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Aug. 7 2009 - 10:31 am | 296 views | 5 recommendations | 36 comments

Charlie Gasparino and all the weird defenses of Goldman Sachs

Gasparino is perfectly within his rights to make that argument, but when he makes that argument, he’s doing exactly what he accuses me of doing – speculating. He doesn’t have any more information than I do when he chooses to put his innocent spin on all those events, using phrases like “a more plausible explanation is…” and “connect the dots…” He misses completely the point of all the uproar over Goldman’s role in the AIG mess, which is that a speculative interpretation, from me or anyone else, isn’t even necessary: the bare facts are ugly enough. Here’s what we know, for a fact:

1)Goldman was underwriting billions of dollars worth of toxic/crap mortgage-based instruments and selling them as investment-grade paper. In 2006, again, Goldman underwrote over $59 billion in non-prime MBS, which was 7% of the whole market. They then bet massively against the same stuff. At worst, this was fraud. At best – and remember, Goldman itself apologized for getting caught up in the “euphoria” of the mortgage boom – they played an important role in creating a market for irresponsible mortgage-lending.

2)But, as Gasparino pointed out, Goldman didn’t sell all of that stuff. They kept a big enough chunk of it, leaving them with billions and billions of dollars of exposure to these absurd/toxic MBS investments. Remember also that Goldman was able to have even more leverage here than before thanks to the fact that its then-chief, Hank Paulson, had in 2004 personally lobbied the SEC to relax reserve requirements. As a result, Goldman steamed into 2008 with a crazy debt-to-equity ratio of 24-1.

3)As a means of dealing with this insane gamble on mortgage-backed crap, Goldman then made an equally insane decision to “insure” its investment with AIG’s resident dipshit, Joe Cassano, tagging this half-baked little shyster with a full $20 billion in risk via CDS contracts.

4)When AIG gets downgraded, Goldman freaks out and starts blasting AIG with collateral calls, demanding that AIG pay up.

5)When AIG goes into its death spiral, in large part thanks to these collateral calls, there is suddenly a meeting of government officials to see if something can be done to make sure that Goldman’s stupid investments in MBS can be paid off, if not by a private bailout, then somehow with public money. The players in this bailout discussion include Goldman CEO Blankfein, former Goldman chief Hank Paulson, NY Fed chair Stephen Friedman (a former Goldmanite), and Tim Geithner, who has only served under no fewer than five ex-Goldman bankers in his career, among them Bob Rubin.

Did Blankfein go to Paulson and beg him to fork over public money to help pay off his mistakes? Maybe, maybe not. Who cares? It’s bad enough that it looks the way it does. The point is that these idiots were incredibly irresponsible for year after year, making decisions that should by all rights have put them out of business forever (what kind of fool jacks up his leverage to 24-1 and bets all that money, money he doesn’t have, on Joe Cassano and a bunch of subprime mortgage borrowers? Would you bet the fortunes of 30,000 employees on those things?), and yet instead of going out of business as they all undoubtedly deserved to, they got bailed out with public money by a bunch of officials who, in a big coincidence, just happened to be former employees of their bank.

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  1. collapse expand

    Glad you are moving on from GS. Will wait for the next book to read more.
    Healthcare (and we all) need you. Congrats on getting engaged too.
    Hey, I see Heidi wrote another one since you dissed her last one.
    http://www.thebigmoney.com/articles/judgments/2009/08/06/matt-taibbi-just-plain-wrong

  2. collapse expand

    Unfortunately you have been force to defend yourself again and again, but it is 100% necessary. You cannot let the mindless sycophants that pilot the propaganda model cloud the story with bullshit subterfuge. I realize that many are too brainwashed to even realize that these Wall St. douche bags makes hundreds of million on our backs and then defecate on us, but it is very depressing that anyone, let alone many people in “the media”, would defend GS. It’s despicable really.

    Can’t wait for the health care piece.

  3. collapse expand

    “No one is talking about that, huh? Does he mean except ***Tyler Durden***, Joe Hagan, Michael Lewis, Max Keiser, Eliot Spitzer, me, Alan Grayson and about three other dozen Members of Congress, and much of the progressive press community?”

