... the story is really not meant for an audience interested in a discussion of financial markets, as evidenced by his rhetorical style (almost everyone is simply an "asshole"), and his ridiculous leaps in logic (e.g. Goldman lowering its IPO underwriting standards created the .com bubble... and that explains how Nortel had a peak valuation of over $300 billion, how?). <...> Taibbi is really just repeating an annoying tendency of mainstream financial journalists and pundits, who claim that the problem with CDOs is that they were exotic and 'not vanilla'. In fact, we might as well rename them 'Complex CDOs', since that's how they are always referred. But that's wrong. The problem wasn't lack of regulation or their complexity -- the problem is that they represented a bet on housing and that bet went horribly awry. What about that is so complex and hard to understand? If valuing CDOs were so impossible, whey did the collapse of that market in late 2007 precede the broader collapse of more normal securities? <...> securities fraud this isn't. As McArdle reminds Taibbi, there was this whole Eliot Spitzer-led inquisition on Wall Street to ensure that the left hand didn't know what the right hand was doing -- so a company can sell a product and its traders can be short it, and that's okay. Again, it's the opposite of what's called securities fraud. As an aside, it's also total crap when he says that the securities were dumped to "old people" as though they were being sold at the corner to grandma and grampa. These pension funds may manage money for old people, but they weren't being run by unsophisticates. They're run by just the opposite -- highly paid, sophisticated managers that knew exactly what they were buying. He goes onto note that, like with the IPO boom, Goldman Sachs has faced lawsuits related to its dealings in this area, as if that's damning (he talks about this elsewhere in the story, too). But the mere fact that someone is sued by angry investors, or the fact that a bank pays a fine to a regulator doesn't mean anything, given the perfunctory lawsuits anytime someone loses gobs of money. ...
Taibbi is really just repeating an annoying tendency of mainstream financial journalists and pundits, who claim that the problem with CDOs is that they were exotic and 'not vanilla'. In fact, we might as well rename them 'Complex CDOs', since that's how they are always referred. But that's wrong. The problem wasn't lack of regulation or their complexity -- the problem is that they represented a bet on housing and that bet went horribly awry. What about that is so complex and hard to understand? If valuing CDOs were so impossible, whey did the collapse of that market in late 2007 precede the broader collapse of more normal securities? <...>
securities fraud this isn't. As McArdle reminds Taibbi, there was this whole Eliot Spitzer-led inquisition on Wall Street to ensure that the left hand didn't know what the right hand was doing -- so a company can sell a product and its traders can be short it, and that's okay. Again, it's the opposite of what's called securities fraud.
As an aside, it's also total crap when he says that the securities were dumped to "old people" as though they were being sold at the corner to grandma and grampa. These pension funds may manage money for old people, but they weren't being run by unsophisticates. They're run by just the opposite -- highly paid, sophisticated managers that knew exactly what they were buying.
He goes onto note that, like with the IPO boom, Goldman Sachs has faced lawsuits related to its dealings in this area, as if that's damning (he talks about this elsewhere in the story, too). But the mere fact that someone is sued by angry investors, or the fact that a bank pays a fine to a regulator doesn't mean anything, given the perfunctory lawsuits anytime someone loses gobs of money. ...
Ditto the Atlantic's Girl Friday. Diversity is the key to economic and political evolution.
