Joe Rogan - Matt Taibbi Explains the 2008 Financial Crisis

the Joe Rogan experience no well it you get compared to him a lot and one in one way I really saw that comparison was your brilliant coverage of the financial crisis and what was the the mechanisms behind the scene of the financial crisis and that I became a really big fan of your work reading that because the that I I think you covered that as well if not better than anybody oh well thanks yeah I mean so I I knew nothing about any I couldn't even balance my checkbook when they assign me to that story and and I had to start basically from square one and I was calling people and saying things like can you tell me something about something that I'll understand you know it's real cold calling investment banks and literally saying that and I finally got a guy to have lunch with me and he said your problem is that you're trying to understand this as an economic story once you look at it as a crime story you'll get it and and from that point forward I I totally I felt like like I started to understand the whole mechanism in the subprime mortgage scam it really was a scam it's really it's really just a massive corporatized version of like selling oregano as weed basically they they took stuff that these is incredibly worthless highly risky mortgage loans right you know they would give out loans to everybody with a pulse you know whether you had a job or not whether you were a citizen or not didn't matter poor thing was to get the loan immediately sell it off chop it up turn it into securities and then they used this highly advanced sort of mathematical trick to turn all that sort of mortgage hamburger into triple-a rated securities so you'd have like a you know a junk rated mortgage like the riskiest loan in existence something that was so toxic that country companies like country or I wouldn't want to hold on to it for more than a week because they were afraid it would that the stuff would blow up and then they would sell it off to like a pension fund or you know an insurance company in the form of a triple-a rated security which you know is as safe as a US Treasury bond so it was a scam McGann and the the the the metaphor of you know baby power taking baby powder and selling it as coke or whatever that that's exactly what it was they just took worthless [ __ ] and sold it as something that was that was gold and they got they did it for years and years and years and years and they they knew that this gigantic huge bubble of risk and disaster was just accumulating and that someday it was going to all explode and cascade and and and ruin the economy but everybody was trying to time it right and and bet on when that would happen and make their money before that that Judgment Day came and it was it was fascinating what's it once I started to learn about it it was just such a an amazingly disgusting fascinating story that it was just hard not to not to get into it a crime story yeah think of it as a crime story yeah no absolutely I even got one guy gave me a book it was called famous famous con artists in history right it was like this little tome it's smaller than like the smallest paperback and it was the biography of this guy Victor Lustig was his name he was famous because he sold the Eiffel Tower twice alright and he he had this this scam that he called I think it was called the the the Hungarian box I'll have to go back and look but basically what he would do is he would get on a boat in New York and he had this sort of beautiful mahogany box with ranked on it that had two holes in it and he would show all the guests that he would put a blank piece of paper in one and turn a crank and $100 bill would come out the other end and he convinced them all that it was a machine that made money and everybody would offer him an increasing amount of money for this invention and he wouldn't sell it until the last day when he would sell it for a you know forty or fifty thousand dollars and then he would disappear and jump off the boat and in France and never be seen again people would yeah there it is what's it called yeah but but that's exactly what the Mortons picture let me see his face look at that [ __ ] creep [Laughter] Wow let me see that box again Wow that is crazy so there yes so it was obviously fake and and and but that's what the mortgage scam was they they they were taking basically blank paper these these subprime loans that belong to jander's who were gonna foreclose within ten minutes all right and they were telling people that oh we have this new mathematical process that allows that actually makes this stuff really safe and you can put it in your in your College endowment you can put in your pension fund and so all these people you know whose retirement monies were based on securities we're buying all this [ __ ] that they thought was was triple-a rated and that's that's how they woke up and you know and in 2008-2009 and they found their 401ks or were you know wiped out by 40 percent or whatever it was my neighbor really did I happen to him my neighbor bought this plot of land and had this dream to build his dream house and he would go buy the plot of land and he was always cleaning up and getting ready and I was talking to him and then boom 2008 happened he lost everything and he would still go buy that plot and cleanup and he and I would talk about it and they just told me lost everything yeah so it's never gonna happen huh yeah no I think he I think he died he eventually got really sick and they took him out of his house and brought him somewhere but I think he's dead now but yeah his his story was awful awful to hear this guy who was in his 60s who had got this piece of land with a nice view and it's like this is where I'm gonna