On the radio this weekend, a woman who lost her small business in the recent financial crisis unraveled her tales of woe. The radio blared this somber tune as I drove through towns with “Closed” signs hung during the busiest hours of the day. Yep, it’s a western movie out there in the world of capitalism–with tumbleweeds blowing across roads and cowboy guns cocked. Okay, maybe not cowboy guns. I don’t really know how best to describe what’s going on, to tell you the truth.
The Looting of America: How Wall Street’s Game of Fantasy Finance Destroyed our Jobs, Pensions, and Prosperity, by Les Leopold, has the best explanations I have found yet of Collaterized Debt Obligations, Credit default Swaps, and the other financial weapons of mass destruction that have detonated on our economy the last few years.
But Mr. Leopold goes beyond clearly-written descriptions and tells us the story of how these bizarre derivatives originated, thrived, and ultimately dominated the world’s financial system. He also, I think, makes a case for how income inequality, which we’ve been discussing recently, led to the financial meltdown.The book opens with a specific episode from the 2007-2008 financial fiasco to illustrate how otherwise responsible elected officials and public trustees could get sucked in over their heads – “The Hooking of Whitefish Bay”. Reading, I kept think of Jefferson County’s woes, for the stories are similar – promised high returns through mysterious investments that were supposedly AAA-dead-safe, followed by fee after fee after fee to the banks and Wall street.
Like the best storytellers, he ties the particular local disaster for Whitefish Bay to the larger financial catastrophe playing out across the nation, but he doesn’t just leave it as some kind of perfect storm that no one could have foreseen. Oh no, this was a self-inflicted wound, and Mr. Leopold steps the reader through the economic and political history leading up to this mess.
Given all the policy and tax changes that our elected leaders elected to make, as well as the changes in the world’s economy, this was going to happen. As a co-worker said, “The amazing thing is not that we shoot ourselves in the foot every so often, it’s how quickly we reload!!”
Read the entire article here.