    Tyler Durden? Am I humor-impaired today or was that a mistake?

  4. collapse expand

    “the firms underwriting mortgage bonds, and carrying them on the books, something known as the ‘carry trade.’”

    um, no. That’s not what the carry trade refers to.

    http://en.wikipedia.org/wiki/Carry_(investment)

    Gasparino is such a meathead. He should go back to writing his ‘wiseguys vs. the jews: battle for wall street’ books

  5. collapse expand

    “I’m sure you’re all tired of it. I am.”

    Oddly, no… As worked up as I get about it, I could read your dismantling of these financial whackjobs every day. Very informative.

    @bigtuna: Not a mistake; “Tyler Durden” is a blogger at Zero Hedge that Matt has repeatedly referenced in his GS entries since the RS article came out.

    • collapse expand

      ahh, thanks joshua

      In response to another comment. See in context »
    • collapse expand

      np Tuna…

      Looking at my comment, I think maybe I came off a little strong – by “whackjobs” I meant the Goldmanites who obviously played a huge role in getting us where we are now; I have no problems reading something like Gasparino’s piece and taking it in the spirit it is intended. Partisans across the spectrum (like Matt Taibbi) deserve strong critical analysis, particularly when they appear to have taken a strong position on something and gone after it the way Matt has with GS.

      But as pointed out above, the raw facts speak clearly enough for themselves, and if people wouldn’t get so caught up in the specific words that people use but pay more attention to their intention, I think there’d be a lot less vitriol on both sides of the topic, and also within the sides.

      When I was very young, I remember visiting my grandparents’ house and seeing a “Lockhorns” comic on the refrigerator. In it, Loretta was saying to Leroy “You know, if you paid more attention to what I meant, you wouldn’t be so distracted by what I say.” That has stayed with me all my life and I have thought of it frequently the last 10 years or so that I’ve gotten increasingly interested in politics.

      In response to another comment. See in context »
  6. collapse expand

    Not tired of GS-bashing at all Matt. You do it the best out of anyone, except perhaps Client 9, who appears to be one of the only officials, former or current, who know what the F*** is going on. Matt, keep on it, please. I bought a F***g magazine with the F****g Jonas Brothers on the cover, just to read your article, and am actually thinking about subscribing to the print version, just because of their huge balls to print you. Keep it up!

  7. collapse expand

    Matt – You can write about GS all you want and I wouldn’t mind it one bit. Your work has been very educational to those of us out here who have no background in finance. Of course, it’s also of great value to me that you will call a fraud a “fraud,” a thief a “thief,” and a motherfucker a “motherfucker”!

    I understand you’re tired of defending yourself from Wall Street’s army of ass-kissers, but I hope you’ll keep us informed of any new angles or developments.

    Moving on to healthcare? Can’t wait to read it!Go get ‘em!!!

  8. collapse expand

    You touched quite a nerve. I love seeing your name on the Goldman Sachs page in Wikipedia. I’ve read all the contrarian articles from Moore, Weisenthal, McArdle, and Gasparion. Note how a majority of the respondents don’t buy their thin arguments. The most irritating thing is how they always attempt to attack on a business accumen basis. “Matt doesn’t understand Finance and capital markets. He thinks CDOs are derivatives, he he” Finance? What (the f*ck) does finance have to do with this gimicky shell game? I guess people in this world (of Wallstreet) have to justify their high income with the fact that they have some indispensable knowledge.
    Stay on target, I want to see in some way GS to give back that $13 billion that they stole from us.
    Oh, yeah, ika1 are you secretly a stooge for GS? Obviously, you are in the financial industry… you seem to be subtly trying to influence our hero away from this effective attack.

    • collapse expand

      nope. he is my hero too, even if i don’t agree with everything in that article. I know it is meant to be hyperbolic and a polemic (in MT’s own words). Just surprised that the libertarians and the left shut down debate just as quickly as the right and the fascists do.

      Yes, it would be good to have billions back from all of them (GS but also Merrill Lynch’s $12 billion, Societe Generale and Deutsche Bank’s $12 billion each,Barclays Plc’s $6 billion, and UBS’$5 billion).