build my dream house and he had all this money prepared for it all this money saved away and he was ready to rock and roll and then boom mmm it all went out they just drained out somebody put a hole in the bottom of the boat and everything everything went to the bottom of the ocean yeah and then he'd probably got ripped off twice because his tax dollars went to go bail out the guys who you know you know who because some of the some of the banks got stuck holding some of this [ __ ] and rather than eat the losses like your your friend did they got the Federal Reserve to buy it from them ya know and and you know or or the Treasury how the [ __ ] did they get away with giving the CEOs bonuses during that time yeah a giant bonuses during the time where they they had to be bailed out by the taxpayers yeah that was another scam like so they were if you looked at the fine print of all the bailouts it's basically said that you had to repay the money by us by X time before you could start paying people exorbitant amounts of money again but a lot of those a lot of those conditions were never really followed and you know the the conditions of repayment were kind of glossed over and the the the companies that they were supposed to be able to pass these things called stress tests which demonstrated that they were back on solid footing again before they paid people bonuses but the stress tests were all fledged and you know I mean the there were there was crime and corruption a legality basically in every direction during that whole period and and not just in the government but in in all these companies as well geez yeah but fascinating to follow yeah what was it like covering that I mean how long did you spend working on that seven years probably yeah yeah well because one of the things that I thought no that was really interesting was I did my first story about this and I got this incredible reaction because it turns out that the financial press there is nobody in the financial press who writes for ordinary people like it's basically what I was doing was a translation job I was trying to basically take what had happened and explain it in a way that a person who knew nothing about finance would be able to understand and it turns out that nobody is doing that so all these people who had questions about it who who wanted to know what had happened to their money or why don't why didn't my house get foreclosed on or what it you know what's what's a subprime mortgage or anything you know there was nobody else doing that work so I had lots of it to do and it was really interesting and I just kept doing it that had to be depressing yeah oh yeah of course of course I mean most most investigative reporting is depressing particularly that because you mean a lot of it was old people that oh my god old people minorities I mean I did one story about a bank in Maryland well it's a National Bank it's it's a bank that you know I wouldn't be surprised that a lot of people listening how have their accounts at this Bank they had to pay settlement to the government because they were intentionally targeting elderly black people to sell subprime mortgages to and they called the mud people and there were all these these like toxic emails going back and forth about how stupid they were and how they'll buy anything etc etc the emails they call them mud pee yeah yeah and so they had to pay a settlement to the government and but you know the racial component of the of that crash was something that I didn't really clue into until late but that was a big part of it too it was you know a lot of it involved these mortgage lenders going into particularly like lower middle-class black neighborhoods and knocking on doors where there'd be like an elderly person at home and saying hey would you like to refi your mortgage and you'll have a little bit of extra spending money this month right and the person won't know anything about finance and they'll still sign this refinance deal that allows them to save a little bit of money each month not knowing that they had just converted their fixed mortgage into a floating mortgage and that is seeing the interest rates changed you know you'd have people who went from paying $900 a month to paying $7,000 a month right and suddenly they're out in the street and and you know the the company that sold them the loan is long gone by then they they're not holding it they as soon as they got her name on the dotted line they sold it off to a bank in New York who in turn again chopped it up into hamburger and sold it probably to you our pension fund or who or whatever so there's nobody she'd give a complain to and you know yeah that stuff was really depressing what was a feeling like of having very little understanding about finance and then immersing yourself in it and now is vac sizing that this is the underlying structure that our society is Rhon that our money is established through like this is this is how we we sell houses and loans and this is what we're doing yes yeah no it was it was fascinating I because before that I was mostly covering like elections right and again if you cover elections it's incredibly boring and you never hear anything of substance and it's not terribly complicated and you know one one the the Democrat says that you know we want to help the middle class and the Republican says we want to protect America Family Values and that's pretty much the extent of the end a challenge in terms of covering that stuff and I always thought to myself you know politics in America must be a lot more complicated than this right there must be some other hidden thing where it's incredibly complex and diabolical and and you know the the real match additions of power must be visible somewhere and I think