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LQD: Matt Taibbi shreds Goldman Sachs excuses

by NBBooks Thu Jul 9th, 2009 at 10:53:11 AM EST

Matt Taibbi has been wading through the objections to his Rolling Stone article a few weeks ago detailing how Goldman Sachs has profited obscenely by using its political influence in the United States to help create, then prick, a series of financial bubbles over the past century. Taibbi's reply is very much worth reading, to see the depths to which defenders of the financial status quo will stoop, such as hurling the "anti-semitic" charge. But, here is the conclusion, which I consider the best part:

Two, even if it is true that “everyone else was doing it”: so what? Who cares? To me this response is highly telling. We published a piece accusing Goldman Sachs of systematically ripping off pensioners and other retail investors by sticking them with rafts of toxic mortgages it knew were losers, of looting taxpayer reserves to cover its bad bets made with AIG, of manipulating gas prices to massive detrimental effect, of helping to explode an internet bubble that caused over $5 trillion in wealth to disappear, and numerous other crimes — and the response isn’t “You’re wrong,” or “We didn’t do that shit, not us,” but “Well, Morgan did the same stuff,” and “Why aren’t you writing about Morgan?”

Why didn’t we write about Morgan? Because we didn’t. Because it’s your turn, you assholes. Maybe later someone will tell the story of the other banks, but for now, while most ordinary people are only just learning about the workings of the financial innovation era that blew up in their faces last year, the top dog in that universe is going to be first in line to get the special treatment. That might be inconvenient for Goldman, but it doesn’t make the things I or anyone else say about them untrue. . . .

. . . the response of a bank like Goldman and Goldman’s supporters is characteristic of the subject matter in a way that is important to point out, even after the fact of publication. These are powerful people who know how to play the public relations game, have all the appropriate contacts, and have a playbook that they follow to discredit their critics. Whether it’s me now or the next guy who takes them on, they’re going to come back with some kind of charge, be it “Everyone was doing it,” or “We’re just smarter than the other guys, you can’t blame us for that,” or “The real culprits are the ineffective regulators,” something.

They’re going to say that and more, but whether it’s this time or the next time, the important thing is to pay attention to what they don’t say. And what they didn’t say about this piece is that it was wrong. They didn’t deny any of it. They said others were just as bad, they said I was a bad guy, they said it was a conspiracy theory. But they didn’t say it was mistaken, and that’s the only thing that matters.



Let's get the ad hominum excuses out of the way first, and lets deal with the facts.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jul 9th, 2009 at 10:59:58 AM EST
Like the UK parliamentarains caught with their hands in the cash register they'll say {imagine Hazel Blears whiney voice} "I didn't break any rules"

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Thu Jul 9th, 2009 at 11:14:02 AM EST
Well if you employ lobyists to get the ability to take advantage written into the rules, then take advantage of those loopholes, then morally you're guilty, case closed. You may not have broken any written rules, but you've shown a disturbing lack of morals that should see you turfed out of polite society, thrown out with the barbarians and wolves beyond the village walls without the necessary supplies.

you may not have broken the rules, but it's nowhere in the rules that we should care about parasites either. can anyone think of any good reason why we should give a shit?

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Jul 9th, 2009 at 11:38:22 AM EST
[ Parent ]
What's morals got to do with it?  And since when was polite society anything other than a slavish worship of those with lots of dosh however acquired.  We need society to become somewhat less polite about this sort of behaviour, but sever consequences, rather than moral scruples are likely to be more effective.,..

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Jul 9th, 2009 at 11:45:05 AM EST
[ Parent ]
Im willing to accept putting those people who want to be worshiped for having lots of dosh out too.

