Goldman Sachs as the Heart of Darkness?
Matt Taibbi, the Rolling Stone magazine contributing editor who in March wrote a brilliant and searing piece on the collapse of insurance giant AIG ("The Big Takeover'), now turns his attention to Goldman Sachs Group.
If you've read or heard Taibbi before, you know he's not writing a profile that is likely to be excerpted in the next Goldman annual report to shareholders.
Here's how his story in the latest issue of RS begins:
"The first thing you need to know about Goldman Sachs is that it's 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."
The theme of Taibbi's takeout on Goldman is that the firm has, by design, been at the center of the biggest investment bubbles since the Depression. He includes the tech-stock bubble of the late-1990s, the housing bubble of this decade, and the oil bubble of the first half of 2008.
"The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased."
Of course, he's describing the modus operandi of Wall Street in general. His assertion is that no one does it better than Goldman, and that no firm has enjoyed the political clout of Goldman, given how many of its alumni have landed in positions of power in government -- from Robert Rubin, who was Bill Clinton's Treasury secretary, to Henry M. Paulson, who held the same post under George W. Bush, to William Dudley, now president of the Federal Reserve Bank of New York.
Conveniently for Taibbi's purposes, Goldman doesn't try to fight back. He says in the piece that the firm "refused to respond to questions for this story."
Goldman does have an official response to the story, however: "The article is a compilation of just about every conspiracy theory ever dreamed up about the firm," spokesman Lucas VanPraag said in an email. "It's a grotesque distortion of facts, commingled with fiction and spiced up with hyperbole. The only things missing seem to be allegations that we were responsible for assassinating President Kennedy and faking the first lunar landing."
Taibbi's style of writing will be too over-the-top for some readers, but he does a masterful job connecting the dots for anyone who has had trouble understanding how the Internet, housing and commodity bubbles developed one after another -- whether or not you believe Goldman really was the prime conspirator.
As Taibbi notes:
"Instead of teaching Wall Street a lesson that bubbles always deflate, the Internet years demonstrated to bankers that in the age of freely flowing capital . . . bubbles are incredibly easy to inflate, and individual bonuses are actually bigger when the mania and irrationality are greater."
-- Tom Petruno
Photo: Matt Taibbi. Credit: Trueslant.com