that you find that when you when you start looking into how Wall Street works how money works how central banking works how you know how the concentration of wealth works I mean basically the subprime scheme was an effort to pull the remaining savings out of the population right it just wasn't you know in the old days investment banks made their money by lending money to companies who would build factories and they would make stuff and sell it around the world and everybody would make money and never you know even even the population would would would benefit from it but that manufacturing economy it's all gone it's so four C's so you have this financialized the economy and they have no normal beneficial way to make money and all that all they can really do is look to see where is their money and how can we get it and most people had money in their houses right like the the accumulated savings of most people whatever was left after the internet crash in the 90s was in real estate and that this was the scam by which they took the wealth that was left in the pockets of ordinary people and transferred it to you know nine people in Manhattan basically I mean that's why you have you know we told them when we talk about wealth inequality now right being a huge factor that you know the top 95 I'm sorry the top 1% of the population owns ninety percent of the wealth in the country whatever it is that's a consequence of schemes like this where they're just there they're finding out where people have a little bit of money and they're systematically coming up with scams to move it from there to here with no consequence no with no consequence and that was the other part of the story that I ended up having to cover later which was you know the last time they tried something like this like during the SNL crisis which was also sort of a giant fraud scheme also that involved real estate lending and you know but that the government after that actually you know indicted 1800 people they put 800 people in jail they put a lot of you know serious influential people on the dock after that nobody nobody went to jail after the stuff and there was and people think that well they didn't do anything that was technically illegal no [ __ ] there there was lots of stuff that was that was brazenly criminally illegal I mean they they committed fraud on a broad scale but some of these companies were into the things that were even worse than that I mean you take HSBC HSBC admitted to laundering 850 million dollars for a pair of Central and South American drug cartels including the Sinaloa cartel right which is suspected in thousands of murders like and you know they they admitted to this activity they agreed to a deferred prosecution agreement with the government where nobody did a day in jail no individual had to pull out a dime out of their own pockets to pay the shareholders pointed up 1.9 million dollars but some of that was tax deductible which means we paid some of that fine and and the only real punishment with any teeth is that some of the executives had to partially defer their bonuses for five years so laundering 850 million dollars for narco terrorists gets you a total walk you know that tells you basically everything you need to know about do we prosecute white-collar crime in this country basically no you know I mean that's the answer ultimately that you find out and there was paperwork that showed they knew it was from the cartels oh yeah they if you if you look at the the agreement and you can watch the thirst there's there's a video of of Loretta Lynch and lanny breuer because this is before laura Loretta Lynch was Attorney General but she was she was basically the head of this deal they talked about the fact that the HSBC branches because most of this was done in Mexico hmx which was the subsidiary company they had special teller windows built to fit cash boxes that the drug cartels were bringing into the bank so basically you've seen the scene the scene in Scarface where the guys come in with duffel bags of cash to the bank right and you know that's like a montage you know there's that that song I forget what song it is in the background same thing these guys would come into the the bank they would slide in these boxes of cash one after the other and that's admitted activity the banks signed off on this they'd you know it's not like they're contesting it they're not saying we neither admitted nor denied it's it's part of the deal so and in they agreed to the amount everything so yeah it was a one point nine billion dollar settlement but you know it's not like it came out of the pockets of the people who did it and it's not like any of the people who did it are in jail it's just you know a thing that happened and you know that's five weeks of profit for the bank so what what the [ __ ] they don't care right did you see the documentary an inside job yeah yep we've covered a lot of the same territory yeah yeah that was a sobering documentary where they're talking to the very people that caused the financial crisis mm-hm and and realizing that these people were economics professors that eventually got these jobs really lucrative jobs with banks and how they finagled this system and made it so it looked like these things were appropriate ya know I talked to the some of the some of the things that they invented that made this the crash possible sounded like good ideas like they they came up with this thing called the credit default swap all right and I won't bore you with what that is exactly but basically it's a kind of insurance where it's it's basically a bet it's hard to explain but it's a way of quasi insuring a product without having to pony up a lot of money and the it's it's called the derivative right and these