The Kochtopus Strikes Out at The Big Short Movie

By Pam Martens and Russ Martens: January 4, 2016

Scene from The Big Short Movie

Scene from The Big Short Movie

Call them astroturf organizations or neoliberal think tanks or corporate front groups – it all adds up to the same thing: big corporate bucks are engaged in a vicious propaganda war to recast the 2008 financial crash and its depression-like aftermath as the product of big government meddling rather than corporate lobbyists strong-arming deregulation of banking and Wall Street. The corporate cartel simply cannot allow mandates for tough new regulations to gain footing in Washington, otherwise the multi-decade work of the Kochtopus goes poof. (Kochtopus is short-hand for the political and front group money machine run by billionaire brothers, Charles and David Koch.)

The Koctopus now has its knickers in a twist over the release of the movie, The Big Short, directed by Adam McKay and based on the bestselling book by Michael Lewis, a former Wall Street insider. Prior to his writing career, Lewis worked at the investment bank Salomon Brothers long enough to fully grasp how greed consumes anything in its path on Wall Street. (Salomon was made infamous in 1991 for rigging two-year U.S. Treasury note auctions.) The Kochtopus is further inflamed by Lewis showing up on 60 Minutes on March 30 of 2014 to promote his latest Wall Street expose, Flash Boys, revealing how hedge funds, stock exchanges and investment banks across Wall Street are rigging the U.S. stock market. None of this fits neatly with the Kochtopus mantra that free markets are perfectly able to police themselves if big government will just get out of the way.

The Kochtopus has bragged in the past about its ability to train journalists and get them on board its agenda. We’ve previously written about how that plays out in real life. Thus, we were not too stunned yesterday to see a column appearing at Newsweek, attempting to discredit The Big Short, authored by Jeffrey A. Tucker, “a distinguished fellow at the Foundation for Economic Education,” according to the brief bio at the end of the opinion piece.

In typical Kochtopus formulaic prose, Tucker writes:

“Krugman and friends like the film because it leaves out any discussion of the main culprit behind the financial crisis, which was not Wall Street ‘greed’ but bad monetary and credit policies from the Federal Reserve and the federal government. The movie barely hints at any exogenous factors behind the boom or bust…So the pro-regulation crowd is cheering. Viewers are given no understanding of the real causal factors and hence fill in the missing data with a feeling that banks just love ripping people off.”

Wall Street banks really do “love ripping people off.” After seven straight years of criminal investigations, deferred prosecutions for felony counts, guilty pleas for felony counts, rap sheets that look like a crime syndicate, that debate is over Mr. Tucker.

To fully grasp the significance of a writer for the Foundation for Economic Education (FEE) getting a byline at a Newsweek web site, you’ll need a quick history of the Machiavellian origin of FEE and this detail: the high priestess of greed is good, Ayn Rand, was one of FEE’s earliest ghost writers.

FEE’s web site says that it’s the “oldest free-market organization in the United States” and was founded by Leonard E. Read in 1946. Read was the head of the western division of the U.S. Chamber of Commerce in the 1930s and assumed the leadership of the Los Angeles branch and its 10,000 members in 1939.

According to writer Kim Phillips-Fein, FEE was formed in 1946 with initial funding of $10,000 each from corporate bigwigs, ConEd, General Motors, U.S. Steel and Chrysler. Jennifer Louise Burns writes in her book, Goddess of the MarketAyn Rand and the American Right, 1930 – 1980, that “Read tapped Rand to serve as FEE’s ‘ghost,’ asking her to read material he intended to publish to make sure it was ideologically coherent.” Our own research, based on a careful reading of the 681-page, hardcover book, Letters of Ayn Rand, shows that Rand also submitted her own prospective writings to Read to review and referred to herself in correspondence to him as FEE’s “ghost.”

