This would not be complete, of course, without a detour into the dastardly CDSs, in which Taibbi illustrates that he either does not understand the concept of "hedging", or doesn't care. Memo to Taibbi: we want banks to lay off some of their risk exposure. That's what makes them more stable. Now, maybe Goldman Sachs was doing something wrong. But the fact that they insured some part of their portfolio against default is not proof of it. To know that, we'd need some sense of the size of the portfolio, the size of the insurance, the structure of the deals. Those are details Taibbi either doesn't have, or doesn't provide us.
I won't even go into Taibbi's silly and naive discussion of Goldman's alleged oil market speculation, except to note:
- He again does not succeed in pinning it all on Goldman
- He fails to explain how a 1991 rule change caused a 2008 price spike and decline
- He fails to note that price spikes and declines in the oil market were common pre-1991
Does this matter? Aren't I, as people love to claim when you get into details, "missing the big picture?" After all, okay, maybe Goldman wasn't really all at fault but the important thing is that it shows how we were all duped over the last 25 years by insiders.
No, for several reasons.
First of all, Taibbi doesn't say that Goldman Sachs is just a sort of Everyman; he claims they helped engineer crises so that they could profit from them. Second of all, ignorance leads Taibbi to ask the wrong questions, and provide no useful answers. The problem isn't that pointy-headed bankers were rooking us--that may have been an individual problem for individual investors, but a crisis this big cannot be explained by any sort of fraud. To make these charges stick, Taibbi needs to posit a ludicrous level of naivite among institutional investors. Being satisfied with sloppy answers, he doesn't talk about, say, Goldman's role in the AIG collapse, or how you build a banking system without putting bankers in charge of it. He doesn't prove anything except that Matt Taibbi knows little about how the financial system works.
A lot of laymen, and not a few financial writers, like Taibbi because he's willing to take the piss out of self-important bankers. But you can learn about how the banking system works without being coopted by the bankers--look at Michael Lewis, whose Liar's Poker remains a classic twenty years on. What you can't do is build cartoon villains. Felix Salmon isn't overly friendly to Wall Street. But he doesn't write rubbish.
The more dangerous thing is that Taibbi makes a lot of people feel like they finally understand how they were conned. Taibbi's facile use of technical terms, his lengthy explanation of little-known secrets that have been endlessly rehashed on every financial page for going on a decade, gives people the illusion that they have acquired valuable information about the financial crisis. They haven't. They've acquired a bunch of disconnected vignettes.