instruments are completely unregulated can I put the secret default swap is like you and I betting on whether or not a third person's house is going to burn in a fire right like the old-school insurance said that it had to be your house in order for you to get insurance on it this new form of quasi insurance said that two totally disinterested parties could have an interest in a third thing that happens so it's basically gambling and on the one hand it allowed people to create a whole lot of capital which allowed them to lend more money which theoretically allowed people to buy more houses but in reality it just created the system where all these people had bets that were back and forth on on all these properties that's one of the reasons why the when the crash happened when when all those mortgages started to fail it wasn't just the failures of those properties it was all these people who were betting on whether or not these people could could pay their mortgages they started to lose money and then there were people who had bets on that who started to lose money and it's like this cascading whirlpool of [ __ ] that happened and again it just it started out as an idea to just create more money to lend to lend and it turned into this nightmare mechanical scenario that just that created losses you know in this almost apocalyptic fashion and a lot of them had no idea but that that was going to be the eventualities yeah it's great it's definitely crazy stuff as a person who didn't really follow finance before how much does that affected your life now like the way you look at things I definitely pay a lot more attention to the fine print when I enter into any financial contract I think about where I do my banking but the reality is you just don't have a whole lot of choice in this country anyway I mean it's like everything else there's only a few companies left so almost every bank that's out there where you can have a bank account in a mortgage is is a bank that I've written about some massive scandal before so that that's that's a problem but yeah I worry about it all the time I mean I have friends in finance who call me and they they tell me that you know that the things that are incredibly unsafe and that this that and the other could could could happen and so I have an anxiety level about things that I never had before but apart from that yeah I mean that's a natural consequence of having to spend 7 years looking at all these horror stories that's great it's crazy you spent their lunch time on it do you see any other bubbles coming up yeah people talk about that all the time there's a lot of a lot of negative press about subprime auto loans for instance which is it's not exactly the same but it's it's a similar thing I mean the same basic scam of taking loans chopping them up and then repackaging them as something that's more valuable than the original loan you can do that with anything any kind of credit you can do it with credit cards you can do it with aircraft loans you can do it with with car loans you can do it with with home mortgages and so the the mechanism of taking things that are are toxic and risky and making them look like triple-a is still is still part of the economy and it's everywhere the plus side of that is that there's more credit available you know almost anybody can get a credit card or even if you've had screwed up credit you can get a car you know I mean there's this put us on this like endless cycle of build-up bubble collapse build-up bubble collapse rebounding collapse again absolutely I mean I think that's that's that's why I can't you have to be nervous about the you know the skyrocketing stock exchange because we verified yeah I mean you should be right do you are you heavily invested in and I've got some in there I just did when when the whole you know when Trump was saying the economy has never been better look at the stock market stock market's killing it always do and then it'll have a bad day and okay well I thought we're doing great like what's going on with this bad day can you not control these bad days right like what's happening here right if you're if you're in control the good days you're also in control the bad days right yeah of course of course it just it seems it seems super suspicious yeah and and in the old days you'd have a lot of confidence that well the stock market always eventually goes up so yeah there's gonna be bad days but it'll go back but the problem is the underlying economy in America it just isn't all that hot you know like we're like what do we really make in this country what what we're where's the floor right like we have we have some industries that sort of perform well but if you know periodically we go through these bubbles that are based on nothing more than enthusiasm you know in the 90s it was the the tech bubble right where people like Alan Greenspan would say things like well we have a new paradigm in economics right so it doesn't matter whether a company hasn't shown any ability to make money or you know has no reasonable profit and loss statements it's just if it's a good idea that the stock is sound and everybody should invest in it and the stock market is going to continually go go up so don't worry about it of course that doesn't happen everybody but it blows up everybody loses their shirt but what what do they do the Fed lowers interest rates basically allows Wall Street to recapitalize drink itself sober and they plunge into the next the next madness which is mortgages and once again you have Alan Greenspan saying hey you know real estate is a great bet it's you know it's going to continually ascend people should use their homes as ATM machines you know you should you should consider refinancing your house so that