
No, I think Occupy was a bit of a canary in the coal mine, that presaged a whole generation of anti-establishment fervour in American politics. The 2008 crash was a really important and under estimated event in American history, because you talked about the number of people who lost money in that crash. There were millions of people who were foreclosed upon. The pain that radiated out into the population after the crash is indescribable. There are huge chunks of the United States now that look like ghost towns or like third world countries. This was massively accelerated, this phenomenon, after 2008. That anger is just, it’s deep rooted in the population now. And it expresses itself in different ways, but on some level, most of these sort of anti-Washington, or anti-elite movements are driven by the conviction that people have that something unfair happened in episodes like the crash. They may not understand it exactly, but they certainly understand the general outlines of it, which are the rich got away with something. And that’s a big part of what’s going on now.
Stephen Platt:
There’s no question in my mind that it had fed a sentiment, a scepticism, about the role of the authority, about the system. And as you say, that it’s fed that sentiment despite the fact that many people perhaps are able to comprehend or understand the circumstances of the crash. So I completely agree with you about that. Now there’s been a great deal written about the financial crisis. And in my own book for example, I drew a link between, or I sought to draw a link between excessive risk taking and other forms of harmful behaviour by the same institutions, rate rigging, mis-selling, sanctions evasion, money laundering, and the facilitation of crimes themselves.
Stephen Platt:
You would have thought that as a society, we’d become more aware of these really appalling behaviours. That the pressure for change would have grown, and the pressure on industry would have become unbearable. But it seems to my mind, to have abated. We’ve rolled back various of the reforms that were introduced after the crash. We certainly don’t seem to be seeing any greater number of a senior executives of financial institutions being sent to jail. Why is that in your opinion? Is it that people just don’t understand, or that they do understand, but they just don’t care enough to try and force change? Where is the block? What’s your view?
Matt Taibbi:
That’s a great question. Again, I really think it goes back to the nonenforcement of episodes like the 2008 crash and some of the associated white collar crimes from that period. You mentioned money laundering. So what happens when you have a case like HSBC where the bank admits, it’s part of its settlement, it admits to laundering $800 million for a two of the most vicious drug cartels in the world. These are people who are suspected in thousands of murders, who are the subject of multiple international criminal investigations. And there’s no individual penalty for a single person in the company as a result of that. The worst individual penalty that came out of that was that some of the executives had to partially defer their bonuses for five years in that company. So that, and you add to the detail that the fine the company had to pay was partially tax deductible, which means that all of us in America got the pleasure of having to help pay for those crimes.
Matt Taibbi:
But what happens when you don’t enforce obvious violations and grotesque violations like that, is that it sends a signal to everyone in the business that there’s really no downside to doing this kind of business, which is why you saw an explosion of exactly that same kind of behaviour including by the banks that got caught doing it. I think we saw the recent FinCEN files, document dumps, that these same companies that in many cases paid settlements in 2011, 12, 13, for money laundering, they went right back to doing it after that. And why wouldn’t they? They got caught and it didn’t cost them that much. I think that’s a big part of it.
Stephen Platt:
What makes this all the more egregious, I suppose, I mean, obviously I don’t want to put words into your mouth, but my strong feeling on this is that there are banks that have laundered hundreds of millions for as you say South American drug cartels with no officers of those institution serving any jail time. Then you contrast that position with the literally hundreds of thousands of people in the U.S. and in the U.K. who are in jail for street level drug crimes. Now, I’m not condoning street level drug crime. Of course, I’m not, but the difference in the treatment between those two elements of society just it beggar’s belief that we can have as you described it in your book, such a divide. I mean, how can this be explained?
Matt Taibbi:
It’s incredible and again, I think that’s what drives a lot of the anger. I mentioned the HSBC case, the day they announced that, they had a press conference in Brooklyn to announce that settlement. I remember talking to some of the other journalists and saying, “Are they actually saying no one is going to get any time for this?” And as soon as the answer came back that it was yes, I ran over to kind of across town to a criminals court, where I knew some public defenders, and I asked, “What’s the dumbest drug case any of you folks had today?” They put me in touch with somebody who got 47 days in Rikers Island for possession. Now that doesn’t sound like a whole lot, but Rikers Island is pretty brutal.
