Goldman Sachs Discussed in Rolling Stone (?)

There is an article, and I use that term loosely, in the current issue of Rolling Stone on Goldman Sachs. It’s certainly not a publication I normally read, in fact I think this may be the first copy I have ever owned, but the the Goldman piece has gotten a little buzz going and one of my commenters told me to read it. (The full thing is not available on-line in authorized form. Google and you can find bootlegs. Legal excerpts here.)

Admittedly, I expected little from an issue whose cover story was "Boys to Men: Inside the World of the Jonas Brothers." But Matt Taibbi’s Goldman diatribe, "The Bailout: How Goldman Sachs Runs Washington" is truly nauseatingly horrible.

The first thing you need to know about Goldman Sachs is that it is everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

If that opening paragraph does not make your hair stand on end and your heart rate quicken, permit me to edit it a little.

The first thing you need to know about [Jewish bankers] is that [they are] everywhere. The world’s most powerful [race] is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of [Jews].

How do you feel now?

I want to be very very clear that I do not for a moment think that Taibbi or Rolling Stone intended any anti-Semitism. For all I know Taibbi is a member of the tribe himself. On the contrary, I think they are entirely too ignorant, too young, and just plain too utterly clueless to know what they are saying. For Wall Street denizens of a certain age, Goldman is not the leading investment bank so much as it is the leading Jewish investment bank. And there are still in America those that think that the names Rubin, Cramer, Greenspan, Summers, Levitt, Bernanke, and Weinberg have something more obvious in common than that they all belong to conspirators in Goldman’s plot to suck blood from ordinary Americans.

There was a time, and I am glad that it is gone, in which the editors of Rolling Stone would have made Taibbi rewrite this screed to reduce the number of Jewish names mentioned. They might also have redone the accompanying cartoons to make the chubby pig representing Goldman a little more Anglo-Saxon in appearance. Come to think of it, in those days the editors would have rejected the story entirely, as it has nothing to do with sex, drugs, or rock and roll.

Here in 2009, I am certain that not only was this not intended as anti-Semitism, I doubt that it occurred to anybody involved that it might be taken as such. That does not say much for the level of professionalism at Rolling Stone, but we can all be thankful we live in a world in which it could happen.

But this is hate mongering vitriol nevertheless. Taibbi may define the protagonists of his paranoid rant in a socially acceptable way, but in form and substance he echoes theories from darker chapters in our history that centered on groups ranging from Catholic immigrants to communists. And his choice of villain isn’t even terribly original. New York bankers have been recurring characters in fantasized plots to cheat wholesome middle America since the days of Hamilton.

Nearly everything Taibbi says is, in fact, a repetition of populist hysteria from at least a hundred years ago. He alleges that Goldman rigged the market for oil and uses as supporting evidence that an average barrel of crude is traded dozens of times before being delivered and consumed. That’s not really how the futures markets work, but it is exactly the same evidence as was given by progressive muckrakers making the case that evil capitalists rigged the wheat markets in the 1880s and 1890s.

Taibbi’s main thesis, if it can be called that, is that Goldman was at the center of everything that has gone wrong in the financial markets since and including the Great Depression. After a brief, confusing, and not particularly factual account of Goldman’s evil doings in 1929, Taibbi picks up the narrative in the late 1990s to tell us of Goldman’s involvement in dot com IPOs. Then we hear about housing, oil, the recent financial bailout, and the yet-to-be scandal of trading carbon credits.

Thus, Taibbi’s history of Goldman is largely limited to the last decade or so. But, and especially with regard to that period, "The first thing you need to know about Goldman Sachs is that it is everywhere." Of course it was involved in all the bits of the financial world that went bad. It was involved in all the bits of the financial world good, bad, or indifferent. That was its business plan, and the business plan of a dozen other banks around the globe who could just as reasonably be blamed for all that went wrong. Goldman’s main distinction from those others being that it turned out to be the most successful of the bunch. One of them had to be.

This is awfully similar to the conspiracy theories popular in the early days of the 20th Century about the Money Trust. Back then the epicenter of evil was J.P. Morgan & Co., but the story and the faulty logic are the same. The most successful bank of the time was, by definition, in some way involved in all that went wrong in the financial world over the past decade or two, just as it did, by definition, generally make a profit over the same period.

Even by the standards of the mainstream media, Taibbi’s command of his material is shockingly poor. Granted, he presumably only feels that he needs to know more about finance than the typical Rolling Stone reader, but at times his ignorance seems like a willful insult to the better informed. To cite a single example, he spends about a page explaining how Goldman did very bad things in the tech IPO boom by "spinning" and methodically demonstrates he has no idea what spinning is or how it worked. An accurate description would have been no less damming for Goldman, but Taibbi evidently didn’t bother to research that sort of uninteresting detail.

