“And the who and the how.”
“Which is?”
He checked his watch. “My guess is we have maybe twenty minutes before the SWAT team comes through the door, so I’ll give you the abridged version. The 2008 crisis was caused by a concerted effort of organized criminals, rogue governments, terrorists and financial predators — enemies of the U.S. that figured out that it was unnecessary to declare conventional war or crash planes into buildings. Nowadays if you want to bring down a nation you crash its economy, and that forever alters its population’s existence without firing a shot. They’ve been testing and refining their techniques for at least a decade, but the basics are simple.”
“So you say.”
“I do. First, you have your people design the guts of the system so you have backdoors for all the electronic trading and can manipulate everything. Next, you create a network of brokers and money funds that will participate in an organized attack, using those backdoors when you pull the trigger. Third, you lobby to keep the identity of the money in the funds anonymous — can’t have anyone know who’s providing all the liquidity in the market, because some people might think it’s a bad idea to have every criminal element and enemy of the state in the world investing in the largest funds. Next, lobby to remove all the safeguards that were put in place after the 1929 crash so it can happen again. Because the real profit in all markets is made when they crash, not when they go up. In the ’29 crash, fortunes were made. Same in 2008.”
“It can’t be that straightforward.”
“Of course it isn’t. You need a lot of time, and to spend billions lobbying lawmakers to pass favorable legislation and to ban any regulation of the mechanisms you plan to use. Your Ponzi scheme cronies write the trading regulations so you have loopholes you can exploit. You send your kids to Harvard and Wharton and they get MBAs and go to work with the biggest financial entities, and eventually they’re fifty and running them. All the time, you’re putting the building blocks in place. But the final piece is to convince the entire country to put its money into the market you plan on crashing. That’s the hard part. The test run was the dot com crash. A lot of money was made pulling the rug out from under the system, but not nearly enough to end the U.S. as a global power within a generation, which I believe was the ultimate goal of this crash. To weaken it sufficiently so the population will allow the unthinkable to happen.”
Howard coughed alarmingly, then composed himself, but his eyes were still streaming as he continued.
“That’s where the big banks came in. Everyone was told for seventy years that the one safe investment was real estate. So how do you destroy the value of the one thing everyone agrees is a wise investment? Easy. Create an industry that turns the mortgages into securities that can be manipulated. Then have your mob associates set up loan companies that will give anyone with a pulse a million dollars to buy a house, and have your friends at the central bank drop interest rates to nothing so there’s a ton of liquidity available for gambling on home values. That creates a bubble where everyone becomes a speculator with all the easy cash. Just like all the easy money that led up to the 1929 crash. There are no new ideas.”
“I remember reading a lot of articles about how ridiculously easy it was to get loans for about four years.”
“Yup. A golden retriever could get a loan with no documentation. It got insane, but nobody would stop it — for good reason. Everyone was getting rich, and the big money was preparing to kick the chair out from under the market.” Howard rubbed the moistness from his eyes. “Then one day, at the height of the mania, you pop the bubble. Because you know when you plan to pop it, you’re in position to make hundreds of billions when you crash the market, and the ensuing devastation not only makes you a fortune, but guts the country and plunges it into an inevitable downward spiral. That’s it.”
“That’s impossible. There are safeguards…”
“Are there? Really? Like what? Did you know that some of the biggest Wall Street firms created billions and billions of dollars of securities they
Howard spat through the door into the basement.
“And you know how many people have gone to jail for defrauding the entire world and causing the largest crisis in history? None. Not one. Nobody has, and nobody will. Because the interests that destroyed the U.S. economy are too rich and powerful to prosecute.” Howard looked disgusted.
“I still don’t get how they made money doing it.”
“Many ways. Through credit default swaps, which are like insurance policies that pay you if whatever they’re insuring drops in value. The industry lobbied to keep those unregulated, so a company could sell hundreds of billions of dollars of them, but not have to actually possess the money to pay on them if the market collapsed. That would be illegal to do if credit default swaps were called insurance. But by calling them something else, presto, it’s legal. Look, it’s illegal to take out insurance on your neighbor’s house and then burn it down to collect the payment. But if you call that insurance a credit default swap, and you get your former CEO to run Treasury so it will step in with the taxpayer’s checkbook when your neighbor’s house burns down, you have a winning recipe to profit handsomely from destruction.”
Howard reached into his jacket for a small bottle of water and took a pull before continuing.
“Another way is by short selling. My second to last victim? His brokerage was one of several that came from nowhere to account for a ton of the trading in the markets every day during the 2008 crash — most of it short selling. The vast majority of the selling never had any shares delivered, so whoever sold those millions and millions of shares never had to come up with any — they were literally selling shares that didn’t exist, getting paid as if they had delivered them, and if the company went belly up, they never had to deliver — ever. Do you see how creating unlimited supply of a commodity during a panic could dump the price, no matter how much buying took place? It’s simple supply and demand.”
“But surely that’s illegal…”
“Don’t you get it? Since when has fraud not been illegal? But do you see any criminal cases being brought against anyone who was known by the government to be committing fraud on a daily basis? No. Why? Because they’re ‘too big to fail’. That means they’re too powerful to prosecute. That’s the simple truth. All the regulators would have to do is look at who sold ten times as much stock as existed in a bank like Bear Stearns — a deliberate fraud that destroyed the economy — but nobody dares. Nobody is curious about who was trading that twenty percent of the total market through a couple of tiny brokers.”
Howard stopped to catch his breath, then glanced at the time. “I need to go get something. I’ll be right back.”
He walked out of the room. Silver and Cassidy listened as he mounted the stairs.
“Sweetheart, see if you can get my wrists free. If I can use my hands, we have a better chance.”
“Mommy, you were bleeding really badly. It scared me. He closed the wound and stopped the bleeding, but he said if you moved around it would be really dangerous. He told me to just wait until help came. Maybe we should listen…”
Silver tried to move and realized that her head was worse than she’d originally thought. Even the slightest attempt to move blinded her with pain. Before she could argue, they heard the sound of Howard’s boots descending the steps and approaching.
“Sorry about that. So where was I?” he asked.
“You were telling me how the crisis was a deliberate event. Although I still don’t buy it — there are protections that would keep it from happening the way you say.”
“Really? You mean there are rules. Well, guess what — nobody enforced them. The people who were supposed to stop the barbarians at the gate were instead lining their pockets, looking the other way.” He retrieved his water bottle and took a final sip. “How can you tell a population that the system that’s supposed to protect it has allowed the worst miscreants in the world to plunge it into a depression that was a hundred percent engineered, and that it happened because not a single group that was supposed to do its job even tried? What would happen if the average person understood that? It would be anarchy. Nobody could get elected. People would stop paying their taxes. There would be massive social unrest. The only way you could maintain order would be to
