May 16, 2011
Matt Taibbi vs. Goldman Sachs
In an article in the May 26, 2011 issue Rolling Stone titled The People vs. Goldman Sachs, Matt Taibbi says that in a just world, a new Senate report should trigger a massive Justice Department investigation and criminal charges against the people in charge of the big financial companies, especially Goldman Sachs.
The great and powerful Oz of Wall Street was not the only target of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse, the 650-page report just released by the Senate Subcommittee on Investigations, chaired by Democrat Carl Levin of Michigan, alongside Republican Tom Coburn of Oklahoma. Their unusually scathing bipartisan report also includes case studies of Washington Mutual and Deutsche Bank, providing a panoramic portrait of a bubble era that produced the most destructive crime spree in our history — "a million fraud cases a year" is how one former regulator puts it. But the mountain of evidence collected against Goldman by Levin's small, 15-desk office of investigators — details of gross, baldfaced fraud delivered up in such quantities as to almost serve as a kind of sarcastic challenge to the curiously impassive Justice Department — stands as the most important symbol of Wall Street's aristocratic impunity and prosecutorial immunity produced since the crash of 2008.
But Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences.
Taibbi is, as always, able to make reporting about dry financial matters come alive and it is interesting to see how he does that. I think he succeeds because he couples knowledge of arcane details with not holding back when it comes to conjuring up vivid imagery and metaphors (and even profanity when warranted) to describe what is going on.
For example, to those who try to excuse the evidence of the bankers' greed as the kind of small missteps that anyone can make, he says:
Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn't a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it's an advanced-stage, 1,100-pound medical emergency who hasn't left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes.
On Goldman's strenuous efforts, once it realized that it was holding huge amounts of worthless assets, to find suckers to sell it off to and what they did after they forced the sale, he writes:
Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars.
In describing the multiple ways that Goldman defrauded its own clients, the very people who were paying for its services, he says:
This is a little like getting an invoice from an interior decorator who, in addition to his fee for services, charges you $170 a roll for brand-name wallpaper he's actually buying off the back of a truck for $63.
To recap: Goldman, to get $1.2 billion in crap off its books, dumps a huge lot of deadly mortgages on its clients, lies about where that crap came from and claims it believes in the product even as it's betting $2 billion against it. When its victims try to run out of the burning house, Goldman stands in the doorway, blasts them all with gasoline before they can escape, and then has the balls to send a bill overcharging its victims for the pleasure of getting fried.
Taibbi describes the tricks used by Goldman to get the highest AAA ratings for the junk securities on its hands that enabled them to be sold off to their dupes. They did this by taking the low-rated bonds from each pool and then ranking them again within that pool and giving the best the highest rating. And then repeating the process.
This is kind of like taking all the kids who were picked last to play volleyball in every gym class of every public school in the state, throwing them in a new gym, and pretending that the first 10 kids picked are varsity-level players. Then you take all the unpicked kids left over from that process, throw them in a gym with similar kids from all 50 states, and call the first 10 kids picked All-Americans.
Taibbi's article is well worth reading in full.
Will the Justice Department prosecute? Don't hold your breath. Starting with Bill Clinton, there has been a continuous bipartisan sellout to Wall Street and I don't expect anything more from Obama. What I predict will happen is that if the rest of the major media raise a fuss about this report (which itself has a low probability given the media's alliance with the oligarchy), then the Justice Department might be forced to look as if it is doing something. They will open a highly publicized investigation, then strike a deal with Goldman Sachs to have them pay a fine which will seem like a lot to us (say a few hundred million dollars) but will be peanuts to Goldman which will look on it as just the cost of doing business.
But no one will go to jail and there the matter will end.
The Lewin subcommittee's hearings figured prominently in the wonderful documentary Inside Job that I reviewed two weeks ago. The producers of that documentary received Academy Awards for it in February and what they said on that occasion pretty much sums up the corrupt nature of US politics.