Of course, the tech boom and bust was ten years ago now. But the comparatively recent events of the financial bailout are no more clear to Taibbi. He twice states that Goldman was the beneficiary of $13 billion from the AIG bailout. Goldman has stated that its net exposure to AIG was "rounding error." If Taibbi has evidence to the contrary he should provide it.

Overall, It’s a piece rather short on evidence. Not many numbers, no citations, and only a few quotes, many from anonymous people we are told are in the know. What few facts that are in the article are bent into service to support Taibbi’s hate-filled views, logically or not. We are told that Goldman is bad because it touted mortgage securities while not owning them itself. Then we are told it is bad because it touted a bullish stance on oil while owning a lot of the stuff itself. And the tiny size of the fines Goldman paid for various infractions are not evidence of the minor nature of those infractions but of Goldman’s pervasive power over government, just as the fact that it was fined at all is clear evidence of guilt, but not that its power in comparison to the government’s is small.

A reader may wonder why I have written what turns out to be a rather long post on something that is, at best, only tangentially related to personal finance. Partly, I have a compulsion to defend the unpopular, and Goldman certainly qualifies right now. (And, for the record, I have never worked there and have no realistic prospects of ever working there.) But in a larger sense, this is exactly the sort of ignorance, and widespread tolerance of same, that has gotten our personal finance culture into the mess that it is in. Taibbi isn’t telling a story that fits with facts, he is spinning a tale that fits with how he and his readers feel. That may be okay if you are writing about music, but not about money.

My daughter liked the article on the Jonas Brothers.

Government, Media | Frank Curmudgeon | July 6, 2009 9:00 am

19 Comments

By ObliviousInvestor, July 6, 2009 @ 11:40 am

Wow. I guess I too am of the age where I don’t think of Goldman as the Jewish investment bank. (Though I am, admittedly, aware that some people view it that way.)

But I agree completely that the author seemed to miss the point that all of the big investment banks were involved in most of these blowups.

When I read the part about the tech bubble, I couldn’t help but think that it was odd that he didn’t mention Merrill at all, as, if I remember correctly, they were even more (publicly) guilty of participating in IPOs of revenue-less companies.
By Dave C., July 6, 2009 @ 12:00 pm

I don’t always believe that the “great” financial banks of Wall Street always have the best intentions in mind when they wheel and deal. However, I do believe the heart of this diatribe by Rolling Stone was just a manifestation of the general frustration of the country with companies that are really good at making money when the rest of us are worried about losing our jobs or retirement savings.
By maxwellthedog, July 6, 2009 @ 4:08 pm

Unfortunately, Taibbi’s screed is a better reflection of the current discourse on finance than most would care to admit. One only has to look at a recent public admonition of the “moneylenders” (his exact word) who refused to go along with the government-directed bankruptcy of Chrysler to understand how close current language is to classic hate-mongering language of days gone by.

It is easy to ignore an ill-informed crank at the Rolling Stone.

It is more difficult to ignore the POTUS.
By CWulf, July 6, 2009 @ 4:47 pm

From The Atlantic, May 2009:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
The Quiet Coup by Simon Johnson

Your complaisance is terrifying, crusty, ill-tempered, old man.
By Frank Curmudgeon, July 6, 2009 @ 6:08 pm

Old enough to recognize hate filled yellow journalism when I see it. Thanks for pointing me to the article.
By abdpbt personal finance, July 6, 2009 @ 8:06 pm

You make a good point, Frank–I’m usually pretty attuned to that kind of thing but I didn’t pick up on the anti-Semitism the first time through. But you’re right–it’s the product of a different generation, both in the ignorance of that problematic, and in the lack of evidence for the article.

One thing that it definitely has down, though, is the recipe for a viral article on the internet.
By James, July 6, 2009 @ 9:49 pm

I usually enjoy your rants, but this one seemed a bit too heavy on the pathos and too light on the logos.

Instead of continuously attacking Taibbi on the lack of rigor and tin-foil nature of his arguments, why not systematically and factually shoot them down? It would be a more effective persuasive argument.
By Frank Curmudgeon, July 7, 2009 @ 10:54 am

ABDPBT: Interestingly, the viral article recipe seems to include not putting it on the net. That way people have to run out and actually pay for a paper copy. Not a bad business plan.

