[...]... condition was the opposite of the American economy’s posture in 1929 when it had been the era’s massive creditor, exporter, and industrial producer; that is, the US back then had played the role belonging now to the red capitalists of China At the end of the day, the 2008 financial panic had originated in the canyons of Wall Street; it had actually been contained there during the peak weeks of the crisis,... fueling a boom in real estate and mortgage lending that had no precedent During the midst of the housing boom, of course, Fed policy makers insisted that nothing was amiss Notwithstanding the 100 percent increase in national housing prices since the turn of the century, and the white-hot gains of 200 to 300 percent being recorded in many “sand state” markets, there simply was no visible bubble, according... Moreover, these pools had also been drained of value time and again by the fee extractions taken at each step along the route to securitization and sale This sequence of fee scalping included mortgage origination, packaging of these loans into mortgage-backed securities, repackaging of MBSs into CDOs, and even further repackaging of CDOs into CDOs squared As a consequence of the “run” in the wholesale funding... of employment, income, GDP, and general prosperity would no longer be an outcome of the invisible hand; that is, the interaction of millions of producers, consumers, and investors on the free market Instead, the advance of the American economy now flowed from the visible ministrations of the Federal Reserve, which by the end of the decade had become the omnipotent overlord of daily economic life, influencing... money-printing spree Nixon’s malefactions were then further nourished by the final destruction of fiscal rectitude during the Reagan era, enabling both the warfare state and welfare state to balloon without the yoke of taxes weighing on the people In the final descent into bubble finance, the Greenspan and Bernanke Fed institutionalized the financial repression, wealth effects, and Wall Street–coddling... meltdown was not the real crisis; it was only the tip of the iceberg, the leading edge of a more fundamental economic malady In truth, the US economy was heading for the wringer because a multi-decade spree of unsustainable borrowing, speculation, and financialization of the national economy was coming to an abrupt end In the years after 1980, America had undergone the equivalent of a national leveraged... that in the event of a bankruptcy there would be no raid on the insurance company assets to satisfy holding company liabilities It also meant there would be no contagion—that is, the AIG holding company was in no position to engage in a fire sale of insurance subsidiary assets in order to satisfy the margin calls and loss claims against the CDS policies issued by the holding company The insureds the. .. being fostered by the Fed and other central banks Not surprisingly, therefore, they were now desperately petitioning the treasury secretary for help in collecting their gambling debts from AIG Needless to say, Paulson did not hesitate to throw the weight of the public purse into the arena on behalf of these gamblers, because it resulted in an immediate boost to the stock price of Goldman Sachs and the. .. foundation has morphed into a speculative casino which swindles the masses and enriches the few These lamentable conditions are the Janus-faces of crony capitalism a mutant régime which now threatens to cripple the nation’s bedrock institutions of political democracy and the free market economy A decisive tipping point in the evolution of American capitalism and democracy the triumph of crony capitalism took... nothing of the kind Contrary to Chairman Bernanke’s faulty and self-serving scholarship, the famous bank runs of 1930–1933 were not the result of monetary policy mistakes by the Fed after 1929 Instead, they were the ineluctable consequence of the wartime and postwar debt booms from 1914 to 1929 and the vast crop of insolvent borrowers which they fostered Likewise, Washington’s massive intervention in . Roots of the Great Housing Deformation 20How the Fed Brought the Gambling Mania to America s Neighborhoods 2 1The Great Financial Engineering Binge 2 2The Great Raid on Corporate Cash 2 3The Rant. alt="" THE GREAT DEFORMATION THE GREAT DEFORMATION THE CORRUPTION OF CAPITALISM IN AMERICA DAVID A. STOCKMAN PUBLICAFFAIRS New York Copyright © 2013 by David A. Stockman. Published in the United. Larceny 3 0The End of Free Markets: The Rampages of Crony Capitalism in the Auto Belt 31No Recovery on Main Street 3 2The Bernanke Bubble: Last Gift to the 1 Percent 33Sundown in America: The State-Wreck