Stephen Platt:
It’s no picnic.
Matt Taibbi:
Exactly. So what we’re talking about is the people who are at the very top of a homicidal crime organization, who are making the most consequential decisions in helping drive that entire organization, they’re getting a complete walk and the people who are the very bottom, who one could argue are even victims of this. The people who are just merely consuming the drugs, they’re getting time, and they’re getting serious time. Going to jail in America is no joke. I think people see, it’s abundantly clear to anybody who is the lower or middle class citizen of the United States, that if they make a mistake, they’re going to end up paying for it in very, very serious terms.
Matt Taibbi:
But if you make a mistake, even if you get caught at the very, very highest echelon of society, you can basically buy your way out of it. And that’s no longer really even concealed, which is a tremendous problem for society, because there’s no longer even the illusion of evenness. Which is why it’s so important to do those symbolic prosecutions like Enron. Even if you’re not going to do it in every case, you have to do it in at least a few, and they don’t do that anymore.
Stephen Platt:
The way I see this, Matt, we need to understand why. And there are lots of reasons, I guess, why they don’t prosecute. With my lawyer’s hat on, it’s like there’s no single event. Evidentially, it’s a complex matrix of different causes, and proving a case can be quite difficult. You’ve already talked about the revolving door between regulators, corporate defence firms. There’s a resource inequality with Wall Street banks being able to literally out lawyer government agencies. Then you’ve got the issue of as a prosecutor, you can get 100 drug related convictions for street crime easier than you can bring home a single prosecution of a well defended banker. So what are you going to do? You’re going to go for the 100.
Stephen Platt:
Then we’ve got issues like too big to jail if we prosecute this financial institution, we could bring down the world economy and those sorts of considerations. Now, they’re just some of the issue at play here and they all play a role. But what you also say, I think, is that the real problem is that we just don’t regard people who commit crimes on Wall Street as being criminals in the same way that we view some poor black kid dealing drugs on the street. Am I being fair? Does that represent some of what you say?
Matt Taibbi:
Yeah, absolutely. I remember having a conversation with a prosecutor and I was bringing up some of these cases and asking, “How can you justify not putting somebody in jail for X, Y and Z, when you’re putting welfare moms in jail for welfare fraud?” The comment that came back was, “Have you been to a prison? Those places are horrible.” In other words the prosecutor was actually shocked that I would even entertain the idea that somebody who went to a good school and came from polite society and lived as an otherwise law abiding citizen in a high class suburban neighbourhood, that person is just not what they would call appropriate for incarceration, because they don’t handle jail well. So, the idea is that mentally they just don’t see those people as being the kinds of people that you would throw in jail.
Matt Taibbi:
Whereas the reality is, I actually think that the kind of person who goes to Princeton or Yale and makes an intellectual decision to accept money from a drug cartel or a Ponzi schemer, or to sell fraudulent mortgage securities to a pension fund, to me that’s actually a worse crime than somebody who doesn’t have a whole lot of options and goes out and sells crack on the street. It’s an intellectual decision that they’re making to damage society. But they see it the other way. They see it as a cultural issue, where culturally those people are just not the kinds of people that we think of as being jailable. That’s seeped into our mindset. I studied a little bit in the Soviet Union and I remember this idea of people internalizing the notion that there were two different classes of people that were party members than everybody else. And I think that’s kind of what’s going on here, is we’re sifting people into categories.
Stephen Platt:
I mean, it’s a fascinating turn of phrase, the prosecutors see certain members of society as being more appropriate for jail than other members of society. Astonishing. Was it Margaret Thatcher who said, “There’s no such thing as society.” Astonishing. Now, so, what’s the problem? Is it system, is it the regulation, the institutions themselves, the economic capture? Let me put the question in a different way. What would you look to change if you were in control? What changes would you make in your first week in the White House?