you can get a little bit of extra cash and and this is this was actually the message they sent to America and again it creates as artificial mania where the economy is stoked artificially to gigantic dimensions but it's not based on anything and so when when it crashes when you finally get like any Ponzi scheme it you know it depends it depends on more new investors coming in than old investors leaving right so there's always going to be that moment when suddenly we don't have as many new ones as old ones and the instant that happens it all goes kaboom right and that's what happened with with the subprime market there was a moment in time where they they just couldn't keep it going anymore they couldn't find any more new suckers though to get to sell mortgages to and the mania ended and all went splat and then it was amplified by the fact that we have this system now of people betting on credit that is legal which creates more losses out of thin air so yeah I'm terrified every time I see this the stock market go up what's it based on is it based on our economy actually doing well I don't know I don't think so you know I'm sorry I'm look like I'm scaring you a little bit you're definitely scaring but I think that's good I think I need to be scared I tend to take these things and just you know I have financial advisors I let them handle money right when I hear things like this I just got Jesus well I I get terrified when I hear about really smart people getting scammed like yesterday we were talking about theranos do you know that a blood testing company that turned out to be total horseshit no I didn't hear about this oh it's great story it's it's a story of one of those things where you you find someone who you hope exists and you build them up there was this woman she looked like Steve Jobs she wore a black turtleneck in every photo and she was the richest ever self-made woman she was worth four billion dollars she had built this company called theranos right out of college she was like 19 when she started the company it was a blood-testing company that just required a small prick of your blood to do complicated blood analysis for diseases and things along those lines turns out it didn't work at all mmm and they faked a bunch of [ __ ] I'd spread fraud a lot of people got their blood tested it turned out to be you know they were at risk for all these diseases and warren buffett invested a hundred million dollars I think 125 Betsy DeVos more than 100 million dollars like all these super wealthy people got scammed Wow yeah when you find out that really wealthy people write that do this for a living yeah Buffett does that for a living right that he can get scammed out of a hundred and twenty five million dollars right right yeah and and Warren Buffett his his mantra is supposed to be picking the the absolute long term investment right so it's not he's not like a stevie colon type who just looks at the tape and tries to time it just right so you know you can you can make an investment for ten seconds and come out with it with a you know if he if he's investing in a company and a and even he can be fooled that's that's pretty terrible but look at Enron I mean Enron was was another example of the world's best financial analysts we're looking at this company for a decade and the the results were completely ridiculous like it should have been obvious to any layperson that that these profit numbers couldn't possibly be real and it wasn't until one of those guys I think it was Jim Chanos it was sort of a famous short seller I mean I sort of said hey wait a minute that there's something up here but people continually invested in these companies and there's just not a whole lot of oversight that goes on with with Wall Street and I think that's that's a major lesson of you know the last 20 years is that is that there's just not a lot of eyes on on crime and in this area another example is I'm sorry the the who's the guy scammed all the rich people really made up Bernie Madoff yeah I was gonna bring him up yes the most egregious example right yeah yeah I mean there are other there are other people who did similar things but this guy didn't even make investments right you know what I mean like he he was literally just sort of taking money and you know when someone cashed out he would you know it was like who's that little girl throwing he had a big you know pile of cash and you know he would who take some man and throw some out but if the SEC it had at any time just looked at his books and said what are you invested in it all would have you know that whole house of cards would have fallen and invest in anything no and he wasn't he wasn't making trades he wasn't doing anything you know and and there are a bunch of stories like this there's a great book called the octopus which is about as somebody who did a Madoff like scam another hedge fund where same thing they weren't really making trades they were just sort of creating phony profit and loss statements and and and creating records that look like trades they could they could tell their investors about but they weren't actually doing anything so if anybody any expert at any time had just poke their nose in into this person's books they would have seen it in ten seconds that's the mean that's the amazing thing about this you know not not to get back to you know my my drug-dealing book but this is one of the things that he says which is that you know you can be in a you know in a poor black neighborhood and a couple of kids will be on a cell phone and talking about selling ten dollars worth of weed and they'll be picked up by cops you know within 20 minutes or something like that meanwhile you know somebody like you know Bernie Madoff can commit 100 million