James: I’ll try and work on my pathos/logos ratio. I thought about running through the article and refuting it item by item but that would probably run longer than the article itself, be really dull, and largely miss the point. Taibbi and his enthusiastic supporters don’t really care about facts. They’re angry and want to tar and feather somebody. A reader of the article will either embrace it because it says what they want to believe is true, or be repulsed in horror. I’m trying to make the case for horror.
By gpr, July 7, 2009 @ 1:54 pm

Frank: Did your grandfather change the family name from Curmudgeonstein? (Just ignore that. Sorry.) Chalk me up as one who would not have seen the parallels. But very interesting.

Several weeks ago when you were discussing the tar-n-feather mentality around bonuses on Wall Street, the conversation turned to the idea that the general public likes a straight forward story with no complexity.

Why would the general public have changed? Rolling Stone is going to give them exactly what sells. Nuance doesn’t.
By Jim, July 7, 2009 @ 5:45 pm

Language like “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything” really doesn’t impress me as coming from an unbiased, credible journalist.

Here is a report that Goldman got $12.9B from AIG after the government bailed out AIG:
http://www.reuters.com/article/ousiv/idUSN1712706420090317

“Suspicions of potential conflicts of interest and favoritism have been fueled by $12.9 billion AIG paid to Goldman Sachs — where then-Treasury Secretary Henry Paulson had previously worked as chief executive — in the months after the insurer was rescued by the government last September.”
By CWulf, July 9, 2009 @ 12:12 pm

First of all, Mr Taibbi is Irish Filipino (probably from the lost Tribe). So much for the attempt to play an Arabic Anti-Semite card.

Second (from The Wall St. Cheat Sheet, posted 7/7/09)by Damien Hoffman:

“Damien: Most powerful institutions such as the Federal Reserve and Vatican dismiss most criticisms as “fringe conspiracy theory.” Why should the average citizen not dismiss your claims against Goldman as fringe conspiracies about bankers or Jews?

Matt: That was the tactical criticism I got from Goldman who said to the media, “Next thing you know he’s going to blame us for the Kennedy assassination and say we faked the moon landing.” But if you pay attention to all the criticisms they are leveling, it’s what we call in this business a “non-denial denial.” When people respond by calling names and changing the subject, it means they don’t have any issue with the factual allegations in the article. So, in response to being called a conspiracy theorist, the fact is they are resorting to the rhetorical non-denial denial shows they don’t have any real basis to criticize the facts in the article. The article speaks for itself and the fact they don’t have substantive issues with the piece is highly revealing. In fact, before the article went to print I was extremely nervous we had gotten something wrong and Goldman would come out with a whole list of things they’d say we made mistakes about. But the fact that they didn’t come up with a single thing greatly emboldens me to think we got it right.”

Happy to hear your daughter enjoyed the magazine. Sorry her dad doesn’t get how noxious and pervasive corporate greed is and how it undermines the entire fabric of families and communities.
By Woodwork, July 10, 2009 @ 4:40 pm

Re Paulson:

Fortune Magazine Sept. 2008
“That, he decided, was not a good enough reason to turn down a call to serve his country. (One fringe benefit was the capital gains tax exemption given to federal appointees who have to sell holdings before they take office: When Paulson sold his $500 million of Goldman Sachs stock, he saved tens of millions of dollars.)”
By Frank Curmudgeon, July 10, 2009 @ 6:18 pm

Your point being what exactly? That Paulson should have been able to hold on to his Goldman stock so that he would have a financial interest in saving the financial sector? Or that federal appointees shouldn’t have this exemption? Or that Paulson only took the job to save on his taxes? Or is it that you don’t think it is fair that he has a whole lot more money than most folks?
By Woodwork, July 10, 2009 @ 7:04 pm

My point is: How many millions do you need to retire, only to save “Tens of Millions” by not paying taxes that the Fed really needs and Paulson does not.
By Woodwork, July 10, 2009 @ 7:05 pm

Paulson should be in jail
By Dion Mulvihill, March 2, 2010 @ 7:00 pm

Woodwork;

So should many politicians
By Gary Anderson, January 3, 2011 @ 7:07 pm

I am adopted and my natural father was a Jewish descendent. I think this article is terrible. First, you don’t know if international banksters are Jewish or other races, or descendents of Jews who don’t practice Judaism. Don’t be fooled. Jews practice religion. The descendents of Jews who made up a minority of Bolshevism were not Jews. Leo Strauss, though he was a Zionist, was not a Jew although his parents were Jews.

I just think this article is irresponsible.
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