Matt Taibbi:
That’s a really interesting question. I don’t think about those things a whole lot, but I do remember talking to a prosecutor who made an incredibly interesting observation. He was talking about the beginning of the Obama administration and they were looking to create a new department that was going to investigate white collar crime. They were taking applications to look for new prosecutors. The people who were at the head of the Justice Department at the time were just throwing out the applications of anybody that didn’t come from an Ivy League school. So you had all these people, ace prosecutors, but had maybe gone to state schools in Alabaman or whatever it was. They’re just not employing those people.
Matt Taibbi:
I think the system in America, and a lot of the laws are sufficient, but what’s happened is we’ve changed the makeup of who occupies those jobs and there’s a major class divide that’s going on in many professions, including journalism, where there just aren’t that many working class people in journalism anymore either. I think that’s not a very good answer to your question, but systemically, I think what’s ended up happening in the United States is that we’re giving into a lot of incentives that just put all the people who already have a lot of power and influence in this country into all those powerful positions and we’re not making it easy enough for people in other walks of society to rise and have a say.
Stephen Platt:
Having people with different perspectives in any walk of life is critical, right? I mean, it’s very interesting to hear what you say about the recruitment process of prosecutors, because this mirroring that you describe, is something that I think is prevalent also within the financial institutions themselves. When you look at the composition for example, of the boards of directors of these institutions, all of these characters look remarkable similar to each other. The reason for that is that they like doing business with people that they know and they trust and who are not going to challenge and everybody wants to work in a very consensual way, because we’re all much more comfortable with that aren’t we, than working with people who are challenging us all the time? Whereas in fact, what we need, is we need people sitting on these boards who are bringing different perspectives, who are asking different questions, who are challenging the status quo. It’s fascinating to hear that you think that same dynamic is also applicable within the public sector in the recruitment of prosecutors. That’s not something I’d ever considered before.
Matt Taibbi:
Well, it’s interesting because that wasn’t always the case. I think if you go back in the ’80s and ’90s, there was a pretty strong tradition of kind of the middle class sons and daughters of cops who go into the criminal justice system and they scrape their way, maybe they’re the first people in their family to go to law school. In New York they might have ended up in schools like St. John’s or Fordham. They get law degrees and people like Rudy Giuliani, not the greatest example, but there was this idea of the middle class prosecutor who rose and became a political figure.
Matt Taibbi:
That kind of person is sort of vanishing from the OJ landscape and we’re tending to see more of the Lanny Breuer, Eric Holder type personality who rises through the corporate defence system. And they become justice officials. So the guy who I was talking to was kind along to the former category. He was a Massachusets guy who came from the suburbs, or actually beyond the suburbs, and rose through the ranks. But it’s a problem that is kind of existence in a lot of professions, including my own.
Stephen Platt:
Well, as wealth becomes concentrated in fewer and fewer hands, you get a smaller volume of quality applications coming from people who can afford the best educations and so on. Maybe that’s just a function of our economic system, but I agree with you. Say what you like about Rudy Guiliani, but in his heyday, he was one hell of a prosecutor. He was utterly fearless, at a time back when he was prepared to bring senior people to book. So, it [crosstalk].
Matt Taibbi:
Right, the Ivan Boeskys of the world. Michael Milken.
Stephen Platt:
Exactly.
Matt Taibbi:
Yeah, and that was a pretty common phenomenon with the kind of kid who came from the hard scrambled background, who wanted to go after the white collar criminal. That wasn’t an unusual dynamic back then.
Stephen Platt:
What we’re essentially saying, Matt, I think, and I explored a similar concept with another journalist and author who you may know, Tom Burgis, who just wrote a superb book called Kleptopia. We discussed the fact that in his view corruption is the dominant force of power. And I think you’re really saying the same thing. That ultimately this all tracks back to money. And the economic imperative of continuing to attract or retain capital within one’s sort of financial services industry or within one’s economy, does trump the desire to crack down on this behaviour, including financial crime. The carrot is bigger than the stick for the financial institutions. There is not disincentive. So where do we go from here?