      In response to another comment. See in context »
      • collapse expand

        Sure, get the money back from all of them (at this point, the best to hope for is a review and fine…1% would be huge), but keep the focus on GS. It was their influence that made Paulson make his move to screw the taxpayers. It probably wouldn’t have looked good if the government only bailed out the GS portion of this mess. The European banks must have been astonished getting dollar for dollar back on their investments. They probably were thinking they would be negotiating a lower return as AIG moved to bankruptcy. I still think if it weren’t for GS, the $184+ billion bail-out of AIG wouldn’t have happened.

        As far as being hyperbolic and polemic, it is required in matters like this. Matt’s detractors are even more so than he is in their rebuttals. It is really hilarious how bad the other writers are trying to beat Matt at what appears to be his strengths. Heidi Moore is probably all stressed out from this. She might just quit her beat, cut her losses, and find a new gig.

        In response to another comment. See in context »
  9. collapse expand

    Maybe you’re tired of talking about G$ – especially defending yourself against the brick walls – but this type of thing has to be done, especially in the world of the internet and other places for noise-news. When they scream, you have to find a voice to counteract them.

    This rebuttal works well, but for the proof-reader in me (I’m wrapping up an on-line course as I type), could you change “for a fact” to “in fact”? You list 5 things after that phrase, so don’t short-change your goods.

    Looking forward to the health care article. I’ve got some thoughts to email you on your book as well as the G$ and health care BS; some of the ideas are related, some not.

    chuss–

  10. collapse expand

    At first it was ‘Goldman did nothing wrong!’ Now they’ve shifted the goal posts to fallacy number 2: they suck. That whole heidi wasserface story is about trying to shift the blame onto other banks and individuals.

  11. collapse expand

    When is anyone going to discuss Warren Buffett’s role in this whole mess. Without his support and image AIG doesn’t get rescued and Goldman fails.

    Not So Strange Bedfellows: The Warren Buffett – Goldman Sachs Love Affair
    http://proudtoliveinamerica.com/forms/main/default.aspx?l=en-us&p=editorials13

    The Treasury Department could have never pulled off this Great Train Robbery with Buffett’s pristine image of the honest old man from Omaha.

  12. collapse expand

    get-em Matt. There’s 2 things I can’t figure out though – should Paulson and the upper management of Goldman Sachs be tarred and feathered or simply lynched. Lyching seems too quick and easy, they need to suffer like all the people that can’t keep their homes or pay their medical bills. The fools that are the upper management of most of today’s big corporations all think that no one else can figure out how badly they’re screwing us, or maybe they just think it’ll go on forever. Listening to America though, peoples patience is starting to wear thin with the ‘I’m better than you’ multi-million a year crowd. I say lynching as a joke but it’ll come to that if the idiots don’t start behaving, mark my words…oh, and slap Ungar for me a few times will ya, he needs it.

  13. collapse expand

    listen, mister gigantic monster cop-out, we aren’t only NOT sick of your writing about this, but we (and i am speaking of the broadest possible “we” here) NEED you to keep writing about this. this is your whale, but unlike ahab’s, this whale matters to ALL of us. we need you to stay on point, stay on top of these bastards. you’ve outlined the stakes very well for our economy and our democracy. they couldn’t be any higher. so now, when you have gained a bit of a bully pulpit, you are just going to walk away? that’s just lame and weak and frankly inexcusable. continue to hold their feet to the fire, find someone to sponsor a website devoted to tearing at GS’s soft underbelly, get all upton sinclair-meets-HL Mencken on their asses. don’t go quietly into the night on this. it would be incredibly sad if you did so.

  14. collapse expand

    My fifth grader and I both agree with you totally; although he hated you compared him to Gasparino. It’s disgusting to see so many people acting like we should be proud of Goldman for bringing back profits to Wall Street when we are the ones who are making it possible, thanks to the “good old Boyz” who are so connected with Goldman now working inside Government.

  15. collapse expand

    Thanks for writing the RS article and everything that you’ve done since. Like most of the other commenters I am not tired of the GS story, but I fully understand your need to move on to other issues.

    You have given people something to rally around. Nearly everyone concerned about the influence and power of Wall Street, and its ability and willingness to manipulate our society, is familiar with the “Taibbi article in Rolling Stone.” For that, we owe you our gratitude.