dollar frauds year after year after year and not even do any to take any effort to try to cover it up all that well and get away with it well Bernie's big crime was that he ripped off rich people yeah absolutely if he had done the exact same thing to poor people but he did was just it was just too easy to call what he did a crime versus what you were talking about with these financial institutions right yeah yeah if he if he had long if he laundered it through a slightly more legitimate process he he would have gotten out flattened but the one of the things that a lot of these guys these scam artists get into it thinking that they're actually gonna be real hedge funds and that they they have some stock picking system that's actually going to make all their clients money and one of the things they find out is that a they suck they they they're not outperforming the market and they're not that smart but be that their clients can't tell if they just make up the numbers so there there are a number of cases of people who start out trying to be legitimate and trying to be really real investment advisors but they just end up turning it to Bernie Madoff types because it's just easy there's no there aren't that many people watching for it and you know that that's kind of scary too well it seems like there's so many people doing it how could there be enough people watching it right about how many investment firms there are and how many different people that are involved in trading how could anybody be watching all of it right yeah no there but even even so even if you take that into consideration then the number of eyes that are that are on this world is is ridiculously low electic take AIG all right AIG was one of the world's largest companies at before before it crashed it had like a hundred eighty thousand employees it was it took advantage of this weird loophole that allows financial companies to essentially choose their own regulator so because because AIG had a thrift or Savings and Loan that's basically the same thing they chose to be regulated by the OTS which is the office of Thrift Supervision which is this tiny tiny little you know office in Washington that oversees basically Savings and Loan operations and in in the OTS this is this is actually true the they had exactly one insurance expert on staff so essentially with the world's largest insurance company was being regulated by a government office that only had one person who really understood insurance and and even and even that person wouldn't have understood the the part of the company that blew up which was essentially an investment bank within the insurance company that was creating these sort of highly advanced sort of derivative operations that know that they just would not have been able to understand that stuff so there the government just does not place a lot of resources into you know keeping an eye on even the most basic things and when you compare that to law enforcement in other areas you know is how many how many people do we have you know worrying about back bank robberies in this country or drugs right or you know how many people are being watched because their marijuana dealers in other states I mean it dwarfs the number of people who are watching for economic crimes yeah one person yeah I just love the the name of it office of Thrift Supervision yeah sure it exists anymore I think it was it was merged into some other because there used to be the OCC the officer of the Comptroller of the currency and I think they created a new regulator at out of all that after the crash but but yeah and I chose its regulator and its regulator you know was totally overmatched didn't couldn't understand [ __ ] and that's one of the reasons why the company blew up the company also blew up because it was run by insurance people who didn't understand the idea was basically Wall Street's bookie all these people were betting all these investment banks were betting on whether or not mortgages were gonna fail or not and AIG was selling the product that they could use to make those bets essentially or they were taking on insurance on packets of mortgages so if they exploded you would get a payout right it was it's like it's like buying an insurance policy on your neighbor's house if it goes up in flames you get paid on it you got paid AIG was selling a product that allowed banks essentially to buy insurance on on houses on mortgages and if the if people foreclosed if the mortgage has failed or pools of mortgages failed if you if you bought that kind of insurance you got these huge payouts so people were betting against mortgages basically and AIG was taking all this book and but the the heads of the company were oldschool insurance executives who just didn't understand this sort of newfangled complicated form of insurance and so they would look at the numbers they were being given and even they didn't get it didn't they didn't understand how how exposed they were and so and all the bets started going the wrong way suddenly they're being asked to pay out billions of dollars and they're like wait where is this coming from so even the companies were kind of clueless about the [ __ ] that was going on it turns out [Applause]

Channel: JRE Clips

Views: 1,429,852

Rating: 4.8486104 out of 5

Keywords: Joe Rogan, JRE, Joe Rogan Experience, JRE Clips, PowerfulJRE, Joe Rogan Fan Page, Joe Rogan Podcast, podcast, MMA, Joe Rogan MMA Show, UFC, comedy, comedian, stand up, funny, clip, favorite, best of

Id: L0BHAD4tQwQ

Length: 39min 53sec (2393 seconds)

Published: Fri May 11 2018

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As an alternative, you could just watch The Big Short and have Margot Robbie explain it to you while she sits in a bubble bath.