Matt Taibbi:
It’s a really good question. I think one of the things that’s happened also is that there has been a philosophical shift where a lot of the people who work both in the financial services industry and who are in politics have become seduced by almost as sort of Ayn Rand’s philosophy of there’s a producer class, and there’s a parasitic class and we have to protect the producer class, especially now when we’re in a shaky economy. The people who create jobs, the people who are employers, we need to give them a little bit extra leeway, because those are the folks that we depend on the most and the people who are merely job holders, those are the folks we can lean on a little bit harder.
Matt Taibbi:
That was expressed openly by Eric Holder in this memo he wrote in the late ’90s called the Collateral Consequences Memo, where basically the idea was as prosecutors we have to think about taking our foot off the gas if they people we’re prosecuting are systemically important and major providers of jobs. That may be true in some cases, but they’ve internalized it to the degree where I think they can no longer even see that they have to actually do real enforcement within their own communities.
Stephen Platt:
I’m very familiar with that memo, the Collateral Consequences Memo, which has been massively influential in shaping the attitudes and approach of I think U.S. and indirectly, I think, U.K. law enforcement as well. Of course the Enron, the prosecution of Arthur Anderson and then the appeal was very damaging in that regard. Now, Matt, you would, I’m sure, agree with me that there are very, very many well meaning people in the financial services industry that are trying to do the right thing. The idea that everybody that works for Wall Street bank or a tier one bank gets up every morning to go out and do harm is clearly a nonsense. There are a lot of people trying to do the right thing in quite difficult circumstances.
Stephen Platt:
Do financial institutions and the people that run them, do you think not withstanding what I’ve just said, that they really undertake a sort of cost-benefit analysis in deciding to take these excessive risks to do business with the wrong people? Do they consciously think, “Well, worse case scenario is we’ll cut a check for less than we’re going to make, so let’s just do it”? Do you believe that that really takes place?
Matt Taibbi:
That’s an interesting question. I think you’re right first of all that of course not everybody in the financial services industry is a bad person and there’s amazing entrepreneurial energy that in many cases is driven by a desire to find creative solutions to push us into the future, to create new jobs. I mean, even the credit default swaps, that were designed and became central to the 2008 crash story, because they were overused and used irresponsibly. They were originally dreamed up as a way to provide cheap insurance and help stimulate business, more economic activity. And the people, the academics who came up with that idea, were certainly not bad people. And there are also institutionally at a lot of these banks, if you look back at their history, a lot of them have tremendous pride in the idea that they helped build the brick and mortar industries that made American, and on your side of the ocean it’d be the U.K. Great, because they helped supply the capital that built factories and built all these wonderful industries. So yeah, of course that instinct is still there.
Matt Taibbi:
I think what ended up happening though in the ’80s and ’90s, especially is when a lot of these firms started changing the way that they compensated themselves, and the partners had less skin in the game. Their compensation was not tied to the long-term efficacy of the deals that they were making, but rather they were structuring compensations that people were getting paid upfront, bonuses annually for deals that may or may not work out in the end. So you take a company like Goldman Sachs, the first Goldman people I knew, were back in Russia in the early ’90s and they used to have a mantra there called long-term greedy. In other words, we don’t want to make money unless our clients make money. Now Goldman has exactly the opposite reputation.
Matt Taibbi:
I think a lot of that has to do with the fact with the way that they’ve changed how they get paid. What happens when you create that incentive system is that people who are good at generating the quick buck, tend to rise and the ones who care, what value does caring have in these institutions? Not a whole lot. So they don’t rise as much. So yeah, I think that’s a good question to ask.
