Goldman Sachs: The Great American Bubble Machine

[zengrifter]

Kudos to Matt Taibbi - this is the best muckraking we've read in a while. zg

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The Great American Bubble Machine

Matt Taibbi on how Goldman Sachs has engineered every
major market manipulation since the Great Depression

MATT TAIBBI
Posted Jul 02, 2009 | Rollingstone

In Rolling Stone Issue 1082-83, Matt Taibbi takes on "the Wall Street Bubble Mafia" — investment bank Goldman Sachs. The piece has generated controversy, with Goldman Sachs firing back that Taibbi's piece is "an hysterical compilation of conspiracy theories" and a spokesman adding, "We reject the assertion that we are inflators of bubbles and profiteers in busts, and we are painfully conscious of the importance in being a force for good." Here, now, are excerpts from Matt Taibbi's piece and video of Taibbi exploring the key issues.

From Matt Taibbi's "The Great American Bubble Machine" in Rolling Stone Issue 1082-83.

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain — an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

They achieve this using the same playbook over and over again. The formula is relatively simple: Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased. They've been pulling this same stunt over and over since the 1920s — and now they're preparing to do it again, creating what may be the biggest and most audacious bubble yet.

See Taibbi discuss Goldman Sachs' big scam.

NEXT: Goldman Sachs' Role in the Housing and Internet Busts

From Matt Taibbi's "The Great American Bubble Machine" in Rolling Stone Issue 1082-83.

The basic scam in the Internet Age is pretty easy even for the financially illiterate to grasp. Companies that weren't much more than pot-fueled ideas scrawled on napkins by up-too-late bong-smokers were taken public via IPOs, hyped in the media and sold to the public for megamillions. It was as if banks like Goldman were wrapping ribbons around watermelons, tossing them out 50-story windows and opening the phones for bids. In this game you were a winner only if you took your money out before the melon hit the pavement.

It sounds obvious now, but what the average investor didn't know at the time was that the banks had changed the rules of the game, making the deals look better than they actually were. They did this by setting up what was, in reality, a two-tiered investment system — one for the insiders who knew the real numbers, and another for the lay investor who was invited to chase soaring prices the banks themselves knew were irrational. While Goldman's later pattern would be to capitalize on changes in the regulatory environment, its key innovation in the Internet years was to abandon its own industry's standards of quality control.

Goldman's role in the sweeping global disaster that was the housing bubble is not hard to trace. Here again, the basic trick was a decline in underwriting standards, although in this case the standards weren't in IPOs but in mortgages.

By now almost everyone knows that for decades mortgage dealers insisted that home buyers be able to produce a down payment of 10 percent or more, show a steady income and good credit rating, and possess a real first and last name. Then, at the dawn of the new millennium, they suddenly threw all that sh*t out the window and started writing mortgages on the backs of napkins to cocktail waitresses and ex-cons carrying five bucks and a Snickers bar.

MORE- http://www.rollingstone.com/politics...bubble_machine

[Pat]

Hey Guru,

http://www.blackjackinfo.com/bb/show...736#post139736

[Brutus]

wow Zen's got his own personal critic!

is that stalker?

[Katweezel]

Shouldn't Goldman Sachs be renamed Goldman Sacks?

[zengrifter]

Nailed 'em right between the eyes. zg

Goldman Sachs firing back [against Rollingsone] that Taibbi's
piece is "an hysterical compilation of conspiracy theories"

[zengrifter]

Taibbi: New Secrecy Rule Lets Goldman Sachs
Control Stock Prices Unmolested by Public Scrutiny

By Daniel Tencer, Raw Story
Posted on July 6, 2009

The New York Stock Exchange quietly announced last week that it would end its practice of requiring companies to report all their program trading -- a move that helps shield large investment banks, particularly Goldman Sachs, from public scrutiny.

The new rule means the public will no longer be able to tell if large investment banks are manipulating the stock market for their own gain, says Matt Taibbi, the journalist whose Rolling Stone article on Goldman Sachs’ role in asset bubbles over the past century has rocked the financial world.

According to previous NYSE rules, any company that carried out program trading -- essentially, large computer-automated trades worth more than $1 million -- had to report the trades to the NYSE, which then made the information publicly available.

But, under new regulations (PDF) published last week, that requirement has been removed.

"The NYSE announced that it will no longer be releasing its weekly program trading data," Taibbi wrote in a blog posting. "This is quiet obviously a move designed to make it even more impossible to track what’s going on in the NYSE and shield, in particular, Goldman Sachs."

Taibbi argues that the move is designed to protect investment banks from bloggers who are exposing the companies’ stock market manipulations. Goldman Sachs is singled out because the investment bank’s share of principal NYSE trading has gone from 27 percent at the end of 2008 to fully 50 percent of trades in recent months.

Blogs such as Zero Hedge have been using NYSE data to argue that Goldman Sachs now has an almost unfettered ability to control stock prices.

Responding last week to news of the NYSE’s rule change, Zero Hedge argued:

The NYSE has taken action to make sure that nobody will henceforth be able to keep track of the complete dominance that Goldman Sachs exerts over the New York Stock Exchange. This basically ends our weekly Program Trading updates disclosed every Thursday indicating that Goldman has singlehandedly captured all of NYSE’s program trading.

Taibbi’s article on Goldman Sachs’ long history of involvement in asset bubbles and crashes can be found here.

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Matt Taibbi is a writer for Rolling Stone.
© 2009 Raw Story All rights reserved.

[daddybo]

Add the Puppet Masters Prosper....

[Pat]

While Goldman & Sachs is badmouthed here, its stock price keeps going up. Go figure!
http://www.blackjackinfo.com/bb/show...975#post139975

[zengrifter]

[zengrifter]

What the Mainstream Press Can Learn from
Matt Taibbi's Takedown of Goldman Sachs

By Dean Starkman, Columbia Journalism Review.
Posted August 8, 2009.

If biz journalists won't step back and take in the sweep of this crisis,
and the systemic distortions that underlie it, somebody else will.

Mainstream financial journalism is doing its level, eye-rolling, heavy-sighing best to stuff Matt Taibbi back into the alt-press hole he came from, but he’s not going along with it, and the mainstreamers in any case are making a big mistake.

The Rolling Stone writer cemented his status as the enfant terrible of the business press with “The Great American Bubble Machine,” a 10,000-word excoriation of Goldman Sachs, a muckraker’s-eye view of Goldman history, exploring the bank’s and Wall Street’s contributions to various financial disasters, starting with the Great Depression, skipping to the Tech Wreck, the Mortgage Wreck, the oil bubble of 2008, the bailout, and the looming cap-and-trade plan. Salted with “****”s, “****”s and written with brio and hyperbole in the New Journalism tradition, it caught the financial community, which very much includes the financial media, utterly off-guard, unused as it is to hearing its flagship described as a “giant vampire squid wrapped around the face of humanity.”

Financial cognoscenti quickly sought to dismiss the piece as so much conspiracy-mongering perpetrated by a financial illiterate. Funny, but that illiterate’s piece ran more than a month ago, and people can’t stop talking about it. Perhaps not coincidentally, it feels like the general financial news has been all-Goldman, all-the-time ever since.

Ex-Deal and Wall Street Journal staffer Heidi Moore stepped into a buzzsaw last week week when she wrote one of the biggest non-sequiturs of the financial crisis, a column in Slate’s Big Money arguing that Goldman’s success comes from the fact it’s better at what it does than everyone else, therefore, apparently, criticism is unwarranted.

MORE- http://www.alternet.org/story/141852...hs?page=entire