Monday, August 3, 2009

Charlie Gasparino Tells Matt Taibbi to Leave Goldman Sachs Alone


IN SPITE OF MY best intentions this summer, I have yet to write anything original on Matt Taibbi's dynamite Goldman Sachs piece, The Great American Bubble Machine, in July 2009's Rolling Stone. I still hope to this fall. The piece is so complex and my time for deep thought so limited right now, that I've failed to meet my goal in this department

Meanwhile today Charlie Gasparino at the Daily Beast does a good job of answering some of Taibbi's assertions about Goldman. He---Gasparino---like I, thinks Taibbi gives Goldman far too much credit specifically for engineering the past six or seven great bubbles---from housing to oil to toxic mortgage backed securities. But he agrees that Goldman has made off like a bandit. He points out that while the firm was undoubtedly the leader of a pack of other investment bank money-making, smart money dogs, there were certainly other firms just as involved in making money from both the inflation/upside and deflation/downside of these bubbles.

But make no mistake: All would agree, Goldman Sachs is some of the smartest, shrewdest money anywhere. And it positions itself ahead of the next big money curve long before any of the rest of us know what's coming down. Taibbi is correct in saying Goldman has already strategically positioned itself ahead of the next great bubble. I personally know that for a fact. But that's what will have to wait until later. Meanwhile, have a look at Gasparino's piece at the Daily Beast.

Try as he might, he can disagree with Taibbi to a point, only to a point:

"(...for what it’s worth, it’s a hell of a good read.) It's not that Goldman doesn't deserve to be blasted for getting bailed out by the government for losses tied to high-risk trading back in 2008, or for its manifold ties to the last three presidential administrations (including the current one), or for now profiting through the government's subsidy of its recent risk taking; I have done as much on these pages.

"Thank God Paulson and Bernanke turned to Blankfein and not the editors at Rolling Stone for help.

"But Taibbi has elevated a combination of half-truths, superstitions, and a lack of understanding about the financial crisis to what is fast becoming established as "fact”: that Goldman Sachs was the main culprit for the financial crisis and is now unfairly profiting from the various bailouts the crisis caused.

"No rational person can deny the fact that Goldman is benefiting from its status as a government protected bank, as it makes big bucks ($3 billion in just the second quarter alone), acting like a hedge fund just after getting bailed out by the feds, and using its status as a commercial bank to borrow cheaply and make huge bond market bets. In fact, all of the banks are— Morgan Stanley is at the top of that list—it’s just that some, like Goldman, are doing it better than others.
"It's the other part of Taibbi’s story that I have a real problem with—that Goldman either single-handedly or with very little help, was responsible for the financial crisis and committed fraud along the way. And then when it bet wrong, when the markets turned against the firm in a way its rocket-scientist traders didn't foresee, Goldman used its pull in Washington to get a bailout.

"That storyline isn't just wrong, it's pretty naive. But it's gaining credibility following Taibbi's Rolling Stone piece, first in the blogosphere and now with a growing number of what is commonly referred to as the mainstream media. It's one thing to watch half-literate bloggers in desperate need of attention jump on the Goldman is the root of all evil story; it's quite another to see respected news organizations with experienced reporters and presumably more experienced editors do it and in the process obscure the fact that Goldman, for all of its sins during the bubble years, was probably the least culpable for the system's eventual collapse. And maybe more importantly, that Goldman and all the other banks are now overtly protected by the federal government and can still roll the dice and take risk only this time under the explicit protection of the American taxpayer.

"All of which brings me back to Taibbi, who is usually a really good reporter, and a provocative storyteller. In addition to his Rolling Stone piece on Goldman, I watched his performance on WNYC. What's interesting to me is (particularly after the WNYC appearance) is how much of what Taibbi is stating as fact or suggesting is probably true, is actually wrong..."
Well maybe, maybe not. Only time will tell, meanwhile both pieces are well-worth reading, in my opinion.

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