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Thu Jul 9th, 2009 at 11:50:03 AM EST
[ Parent ]
that's why i fear the chinese model of shooting people like this will eventually prevail, tho' i'm agin the death penalty in principle.

allowing people like this to repeatedly get away with it, indeed enabling them on the public's back spells ruin for the body politic, and ultimately the nations and all citizens, especially those still unborn.

these staid, upright people would never tolerate irresponsibility like this in their immediate families, it'd spell chaos, yet they're allowed to cavort and wave their bonuses in our faces, even after what they've done, gambling away the family farm, and the future income of generations, retirement funds of people who've worked their whole lives propping up a system they trusted as fair, while these masters of disaster were getting obesely rich chewing through the foundations.

it's pathological sociopathy writ large... and our future chinese masters will not put up with it.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Thu Jul 9th, 2009 at 11:54:18 AM EST
[ Parent ]
..that's why i fear the chinese model of shooting people like this will eventually prevail..

It may come to that, but un-systematically and and without the benefit of legal cover.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jul 10th, 2009 at 12:21:21 PM EST
[ Parent ]
ceebs re ostracizing GS:
can anyone think of any good reason why we should give a shit?

Because they own the US Senate and the Treasury?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jul 10th, 2009 at 12:18:06 PM EST
[ Parent ]
The oil price increase was not a bubble - Goldman Sachs certainly rode the price increases profitably, but oil prices did not just increase because of speculators, which, for long period in that bull phase were betting on a price fall. No, fundamentally oil prices rose really high because we moved from a supply-driven price to a demand-driven price, and prices had to go up high enough to force people to use less in the few places that were actually subject to full price variations, mainly the US and, to a lesser extent, Europe (because high taxes and the euro softened the variations in gas prices). When demand crashed (whether because of oil prices or because the financial crisis had turned into an economic one, or both), prices went back to supply-driven basis, ie much lower.

And carbon trading is not a bubble: the system is not bad per se, it's just been distorted by too-high allocations to industry (not to Goldmans), a problem of traditional corporate lobbying rather than evil capture of government by Goldmans.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jul 9th, 2009 at 11:58:46 AM EST
Re oil, the debate continues.

I would be interested in your view on what this guy has to say....


This article is an updated version of an article that was published in Seeking Alpha. I have updated  and clarified certain definitions. The relevance of that article in todays' Market justify this updated publication.

The commodities we are concerned with here are those with potentially very low storage costs. Minerals, when kept in the ground, have a storage cost next to zero.

I observed a strong link between the evolution of the market price of minerals and the shape of the yield curve.

The slope of the yield curve indicates the fair valuation or not of the price of short-term assets compared to long-term assets.

I am going to show that the shape of the yield curve is a first order parameter of the evolution of the price of minerals.

When the yield curve is inverted, because of profit maximization, Miners & Drillers prefer hoarding a higher proportion of their minerals in the ground (their preferred short-term assets) rather than extracting them and investing the proceeds in long-term instruments. Hence, the marginal cost of extraction of minerals becomes irrelevant to their market price as miners stop maximizing their output under the constraint: Market Price - Their Marginal Cost of Extraction.

My instinct is that he has put his finger on something. You are much more clued up than me: what do you think?

Re carbon trading, IMHO it's one of those things that works in theory but not in practice. It's probably the biggest boondoggle since the Millennium Bug: promoted by middlemen and consultants, for the benefit of middlemen and consultants.

Totally impractical. I just got back from speaking at a conference in  Bristol. The guy from Defra (relevant UK government department) was basically saying that no one has a clue how Carbon Reduction Commitments are going to work - all help gratefully received...

....oh dear.

Why monetise something worthless, like CO2, when you can monetise energy value quite straightforwardly?

FT Alphaville

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Jul 10th, 2009 at 06:15:20 PM EST
[ Parent ]
Why monetise something worthless, like CO2,

The exchange platform for credits and offsets is a fraud legitmated by government monopoly. Participants assume no liability by issue or trade of such securities --certificates that represent interest in a rated reduction or promise to reduce CO2 emissions purportedly by means of plant, equipment, foregone energy intensive activities, ownership interest in third-party foregone energy consumption, or all of the above. And apart from inadequate regulatory metrics and practice, we find the "face value" (cash value of maximum emission volume) assigned such instruments is not legally binding in each of the jurisdictions where exchanges are established. In short contracts implying buyer's promise to extinguish CO2 production are not executable.