  16. collapse expand

    I just watched Bill Moyer’s interveiw of Bill Black again, I have to say Matt Taibbi is if anything rather nice/polite to the criminals that have done all this to our country. Sach’s upper management and most other of these banks involved in the mortgage crisis need to be imprisoned. Geitner and Paulson right beside them. It really, really hurts me to realize Pres Obama hired Geitner to continue the sham and bailout of these criminals. Our poor country, what fools we are.
    http://www.pbs.org/moyers/journal/04032009/watch.html

  17. collapse expand

    Matt,
    The blogosphere seems to have decided that you meant that GS alone was responsible for the crash of ‘08. I don’t think your denials will have much effect; after all, you’re only the author.
    When you say, :
    “you’d think they were responding to an article written about them” Of course you know that they do think it’s about them. If they are the financial press then they have taken as a matter of faith the divine right to wealth. If you challenge that, you are as much as blasphemer as Thom. Jefferson was when he decried the divine right of kings. GS and their ilk are the new American royalty, and articles like yours threaten regicide.

  18. collapse expand

    Looks like Gasparino has a history of being chummy with the scummy instead of being an objective analyst.

    http://www.zerohedge.com/article/janet-tavakoli-rips-charlie-gasparino

    Gasparino’s Glass Jaw is CNBC’s Draw
    TSF – July 22, 2009
    by Janet Tavakoli
    CNBC is financial entertainment. Guests and watchers should take it in the same spirit they reserve for Dilbert cartoons. Why expect more than it can deliver? Comic relief has its place, and in finance, that place is CNBC (and often Comedy Central’s Daily Show).

    Why didn’t CNBC give early warning of Wall Street’s implosion? Perhaps because CNBC’s on air reporting usually isn’t hard hitting, despite what media articles may say. It’s a good thing CNBC’s Charlie Gasparino didn’t try for the Golden Gloves.

    Gasparino’s July 14 rant about Goldman Sachs was very late to the party. On the topic of Wall Street, the only “f‐bomb” CNBC fails to drop is the fraud pulled off by Wall Street firms when they failed to properly mark their books and fueled massive problems for the American economy. On July 20, Gasparino was easily fooled by Goldman’s assertion it is responsible for a public service (liquidity and a backstop) and failed to analyze the key legitimate issues that need to be addressed by reformers: Goldman’s (and Wall Street’s) undue influence over Treasury and Fed officials and Wall Street’s need to make reparations to the U.S. Treasury.

    Goldman runs a hedge fund. This observation isn’t new, and Goldman is not alone among our large banks in running invisible hedge funds . Many others raised substantive issues about Goldman and Wall Street long before Gasparino, and they haven’t caved.

    There are many good reporters who actually read documents, analyze them, and know how to sift good information from bad, but Gasparino isn’t one of them these days. Here’s a tiny Bear Stearns sample: “Jimmy Cayne built Bear Stearns from the ground up* with one key ingredient: guts. We induct a Wall Street icon” by Charles Gasparino Trader Monthly Jun‐Jul 2007 [Trader Monthly ended operations February 2009].

    At the beginning of August 2007, Gasparino’s mantra was:” “When I had dinner with Jimmy Cayne on Sunday night.” Compare that with this 2005 Bear Stearns CDO expose or this May 2007 BSAM related subprime CDO / IPO expose [Matt Goldstein, the articles’ author, is now a journalist for Reuters.] or with Jody Shenn’s work on Bear at Bloomberg News.

  19. collapse expand

    As a mainstream financial journalist I have to say I totally agree with you Matt, and while there are a number of people I work with that think your article was great, and much needed, unfortunately the whines of wounded egos such as Gasparino and Heidi Moore makes us all look bad.

    Moore has even posted a second attempt to defend Goldman, every bit as bad as her first though this time she at least pretends to address some arguments in your piece. While I would love to see you rip her to shreds again, I also think at this stage its below you to even respond to the moron, shameless that she is.

