You've probably read The Great American Bubble Machine," Matt Taibi's famous 2009 Rolling Stone takedown of Goldman Sachs. That's the article in which he described the world's most powerful investment bank as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
These days even Taibbi sounds surprised by what the Securities and Exchange Commission is dredging up in its investigation of securities fraud at Goldman Sachs. In the latest issue of Rolling Stone, he writes:
Prior to the "Bubble Machine" piece, I had heard rumors that Goldman had gone out and intentionally scared up toxic mortgages and swaps in order to get short of them with sucker bookies like AIG. But – and this seems funny in retrospect – I foolishly dismissed those tales as being too conspiratorial. I thought it was bad enough that Goldman was shorting the subprime market even as it was selling toxic subprime-backed securities to chumps on the open market. The notion that the bank would actually go out and create big balls of crap that would be designed to fail seemed too nuts even for my tastes.
Today the New York Post reports that Goldman may settle with the SEC rather than undergo more of the public humiliation it's been receiving this week during congressional hearings.
But you don't have to be particularly paranoid to suspect that Goldman Sachs' alleged fraud is merely the tip of the iceberg. And if you want to go all the way in that direction, look nor further than a recent piece of gonzo journalism by Mark Ames. A former colleague of Taibbi's (the two worked together on an alternative Russian newspaper), Ames sees rot everywhere in America's financial foundation. In "Confessions of a Wall Street Nihilist, Ames (probably) fabricates a conversation with a Wall Street pal who argues that investigations like this are merely academic exercises. Because if the system's real corruption were ever exposed, the whole house of cards would collapse.
“Let’s say the government decides one day, ‘You know, we oughta listen to Che here, let’s throw the book at every firm and every executive that our people can make a case against. Because you know, gosh, it’s all about rule of law and blind justice, just like Che says.’ OK, so now this means indicting just about every serious player in finance, so they take down Goldman Sachs, they take down Citigroup, JP Morgan, BofA… and they also serve all the big funds who are at least as guilty, if not more. So they shut down Pimco, Blackrock, Citadel… maybe they indict Geithner and Summers, haul in some of Bush’s crooks… right?”...
“OK, now guess what you’ve just done? You’ve just caused the markets to completely tank. Remember what happened after the Lehman collapse? Remember how popular that made every politician in Washington? Still wondering why they coughed up a trillion bucks? They were scared for their lives; that’s why they voted for that bailout. You’d have done the same goddamn thing. But if we go after everyone guilty of fraud and theft, the market crash this country would see would make 2008 look like Sesame Street. Open that can of worms labeled ‘Fraud’ and the whole fucking economy collapses. You may as well prosecute people for masturbating. No one will know where the fraud investigation stops and who will be charged next—everyone will try to cash out, and the markets will tank to zero. And guess what happens when the markets tank to zero? Every fucking American with a retirement plan, or an investment portfolio, or a 401k—every state pension plan in the country, every teacher’s pension fund, every fireman’s pension—every last one of them will be wiped out. That’s what the Lehman collapse taught us.”
Is he right? Read your Taibbi and recall just how many former Goldman Sachs, Citigroup, and Lehman executive are now in government, effecting policy and working for the SEC. The boat ain't gonna rock that hard.