Taibbi Is Back With The Scam Wall Street Learned From the Mafia

Tyler Durden's picture

Matt Taibbi strikes again.

The Scam Wall Street Learned From the Mafia

How America's biggest banks took part in a nationwide bid-rigging conspiracy - until they were caught on tape

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo.

But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices. The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.

USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordi­nated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.

More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.

But USA v. Carollo marks the first time we actually got incontrovertible evidence that Wall Street has moved into this cartel-type brand of criminality. It also offered a disgusting glimpse into the enabling and grossly cynical role played by politicians, who took Super Bowl tickets and bribe-stuffed envelopes to look the other way while gangsters raided the public kitty. And though the punishments that were ultimately handed down in the trial – minor convictions of three bit players – felt deeply unsatisfying, it was still a watershed moment in the ongoing story of America's gradual awakening to the realities of financial corruption. In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.


This was no trial scene from popular lore, no Inherit the Wind or State of California v. Orenthal James Simpson. No gallery packed with rapt spectators, no ceiling fans set whirring to beat back the tension and the heat, no defense counsel's resting a sympathetic hand on the defendant's shoulder as opening statements commence. No, the setting for USA v. Carollo reflected the bizarre alternate universe that exists on Wall Street. Like so many court cases involving big banks, the proceeding looked more like a roomful of expensive lawyers negotiating a major corporate merger than a public search for justice.

The trial began on April 16th in a federal court in Lower Manhattan. The courtroom, an aerielike setting 23 stories up, offered a panoramic view of the city and the East River. Though the gallery was usually full throughout the three-plus weeks of testimony, the spectators were not average citizens come to witness how they had been robbed blind by America's biggest banks. Instead, there were row after row of suits – other lawyers eager to observe a long-awaited case, one that could influence the outcome in a handful of civil suits pending across the country. In fact, the defendants themselves, whom the trial would reveal as easily replaceable cogs in a much larger machine of corruption, were barely visible from the gallery, obscured by the great chattering congress of prosecution and defense attorneys.

Only the presence of the mostly nonwhite and elderly jury, which resembled the front pew of a Harlem church, served as a reminder that the case had any connection to the real world. Even reporters from most of the major news outlets didn't bother to attend. The judge in the trial, the right honorable and amusingly cantankerous Harold Baer, acknowledged that the case was not likely to set the public's pulse racing. "It is unlikely, I think, that this will generate a lot of media publicity," Baer sighed to the jury in his preliminary instructions.

Read the full article at Rolling Stone

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Rahm's picture

Bend over.  Grab ankles. It's time to be Royally Fuct!

SilverTree's picture

I picked a bad day to stop sniffing glue.

gmrpeabody's picture

Where's our attorny general..., oh, that's right!

WestVillageIdiot's picture

His prosecution of the New York financial mafia is never fast and furious.  He's too busy being a key cog in "the most transparent administration in history".  This shows once again that the 2008 election was the biggest crock of bullshit this country has ever seen. 

pods's picture

Thought for a minute you were talking about NY DAs.  They have had some bad ass ones, Spitzer (say what you will) was not someone I wanted sniffing around.

Or even Vacco before that.  

PlaceHolder is nothing more than a waterboy for the big guys.


ITrustMyGut's picture

spitzer r0x0rd! of course... he was hit... couldnt allow that now, can we...


oh.. I <3 Matt taibbi... in a brotherly love kinda way...

nope-1004's picture

Enron fixing electricity rates, creating fake "outages", then double billing happened in the energy sector.  Are we to think that the Wall Street banks are sacrosanct and don't behave in the same way?

LOL.  Taibbi is just scratching the surface here.  Good piece, but the corruption runs much deeper.  It has to, because insolvent institutions have no other recourse than to steal.


Buckaroo Banzai's picture

I've heard that colossal amounts of drug money get laundered through municipal bonds. Sounds like criminals control the whole municipal bond system from top to bottom.

sunaJ's picture

This is a great article by Taibbi.  Beyond the monetary sums that these guys were gutting from the public, the true damage comes in the form of taint and the cost of protecting each other.  Once Bill Richardson or any other individual in the public trust takes such money, then they are known to be corruptible, and will always have to protect their criminal compatriots, divert the public interest to protect their own, lie and become vulnerable to blackmail.  It is a selling out of the soul.  Enjoy your money, fuckers, because your life is pathetic.

I am for citizens getting in on the mafia action, too, if that is the only way to get anywhere in America nowadays.  I'm all for the breaking of some legs of these fucking moral gnats.

AldousHuxley's picture

private ownership of firesale prices what Koch brother was all about in Wisconsin. He doesn't care about teach pension as he doesn't reside in WI, but he wanted his puppet in there so that Walker would sell state utility assets at below market prices.


In Chicago’s case, Mayor Richard Daley sold 75 years of meter revenue – worth an estimated $5 billion – for $1.2 billion. So he gets 20 cents on the dollar for the city’s parking meters in 2008, and then in 2009 the city still has a budget problem that’s now worse, because there’s no parking meter revenue anymore, ever. meter rates went from .25 cents an hour to $1 an hour in the first year of the deal, and then to $1.20 after that. Now $1.75.

Privatization, is code word for tax the shit out of average workers to foreign interests.
Sojourner.'s picture

If 75 years of meter revenue is worth 5 billion, the yearly value would be 66,666,666. . That was a devilish deal right out of the gate!!!

sunaJ's picture

+1 for being Rainman and possessing a healthy sense of irony.


