Can’t say this is wildly surprising: Matt Taibbi, the Rolling Stone reporter famous for his takedown of Goldman Sachs (GS) is now joining the ranks of the naked short selling conspiracy theorists.
Later on this week I have a story coming out in Rolling Stone that looks at the history of the Bear Stearns and Lehman Brothers collapses. The story ends up being more about naked short-selling and the role it played in those incidents than I had originally planned — when I first started looking at the story months ago, I had some other issues in mind, but it turns out that there’s no way to talk about Bear and Lehman without going into the weeds of naked short-selling, and to do that takes up a lot of magazine inches. So among other things, this issue takes up a lot of space in the upcoming story.
Naked short-selling is a kind of counterfeiting scheme in which short-sellers sell shares of stock they either don’t have or won’t deliver to the buyer. The piece gets into all of this, so I won’t repeat the full description in this space now. But as this week goes on I’m going to be putting up on this site information I had to leave out of the magazine article, as well as some more timely material that I’m only just getting now.
He goes onto write about how amazingly widespread it is, and how thoroughly “captured” reglators are on this subject.
Naked short-selling is a popular mythical beast promoted by the execs at those failed companies, as well as guys like Patrick Byrne at Overstock.com, but it’s rubbish. It’s really no different than regular old short-selling, which also happens to be villified by the media, and by executives at struggling companies.
What’s really maddening about reintroducing it in the Lehman and Bear stories is that it essentially lets top executives there off the hook. It wasn’t their extremely levered exposure to dodgy real estate–it was market manipulators that caused them to fail!
That’s odd for Taibbi, right? Why is he advancing a theory that lets failed bankers off the hook? Ah, here’s why. Because there’s an anti-Goldman angle.
Last Friday I got a call from a Senate staffer who said that Goldman had just been in his boss’s office, lobbying against restrictions on naked short-selling. The aide said Goldman had passed out a fact sheet about the issue that was so ridiculous that one of the other staffers immediately thought to send it to me. When I went to actually get the document, though, the aide had had a change of heart.
Which was weird, and I thought the matter had ended there. But the exact same situation then repeated itself with another congressional staffer, who then actually passed me Goldman’s fact sheet.
Now, the mere fact that two different congressional aides were so disgusted by Goldman’s performance that they both called me on the same day — and I don’t have a relationship with either of these people — tells you how nauseated they were.
Oh god, Goldman Sachs (GS) posted… a fact sheet! Pity the poor young Congressional staffers who were nauseated when they first realised that companies do actually lobby.
Taibbi himself finds the fact sheet completely appalling, and says much of it doesn’t apply to naked shorting. But from our read of the fact sheet, it doesn’t look like Goldman intended it to apply narrowly to naked short selling. Clearly it’s just talking about some of the issues regarding shorting in general. Perhaps the staffers got confused?
See for yourself if it’s really that appalling.