Stephen Platt:
It’s obviously in the nature of institutions to push the envelope. By their very nature the more risk they take, the more money they make. So as you say, you start off with a laudable initiative like a credit default swap or some such financial instrument that’s dreamt up by some enormously intelligent individuals, financial engineers, then unless those instruments are in the hands of people whose behaviour is constantly being checked by reference as you say to their remuneration program, unless they’re operating within an appropriate cultural environment, they’re going to push the envelope. They’re going to utilize these instruments in a way that was never intended. So it’s like classic lure of unintended consequences. Which is, you can make a powerful argument to say that that’s really what the ’08-’09 crisis was.
Matt Taibbi:
Yeah, absolutely. And just to take that example, AIG, was I think up until the crash, its reputation would have been as one of the most conservative institutions in the world. It’s an insurance company primarily and it’s whole business model was built on the avoidance of risk. In other words, we’re trying to stay on the red side of the actuarial table. But the company ended up being imploded by a small subdivision called AIGFP, AIG Financial Products, which is headquartered over there in London. What was happening there is that there was a small unit that was taking these new financial products, mostly credit default swaps, and essentially what they were doing is taking book on mortgage securities. There were all these banks that wanted to be insured against risk for the mortgage securities they had sitting in their inventory, so they bought credit default swaps against them with this little unit.
Matt Taibbi:
Now if the unit had been thinking institutionally like, “Should we sell all these swaps and should we sell all this pseudo insurance, because it may not work out for us 10 or 15 years down the line?” Then they probably would have never entered into those contracts. But because this unit was compensated based on the conclusion of the deals, they were paid upfront enormous sums of money, tens of millions of dollars from these executives, so they just took far more of these swaps on than they could possibly pay off and that killed the company. As soon as the counter parties realized that they had taken on too much risk, they started making collateral calls in the company and AIG, this incredibly conservative institution was like the leading risk take in the financial universe. It was crazy. So yeah, you’re absolutely right. If you’re not keeping an eye on it all the time, really terrible things can happen.
Stephen Platt:
Now, your style of journalism, Matt, is obviously strongly opinion led. What’s the reaction of mainstream media to journalists like you? Do you have a place do you think, or do you see mainstream media as part of the problem?
Matt Taibbi:
Well, it’s funny, I go back and forth on this. The particular style of journalism that I do, especially with topics like financial services, which are really difficult, I think you have to use lots of rhetorical devices to keep people interested and to help ordinary, uneducated maybe, audiences follow the material. So I use a lot of storytelling techniques, try to use humour, try to use other things. That’s a valuable way to do journalism. I try to combine investigative journalism with the sort of H.L. Mencken style commentary. The narrator that carries you through the difficult subject. But I never thought that the other style of journalism was illegitimate. I think you need both approaches. But I was pretty heavily criticized in the beginning of the crash for using that kind of approach with this material. But times have kind of changed in journalism. That’s actually now more the way I did things, is now kind of more the norm, oddly enough in a lot of American journalism. And that kind of fact based, just the facts style is kind of going out of business. That’s an interesting question.
Stephen Platt:
Because it seems to me that mainstream financial press, you could make an argument to say, “Well, it exists to serve the financial service industry. It exists to serve Wall Street, but that’s primarily who is consuming it.” Now your style of journalism appeals to a different audience. You’re very good at popularizing concepts that people outside of Wall Street don’t understand and may well find insanely boring. Trying to make a mortgage back security seem sexy and interesting is a change for anybody as I know myself in having written on the subject. How do you try to get your points across without people falling asleep before you get to the punchline?
Matt Taibbi:
That’s a good question. Well, I think your point about the financial press of course, the traditional financial press exists primarily to serve people who are in the financial services industry. I think one of the things that I found fascinating when I first started doing this work is that there’s almost an intentionally boring aspect to the way financial journalists cover their subject. They do not make any effort to try to explain the jargon that they’re using, because they assume, which is completely different from how we do journalism at any other realm. Like if you’re going to do a story about military accounting for the New York Times for instance, you could not do that story and not explain to people what a plug is for instance. You’d have to actually do a couple of paragraphs on walking people through the terminology. But you don’t do that in financial journalism, because you assume your audience knows.
