The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity?and What We Can Do About It

The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity?and What We Can Do About It
by Les Leopold

The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity?and What We Can Do About It
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Book Summary Information

Author: Les Leopold
Edition: Paperback
Audio: English (Unknown); English (Original Language); English (Published)
Published: 2009-06-02
ISBN: 1603582053
Number of pages: 240
Publisher: Chelsea Green Publishing

Book Reviews of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity?and What We Can Do About It

Book Review: CSI Wall Street
Summary: 5 Stars

The Looting of America, by Les Leopold

The `Introduction' tells how Leopold began to investigate modern economics after the bursting of the "housing bubble". Many Establishment Experts can neither explain the crash or solve it because of their "ideological blinders" (p.ix). Many caused it over the past thirty years (p.x). Leopold asks where "several trillion dollars worth of value" disappeared to (p.xi)? That is how a swindle works: the seller gets the money, the buyer gets the loss. Collateralized Debt Obligations (CDO) were a swindle when money was given for fraudulent loans (p.xii). This was similar to the High Tech Stock swindles in the late 1990s where new stock was sold for a price far in excess of its true value. "Some men rob with a six-gun, others with a fountain pen." Financial products (p.xii) bought with real money are dependent on promises to repay the debt. If people do not have the funds to repay their debt there is a recession.

Chapter 1 tells about the looting of Whitefish Bay. Are people kept ignorant of economics in order to fleece them? "Not financial persons" (p.6) is a confession of incompetence. Bankers and brokers profited (p.8), Whitefish Bay owned nothing but owed everything (p.9). Chapter 2 discusses the link between productivity and income. [Wages are kept down by political oppression.] The devaluation of the dollar in 1971 led to lower wages and higher taxes (p.14). The rich grabbed wealth (p.15) then spent it on investments. Under-paid workers were offered "easy credit" (p.19) but not higher wages. Chapter 3 provides a historical perspective on finance. Government bonds were invented in the 15th century (p.30), corporate shares in the 17th century (p.31). Free financial markets lead to panics and depressions (p.33). The "bubble" is a symptom (pp.34-35). Wall Street controls the White House (p.38). Chapter 4 has the lessons of the Great Depression. Ending the New Deal financial regulations led to out Great Recession (p.49). Those "enormous returns" (p.50) were based on low wages.

Chapter 5 tells how the GAO warned of the dangers of derivatives. Innovative financial services did not protect the nation's financial systems (p.55). Derivatives are not based on real items (p.59). Are they frauds (pp.61-63)? The collapse of LTCM was a warning against derivatives (pp.64-66). Was the housing bubble caused by marginal buyers (Chapter 6)? The "most widespread abuses occurred in the institutions with the least federal control" (p.75). CRA banks made fewer risky loans (p.76). Sub-prime mortgage loans were a small percentage (p.79). Lower interest rates increases the demands for homes (p.80), and the value of houses (p.81). Pages 88-89 tell how the scam worked: sub-prime mortgages were rated as AAA and sold as a CDO! Brokers collected billions by selling "toxic debt".

Chapter 7 explains Credit Default Swaps as insurance for a risky CDO derivative. A CDS and a CDO create a "synthetic CDO" (p.94). This sells risk but not value in securities; they are not backed by real mortgages (p.95). The downturn in the economy revealed the frauds (p.99). Synthetic CDOs allow selling the same debt over and over (p.102). Pages 106 to 108 explain how wealth is created by juggling figures. Chapter 8 explains how the use of CDO created an explosive growth in sub-prime mortgages (p.117). Once the supply exceeded the demand home prices declined. Stagnant wages were part of this (p.119). CDO were fancy swindles that made junk bonds appear to be AAA rated. Regulation by the government is the only way to prevent swindles like Synthetic CDO (p.136). The credit agencies were paid for AAA ratings (p.139). They were frauds (p.144). That surplus capital came from shortchanged workers (p.148).

Chapter 10 explains why finance must be better regulated: our economy depends on it. Can insurance premiums prevent future meltdowns (p.156)? Leopold recommends a small tax on each and every financial transaction. Chapter 11 tells that workers earn less than they did in 1973 (p.165). These policies account for today's inequality (p.166). This can be corrected by a higher income tax standard deduction and a higher minimum wage, and closing the loopholes on untaxed income and capital gains (p.169). High profits and low wages cause a "stock market crash, banks fail, currencies depreciate, unemployment rises" and a recession or depression follows (p.176). The cure is to raise real wages to increase economic activity, raise the minimum wage, and increase union membership. "Money-making" causes social instability (p.184) because of impoverishing others. "Private financial markets" lead to depressions, especially when fraud is used (p.185). Isn't it time to nationalize the banking system (p.186)? This would control them "for the good of us all" (p.189).
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Summary of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity?and What We Can Do About It

"I loved this book. A worms'-eye dissection of the Wall Street crisis from a very sharp and very knowledgeable labor economist. Here's hoping that before the Washington consensus gets set in stone, policymakers will read it and reflect on the havoc the masters of the universe have wreaked on ordinary people."
--Charles Morris, author of The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash and Money, Greed, and Risk: Why Financial Crises and Crashes Happen
How could the best and brightest (and most highly paid) in finance crash the global economy and then get us to bail them out as well? What caused this mess in the first place? Housing? Greed? Dumb politicians? What can Main Street do about it?

In The Looting of America, Leopold debunks the prevailing media myths that blame low-income home buyers who got in over their heads, people who ran up too much credit-card debt, and government interference with free markets. Instead, readers will discover how Wall Street undermined itself and the rest of the economy by playing and losing at a highly lucrative and dangerous game of fantasy finance.

He also asks some tough questions:
  • Why did Americans let the gap between workers' wages and executive compensation grow so large?
  • Why did we fail to realize that the excess money in those executives' pockets was fueling casino-style investment schemes?
  • Why did we buy the notion that too-good-to-be-true financial products that no one could even understand would somehow form the backbone of America's new, postindustrial economy?
  • How do we make sure we never give our wages away to gamblers again?
  • And what can we do to get our money back?
In this page-turning narrative (no background in finance required) Leopold tells the story of how we fell victim to Wall Street's exotic financial products. Readers learn how even school districts were taken in by "innovative" products like collateralized debt obligations, better known as CDOs, and how they sucked trillions of dollars from the global economy when they failed. They'll also learn what average Americans can do to ensure that fantasy finance never rules our economy again.

As the country teeters on the brink of what could be the next Great Depression, we should be especially wary of the so-called financial experts who got us here, and then conveniently got themselves out. So far, it appears they've won the battle, but The Looting of America refuses to let them write the history--or plan its aftermath.

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