Financial Planning Blog

In case the passage of time and a nice summer vacation has dulled your rage over the abuses in the financial markets, take a look at The Great American Bubble Machine from Rolling Stone Magazine. No, Rolling Stone is not my normal source for financial commentary, which is why I almost missed this controversial article and the on-line debate that has followed.

The article by Matt Taibbi is great fodder for conspiracy theorists, and I have to admit it made me more than a bit angry. Although I was thoroughly amused by Taibbi's lambasting of Goldman, I tried to maintain a bit of perspective-after all, this is Rolling Stone and it just may not be the whole story. The article alleges that "from tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again." Taibbi reviews the amazing number of ex-Goldman Sachs officials in high government positions in the US and other countries, and then looks at five past bubbles, and one he claims is about to be inflated. He has a number of good lines that make for good reading, such as this description of Robert Rubin the ex-Goldman co-chairman and Treasury Secretary under Bill Clinton:

Rubin was the prototypical Goldman banker. He was probably born in a $4,000 suit, he had a face that seemed permanently frozen just short of an apology for being so much smarter than you, and he exuded a Spock-like, emotion-neutral exterior; the only human feeling you could imagine him experiencing was a nightmare about being forced to fly coach.

Although Taibbi entertains and gets you pumped up, I'm not sure he makes a convincing case that Goldman is behind all of our problems. Don't get me wrong, I am very suspect of any company where the average compensation per employee was $386, 000 for the first half of 2009. (Yes, that was just for six months and we're talking about almost 30,000 employees.) However, I think there is plenty of blame to go around--why stop with Goldman?

If you take the time to read Taibbi's article, also take a look at some of his on-line critics. Not everyone is impressed with his journalism. For example, look at ex-Wall Street Journal reporter Heidi Moore's "Matt Taibbi Is Just Plain Wrong" for a little balance.

It annoys me to see the public that wasn't fully educated about the financial crisis before it happened get snookered again by misleading reporting afterward...Context and good facts were in short supply in favor of a lively, if incoherent, narrative. As a fellow financial journalist put it: "If you read the article without knowing anything about finance, by the end you would still not know anything about finance-but you would hate Goldman Sachs."

Also, check out Charlie Gasparino's "Stop Blaming Goldman Sachs" for another perspective. He's not a fan of Goldman Sachs, but he obvious felt The Great American Bubble Machine was a bit short of the truth.

I have to admit I love to beat up on Goldman; I do it for The Daily Beast and on CNBC every chance I get. I also have to admit cheering Matt Taibbi on when I first read his Rolling Stone article...But Taibbi has elevated a combination of half-truths, superstitions, and a lack of understanding about the financial crisis to what is fast becoming established as "fact": that Goldman Sachs was the main culprit for the financial crisis and is now unfairly profiting from the various bailouts the crisis caused.

You make your own call as to the level of Goldman Sachs' evil. Or, better yet, skip it altogether and take a long walk and try and forget the last couple of years.