Matt Taibbi:
What I tried to do was the opposite. I tried to take everything and make it into an education experience for people. Help them understand what all the terms mean. But also, help people understand that underneath all of the incredibly boring terminology, there’s often an incredibly interesting and sort of almost like a Hollywood level diabolical story going on. I think that’s the way that you try to connect with audiences. I find a lot of these schemes that I write about to be incredibly fascinating and intellectually interesting in terms of just their complexity. You mentioned Divide, there’s a chapter in there about the dissolution of Lehman Brothers and in order to understand what happened there, you almost have to take a college course to understand the swindle, and that’s very very compelling, I think. That’s where you have to connect with people and say, “Look, this is going to be intellectually exciting if you sign on for this. It’s going to be a little bit of work, but it’s worth it.” Then that’s how you get people in.
Stephen Platt:
It’s interesting this, because I think it’s almost self-fulfilling. I’m not sure what you think about this, but the absence of accountability makes it much much more difficult to engage an audience with these types of wrong doing. I mean look, I’m a big Netflix fan. I’m always consuming mainly U.S. based documentaries on Netflix. I’m actually in the middle of one documentary at the moment called Trial 4, about the Sean Ellis miscarriage of justice in Boston, a story I’m sure you’re familiar with. It’s riveting, because somebody was held to account, albeit that it was a grotesque miscarriage of justice, but it’s just one example of many where people want to see people being held to account. They want to see enforcement, it makes them engage. We’ve got no examples. Maybe that’s one of the reasons that people are not as engaged with this as we would like, and therefore, there isn’t the degree of pressure being brought to bear on policy makers to try and introduce some form of meaningful change. Am I going crazy or is do you think there’s something in this?
Matt Taibbi:
That’s a really interesting point. I hadn’t thought about that, but that’s actually true. There’s no Hollywood story of the Wall Street villain getting busted. Well, the only ones that existed were like Bernie Madoff and they did make a movie, a couple of movies that were sort of based on that story, including one that started Robert DeNiro. But the issue with the Madoff case is that the victims were all other rich people for the most part. So I think it was difficult for ordinary people to connect with. Even a story like Oliver Stone’s Wall Street, which I think was a pretty accurate description of what sort of the private equity business is all about. It’s a ruthless effort to acquire functioning businesses and liquidate them and turn them into personal wealth for a couple of rapacious vampires basically.
Matt Taibbi:
But even a movie like that didn’t do the best job of connecting it to how that hurts the ordinary person. They did have the Martin Sheen character who played the working class mechanic. So there just aren’t a whole lot of examples of that, so that’s a good point. We don’t have that story and the few kinds of stories that we do tell, that would be like that, tend to have to be fictionalized because we don’t have the real world stories of the villain being marched off to prison.
Stephen Platt:
I think that’s right. And of course, there are plenty of role models for excessive risk taking. Massively wealthy, heads of the investment banks living celebrity lifestyles and so on. It feeds into this celebrity culture that everybody seems to celebrate. Where are the role models on the other side of the fence? I mean, we can look at whistle blowers, many of whom in the U.K. at least, and in the U.S., have been hounded out of industry. The only whistle blowers who do okay it seems to me are those that get paid to blow the whistle, which in a way is its own form of corruption.
Stephen Platt:
So, when you look at the tribe, the only thing of worth is that which can be celebrated by the tribe. It’s a problem and in the absence of being able to point to heroes who’ve done the right thing, you need to be able to point to people who’ve done the wrong thing and suffered some serious consequences. And now as you say, we’re just not seeing those examples. You illustrated it magnificently in The Divide. Now, Matt, do you think there are any causes for optimism? I hate ending these conversations on pessimistic notes. There is enough to be pessimistic about at the moment around the world. But do you have any cause for optimism?