Hedgetard55's picture

He will be under the choomwagon soon...

Arnold Ziffel's picture

He's too busy prosecuting the Sheriff in NM who makes prisoners wear pink underwear...an alleged violation of their civil rights....

SV's picture

It's actually AZ, Maricopa county to be specific.  If you're going to slur the stupid, get your act together - sheesh!  /s

mkkby's picture

Yeah, because that's a little known fine print in the constitution.  I forgot.  What color does their civil right specify?

R_J's picture


© Ramones

wisfool's picture

The best line in the article:

"Siffert tried to lay this outrageous load of balls on the jury using a faux-folksy analogy"

Buck Johnson's picture

What the govt. will do is allow the banks to pay a fine or into settlement for all the states for pennies on the dollar but the states can't sue or prosecute the banks after. 

bank guy in Brussels's picture

The crooks were not insiders, so they go on trial.

The biggest crooks in the US never go on trial.

YHC-FTSE's picture

+1 Exactly.


And why the hell is this important story in Rolling Stone along with 100 great guitar riffs? That should tell you volumes about the complicity and overwhelming reach of these crooks in the msm. 

Joe Davola's picture

Don't forget the article they're touting that austerity doesn't work.

pods's picture

I think that Taibbi gets all the publicity that he needs from RS.  People see it there, here, everywhere.

Remember where the term Vampire Squid was born?


WestVillageIdiot's picture

Reputable news outfits, such as CNBC, would never report such a blatantly pointed story as this.  They are too busy slobbering on the knobs of all of the criminals that they interview on a day-to-day basis.  They would never take a principled stand and ghive up their access to the insiders of the criminal syndicates. 

Peter Pan's picture

America is fixated on reporting on the size, shape or transfrmation of some actresses back side or breasts. The bulk of the population is being ground down to nothing more than B Grade mince either through propaganda, moronic entertainment or financal destruction caused by unemployment or huge debt.

This sorry state of affairs has a long way to go because the crooks control the whole apparatus of government and finance and while they do they will not be volunteering to put there buddies on the witness stand or the front line in Afghanistan.

YHC-FTSE's picture

That's true. There's no doubt that it works for Taibbi, but perhaps I'm just blinkered and old fashioned in thinking that RS has far less reach and punch than say, The Economist or FT in its readership. I'm afraid to admit that I'm a publication snob, but it looks like I'll have to change my ways if I want quality/reality in my news. Should have done it years ago.

NotApplicable's picture

Given that more young people get their news from The Daily Show than the MSM, Rolling Stone is not a bad place to attract eyeballs not yet affected by cataracts.

Cathartes Aura's picture

digging into who owns the FT and The Economist - and you'll understand why Rolling Stone (not without blemishes, history) is doing this reporting while others remain silent.




AldousHuxley's picture

the economist is British Empire's Wall street journal.  pro rich capitalists, anti labor, but not necessarily pro American empire.


City of London is a major competitor to New York City's wall st. you won't get rid of curropt bankers unless you attack London as they employee more bankers than NYC.

YHC-FTSE's picture

Thanks mate. Interesting background on Wenner of RS, particularly his treatment of Hunter S Thompson, and I see what you mean about the economist: 50% Pearson and 50% Rothchild Banking. I can't believe I mentioned a Rothchild in my post! I swear I sound more like a tinfoil hatter with each passing day on ZH. I'll have to change my definition of a tinfoil hatter from "an eccentric" to "somebody who knows more facts than me". 

Cathartes Aura's picture

Jann has some very interesting "backstory" if you sniff around - this was just the sanitized "wiki" lite story, heh.

I always start from the premise of that "six degrees of kevin bacon" line - there's a lot of inbreeding and mutual palm-greasing at "the top" and fewer players than we realise.

tho' the majority have some things in common. . .

Cynthia's picture

Speaking of guitar riffs, here's David Gilmour performing one of the greatest guitar riffs in the history of rock:


LawsofPhysics's picture

Execute all of them and watch at least some confidence return to the markets overnight.  

Tirpitz's picture

Hearings in the morning, hangings in the afternoon. Publicly.

WestVillageIdiot's picture

Good luck getting at the crooks when they are so well guarded by the thugs of the NYPD and their own private security details.  Now, if you wanted to beat the hell out of some of the Occupy crowd I'm sure the boys in blue could look the other way for a few minutes.  That is the reality of the den of thieves known as Lower Manhattan.

Peter Pan's picture

Do we really need a hearing?

tarsubil's picture

If you hang everyone that is guilty, no one would be left.

RECISION's picture

Could we at least make a really good start though...?

Real Estate Geek's picture

Tabbi deserves either a Pulitzer or the Presidential Medal of Freedom.  Too bad all he'll get is a soggy demise in a hot tub.

billwilson's picture

Taibbi for Treasury Secretary ... or Attorney General. We might then get a little action.

Biff Malibu's picture

I guess I'll have to cancel my subscriptions to all the major Wall Street news sources and just start getting Rolling Stone instead.

CommunityStandard's picture

You had subscriptions to Wall Street news sources?

Dr. Engali's picture

I'm shocked...shocked that the banks weren't prosecuted.

caimen garou's picture

It's all fun and games until someone wakes up with a cut off horses head in the bed!