Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

But here’s the thing: if you were just some schmuck on the street and you wanted to gamble on this nonsense, you couldn’t do it, because your behavior would be speculative and restricted under that old 1936 Commodity Exchange Act, which supposedly maintained that delicate balance between speculator and physical hedger (i.e., the real producers/consumers). Same goes for a giant pension fund or a trust that didn’t have one of those magic letters. Even if you wanted into this craziness, you couldn’t get in, because it was barred to the Common Speculator. The only way for you to get to the gaming table was, in essence, to rent the speculator-hedger exemption that the government had quietly given to companies like Goldman Sachs via those sixteen letters. If you wanted to speculate on commodity prices, you had to do so through a government-licensed speculator like Goldman Sachs. It was the ultimate scam: not only did Goldman and the other banks undermine the 1936 law and upset the delicate balance that had prevented bubbles for decades, unleashing a flood of speculative money into a market that was not designed to handle it, these banks managed to secure themselves exclusive middleman status for the oncoming flood. Now, once upon a time, this kind of “investing” was barred to institutional investors like trusts and pension funds, which by law and custom are supposed to be extremely conservative in outlook. If you’re the manager of a pension fund for Ford autoworkers, it kind of ...