Matt Taibbi:
Yeah, absolutely. I think it’s funny, because I also cover presidential elections for Rolling Stone, so I’ve been watching over the course of the last five election cycles. The degree to which the public is now clued into the fact that something is wrong, not only in the financial services industry, but generally with white collar enforcement, and whether we’re talking about the pharmaceutical industry or medical insurance, it doesn’t matter. Basically white collar enforcement is broken and I think people understand that. That is what is driving a great deal of political energy in this country. And it’s become mainstream now in a way that it never was, to demand all sorts of new reforms that might be solutions to some of these problems.
Matt Taibbi:
Elizabeth Warren last year, who not my favorite politician for a couple of reasons, but she’s really interesting and she ran on a slate of reforms that included things like mandating that workers be a certain percentage of the board in every publicly traded company. She had all these different proposals for money laundering, for closing loop holes for taxation, that are now employed by people in private equity and hedge funds. The average voter is much more likely to know what the carried interest tax exemption is than they were 10 years ago. So, will that ever succeed in making changes? I don’t know, but it is coming into the political mainstream in a way that it never was before, so I do see. I don’t know about you, what you see, but there is a little bit of optimism I think you could have.
Stephen Platt:
Yeah. I think that’s right. And there is this growing awareness of the 99% and the 1% and the inequalities and inequities that flow from that. I think that that has become more popularized. And maybe that will drive change. Now, Matt, what’s in the pipeline? Are you working on anything interesting? Have you got a new book that’s coming out shortly or what’s coming down the line?
Matt Taibbi:
I do. I have an oddly enough, I have a book coming out called the Business Secrets of Drug Dealing, which it’s a-
Stephen Platt:
Do you really?
Matt Taibbi:
Yeah. It’s a very strange story. Somebody I knew in another capacity, let’s just say African-American man, I’d known for ages as a source. He sort of came out to me in said, “Oh, by the way, secretly I’m a drug kingpin.” I never knew. So we sat down and he detailed to me basically a whole lifetime of how he had built his business and all of the rules that he had for avoiding getting caught. We basically turned this into a fictionalized version of his life with all the rules and everything. That’s coming out soon. That’s my first sort of effort in anything that’s not completely nonfiction that’s coming out. Other than that, I’m doing-
Stephen Platt:
What’s the title of that book going to be, Matt? Have you got a title yet?
Matt Taibbi:
Yeah. It’s the Business Secrets of Drug Dealing, it’s called. It’s coming out in the next couple of months or so. But no, I’m going to do probably a little media book related to the 2020 election cycle and the sort of Democratic party schism, between the progressive wing and the people who just got elected. I haven’t quite worked that out, but I’m negotiating through that now.
Stephen Platt:
Fascinating. Well, the book on the drug kingpin certainly sounds like a how-to launder money manual, which it-
Matt Taibbi:
It’s actually quite funny. I mean, he’s a very funny narrator.
Stephen Platt:
Well, I look forward to reading that one. Well, Matt, look we could go talk for much longer with pleasure, but we’re up to our time limit I’m afraid. I want to thank you on behalf of all of our listeners around the world and KYC360 members for taking the time to chew the fat with me and share your thoughts. I hope that you’ve all enjoyed today’s discussion. I would as I say, really encourage you to read Matt’s books, Griftopia and The Divide. They really are rip roaring reads. You will not be disappointed.
Stephen Platt:
If you like what you’ve heard today, please do spread the message about KYC360 and the AML Talk Show. This recording will be available as a podcast on KYC360 and many other platforms from later on today. This is our final AML Talk Show of 2020. Thanks for tuning in throughout the year and sharing all of these really interesting discussion that we’ve had with thought leaders in this space over the course of the last 12 months. Best wishes to you and your families for the holiday season. I look forward to your company again in 2021. Thank you.
Matt Taibbi:
Excellent. Thank you so much.
Other Episodes
You can claim CPD minutes for this content, by signing up to our CPD Wallet