  20. collapse expand

    Matt, Your efforts are working; probably not without costs to yourself and the people who care about you. The disruption and the illumination of G$ branding processes over time is an important thing to show and tough thing to overcome (Edward Bernays writes about this in his book Propaganda);

    You know your voice resonates when you get dismissed by G$ and embraced by a knowledge seeking public.

    You know you are affecting them when they trot out the likes of three stooges Heidi Moore, Gaparino, and the legal action threats.

    You know you are in a war when previously trusted sources, relations, and systems become tainted with re-framed G$ bullshit…

    You know that they have won when their message drowns you out…

    Your efforts are working; Keep infecting the pristine brand of G$; Keep it up!

  21. collapse expand

    You have successfully addressed Gasparino’s misleading article. I hope that you will continue to search out the entire GS story. I now rely mainly on TrueSlant and I also believe that Naomi Klein brings us true insight on what is really going on with the bailouts. She had this to say on her current website: “I usually talk about the bailout in speeches these days. We all need to understand it because it is a robbery in progress, the greatest heist in monetary history.” I would appreciate TrueSlant’s, Matt’s or all or any of the contributors views on the veracity of this statement. I believe it, I thought Klein’s book, The Shock Doctrine was right on, but I don’t really understand much about market transactions and what really has happened though by reading true/slant, the NY Times, and Ms. Klein’s material, I hope I am getting a balanced view.

  22. collapse expand

    Money quote from CJR:

    “Rather than dismiss Taibbi, the mainstream business press would do well first to read him, learn from him, and above all, refrain from all attempts to outwrite him, because that seems to be a losing game.”

  23. collapse expand

    These people are going to do anything they can to discredit their detractors, and also to avoid prosecution when the time comes.
    Good job, Matt. You can’t hammer away at these fools enough as far as I’m concerned.

  24. collapse expand

    You forgot to mention the fact that GS paid more bonus money than their net income for Q3.

    How do you pay more bonus than you actually make?

    That really burns me!!

    I think we ought liberate their heads from their bodies.

  25. collapse expand

    What I cannot understand is how in the July 17 issue The Economist basically made the same points you have, specifically about how Goldman would only continue to exist and is making its billions because it was propped up by the U.S. government, and yet no one calls them on advancing “conspiracy theories” or whatever bullshit dodge is popular this week. I guess they get a pass because they’re St. James’s street and T/S is a blog, or some such nonsense.

  26. collapse expand

    “see how much money Goldman is making now, eating up Lehman’s market share.”
    In fact, it’s JP Morgan Chase that is by far the biggest beneficiary of Lehman’s demise, judging by the league tables. In equity underwriting, JPM share of fees went from something like 8% in 2005 to more than 21% in the first half of 2009. And I don’t think that’s all because of the addition of Bear Stearns. (The claim doesn’t hold up in M&A or debt league tables either, as far as I can tell.)

    I’m no fan of Goldman Sachs. But if I had to choose one firm to pick on as a symbol of what went wrong, it would be Citigroup, hands down. Without Sandy Weill and his empire building, there would have been far less pressure to eviscerate Glass-Steagall (something that could have put Goldman in a bad position, since it instantly created a host of potential rivals with massive balance sheets to put to work.) Moreover, while you might be furious about one group of traders within Goldman spotting risks in the subprime arena and shorting the whole sector (and making a windfall) while another part was still churning out product, no one at Citi even
    REALIZED the risks they were running — and they were churning out still more product. They were utterly oblivious, firmwide, to anything that was going on. Read the UBS shareholder report, and multiply the mishaps fourfold.

    Goldman is fun to pick on, because of their air of entitlement, intellectual arrogance and surreal profits. But the real story, while less exciting (you couldn’t really call JP Morgan a ‘vampire squid’, for instance), is far more complex. And while you may have intended Goldman Sachs to stand for the whole of Wall Street, that’s not the way a lot of people out there are interpreting it. True, no journalist is responsible for people failing to understand the nuances in his/her articles, but they should also be aware of the risk, in the current environment, that people will see this story as blaming Goldman Sachs for the whole mess. Because I assure you, they do. I’ve had it pointed out to me, over and over again, as evidence that Goldman is responsible for the mess we’re in. Not many stop and think through the actual argument you’re making, vs. the rhetorical flourishes.

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