In one extremely telling letter written by Ayn Rand on February 14, 1948 to DeWitt Emery, Rand explains her views on income inequality:

“Whenever we speak of incomes as ‘sharing’ or ‘dividing,’ we merely drive in the collectivist idea of the national income being there for the purpose of being shared. I know that you use these words figuratively, but you can see what they mean literally. I think it will be a great step forward when conservatives overhaul their vocabulary most carefully and discard from it, once and for all, all the words smuggled into it by collectivists. National wealth is not there to be shared. An employer does not share the income of his factory with his workers. That income is his. He pays the workers what he has agreed to pay for their services through voluntary negotiations, and the basis of the agreement is the law of supply and demand. He does not pay on the basis of the income of his factory. This last is the vicious idea which was being advocated, as you will remember, a couple of years ago by labor unions who demanded wage raises according to manufacturers’ incomes….”

FEE is still very much alive. Greenpeace calls it a “Koch Industries Climate Denial Front Group.”

Another basher of the storyline of The Big Short is Stephen Moore, formerly a member of the Wall Street Journal’s editorial board and a frequent opinion writer on its pages. Moore has previously attended the secretive Koch brothers’ fundraising “seminars” and was a former Board Member of the dark money operation known as Donors Capital Fund, Inc. In 2008, Donors Capital sluiced $17,778,600 into the Clarion Fund so that it could release 28 million DVDs of the race-baiting documentary, Obsession: Radical Islam’s War Against the West.  The flood of DVDs, inserted in major newspapers across America, came seven weeks before the Presidential election, in the midst of a whisper campaign that Obama was a Muslim, and flooded households in the swing voter states.  (See “Koch Footprints Lead to Secret Slush Fund to Keep Fear Alive.”)

Moore has penned his criticism of The Big Short for the business newspaper, Investor’s Business Daily. We could not find a bio with the piece alerting readers to Moore’s Koch connections, or any connection for that matter. We did, however, find another opinion piece by Moore from November with the title: “New York’s Climate Suit Against Exxon Is Like Salem Witch Trials.”

Moore has this to say in his critique of the movie:

The Big Short also neglects to even once mention the worst actors of all in the financial meltdown: Fannie Mae and Freddie Mac. These two government-run institutions lost $150 billion of taxpayer money by securitizing mortgages and providing near 100% guarantees on repayment.”

Moore hopefully knows that Fannie Mae and Freddie Mac were, at the time of the crash, publicly traded companies, both listed on the New York Stock Exchange with their own, respective corporate Board of Directors who were supposed to be overseeing their operations. Yes, the bonds they issued enjoyed government backing as a means of supporting the U.S. housing market but the authoritative investigation and report on the crash, the 662-page report from the Financial Crisis Inquiry Commission, releases Fannie and Freddie from being the major culprits of the housing bust. The report notes:

“The Commission also probed the performance of the loans purchased or guaranteed by Fannie and Freddie. While they generated substantial losses, delinquency rates for GSE [government-sponsored enterprise] loans were substantially lower than loans securitized by other financial firms. For example, data compiled by the Commission for a subset of borrowers with similar credit scores—scores below 660—show that by the end of 2008, GSE mortgages were far less likely to be seriously delinquent than were non-GSE securitized mortgages: 6.2% versus 28.3%.”

The report further indicates that “By 2005 and 2006, Wall Street was securitizing one-third more loans than Fannie and Freddie. In just two years, private-label mortgage-backed securities had grown more than 30%, reaching $1.15 trillion in 2006; 71% were subprime or Alt-A.” By 2006, Fannie Mae and Freddie Mac’s market share had diminished to 37 percent.

Today, according to the Heritage Foundation, Stephen Moore is its Distinguished Visiting Fellow for the Project for Economic Growth. SourceWatch carries this comment on the Heritage Foundation:

“The Heritage Foundation has received funding from organizations with connections to the Koch brothers. In 2012, the Heritage Foundation received $650,000 from the Claude R. Lambe Foundation, which was one of the Koch Family Foundations before it closed in 2013. The Lambe Foundation contributed at least $4.8 million to the Heritage Foundation between 1998 and 2012.

“In recent years, the Heritage Foundation has also received funding from Donors Trust and Donors Capital Fund, including $53,300 in 2010 and $69,850 in 2012. The Koch brothers have donated millions of dollars to Donors Trust through the Knowledge and Progress Fund, and possibly other vehicles.”

Unfortunately, you won’t find any of this information next to Moore’s name at Investor’s Business Daily, just like you won’t find the titillating history of FEE next to Tucker’s name at Newsweek.

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