Charlie Gasparino and all the weird defenses of Goldman Sachs
I’ve now gotten enough letters asking me why I’m ducking Charlie Gasparino to make it necessary for me to respond to his recent internet post, “Stop Blaming Goldman Sachs.” The CNBC reporter’s piece is unfortunately pretty long, but I’m still going to try to address it as briefly as I can, or at least quickly enough to keep my Rolling Stone editors from wondering how I have any time to be worrying about this when I’m supposedly on a deadline for a health care piece.
The odd thing about Gasparino’s piece is that he makes noise at the outset like it’s going to be this thorough rebuttal of everything I wrote about Goldman Sachs, yet it goes on to agree with almost everything in that piece. He agrees that Goldman is a “government-protected bank” (which is a pretty major part of what I’m arguing in the article), that it has amped up its risk appetite since the bailouts, and that it is making a fortune thanks to its post-bailout access to a mountain of cheap money.
Gasparino chooses to disagree with me mainly in the area of things I never said, which is an interesting way of arguing – one that Goldman Sachs itself, incidentally, is quite proficient at. The goalpost-moving and passage-massaging in his piece ranges from subtle to frank and undisguised. On the “frank and undisguised” side we have as an example the following passage:
“Later, he went as far as to say that Goldman likely committed ‘securities fraud’ because it later shorted the same mortgage bonds tied to subprime loans after it knew that billions it underwrote all those years were going bad (try proving that one), and that Goldman somehow forced the bond traders – Moody’s, Standard and Poor’s, and Fitch’s – to place Triple-A ratings on subprime bonds (Given the huge fees for rating mortgage debt, I know for a fact that Goldman hardly had to twist any arms on that one).”
Now, I never said anything in my article about Goldman forcing the ratings agencies to give them AAA ratings. I really never said much about the ratings agencies at all, although I probably should have. Here is how the relevant passage read:
“Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to second mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody’s and Standard & Poor’s, rated 93 percent of the issue as investment grade. Moody’s projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months.”
It seems like he just stuck a thumb on the scale a little there, something he would do a few times. In fact he even sort of does it another time earlier in the same passage, when he says that “he went so far as to say that Goldman likely committed ‘securities fraud.’” Which again is not what I did, not exactly anyway: I raised the question of whether or not Goldman had committed fraud, and then quoted someone else (a sometimes-guest on CNBC, incidentally) who says, yes, they did. A subtle difference, one I normally wouldn’t mention, except that Gasparino does it throughout his piece.