More to the point of your citation, the frequency with which participants plow back rather than hold or distribute proceeds obtained by sale of credits and offsets is predictably low, because the security per se, not the underlying "asset" CO2, is a store of value and fungible. More plausible (analogous to buy-back behavior exhibited over the past decade), transnational holding companies may use proceeds to purchase properties (e.g. subsidiary entities and real estate) to hedge the price of credits held and credits available for sale.

The purpose of the exchange is to introduce an additional source of liquidity to existing primary and secondary money markets.

when you can monetise energy value quite straightforwardly?

You know the answer is simple enough: Producers do not voluntarily reliquish profit, and no government requires they must.

Diversity is the key to economic and political evolution.

by Cat on Sat Jul 11th, 2009 at 09:27:41 AM EST
[ Parent ]
Re: oil bubble/not-bubble,

Is the difference between supply- and demand-driven prices really $120/bl?

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Jul 11th, 2009 at 09:59:58 AM EST
[ Parent ]
The best proxy I know for "supply and demand" in the oil market is spare capacity:
(source: my diary OPEC blames speculation from July 2nd, 2008)

Is it possible that oil demand is so inelastic to explain a factor of 4 from peak to trough? ($145 to $35/bbl)

Do people know where to find an up-to-date production capacity/output chart, and a good price series? Then we can see how much of the price variation is explained by spare capacity per capita...

The peak-to-trough part of the business cycle is an outlier. Carnot would have died laughing.

by Migeru (migeru at eurotrib dot com) on Sat Jul 11th, 2009 at 10:24:18 AM EST
[ Parent ]
Thanks for this.  I just saw the original Rolling Stone article this morning when another former Exiler posted it on fb.  Looks like it's gotten a lot of attention!

Completely independent of the Rolling Stone piece, I recently came across the following in an article about Kohodorkovsky.

Many of us who spent the 90s in Russia became aware over time that the aim of the United States was to create a rump state that would allow economic interests to strip assets at will. The population in this scheme was to be good for consuming foreign goods produced abroad with Russia's own cheaply sold raw materials. The aim was a castrated state, anarchy, a vast, confused territory of captive consumers, cheap labor and unguarded oil and aluminum.

Some of us who came home after seeing this began to realize that the same process is underway in the United States: the erosion of the tax base, the gradual appropriation of the tools of government by economic interests, a massive, disorganized population useless to everybody except as shoppers. That is their revolution: smashing states everywhere and creating a scattered global nation of villas and tax shelters, as inaccessible as Olympus, forbidding entry even to mighty dictators.

Taibbi wrote that 6 years ago.

"Pretending that you already know the answer when you don't is not actually very helpful." ~Migeru.

by poemless on Thu Jul 9th, 2009 at 12:26:45 PM EST
I remember that one of the most interesting things about the exile, already in the late 90s, was how much of their most razorsharp analysis was not about Russia, but about the US. It's the first place where I read deconstruction of the pundits' common wisdom on 'capitalism', laced with their experience of post-Soviet Russia (which I could realte to).

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Jul 10th, 2009 at 04:41:16 AM EST
[ Parent ]
For 23 years, Philip Murphy was a top manager at Goldman.  He's now the new US Ambassador to Germany. Oy Veh.

Here's the German version at Stern.de

 Denn mit ihm wird eine seltene Kombination in die Botschaft am Pariser Platz einziehen: Zum einen verkörpert Philip Murphy Kapitalismus pur. 23 Jahre lang arbeitete Murphy in leitender Position bei der Investment Bank Goldman Sachs, er ist einer von der "Goldman-Mafia", so wie die einstigen Finanzminister Robert Rubin und Henry Paulson.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin
by Crazy Horse on Sat Jul 11th, 2009 at 07:31:40 AM EST

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