Although Matti Taibbi’s “vampire squid” was intensely memorable, the basic thought behind his famous Rolling Stone column was anticipated by Ben Stein almost two years ago.
- Goldman Sachs is secretly running the world.
- Goldman has been a multi-generational bubble factory.
- Goldman immorally marketed mortgage backed securities while its traders were shorting them.
“The world is far too complex a place to be run by any one group,” Stein wrote. “But the closest I have recently seen to such a world-running body would have to be a certain large investment bank, whose alums are routinely Treasury secretaries, high advisers to presidents, and occasionally a governor or United States senator.”
The column was widely pilloried at the time. Part of the problem for Stein was that he was writing before the financial crisis had become obvious. And his column is built around the idea that things wouldn’t get too bad and that Goldmn Sachs was “selling fear” to help its short positions. That seemed like a stretch back in December of 2007 and laughable now.(For a rundown of the contemporary critiques of Stein’s column, click here.)
At its core, Stein’s 2007 column was deeply confused. The problem was that Stein was a holdout against reality when it came to mortgages and the financial sector. Even as the bubble was deflating, Stein clung to bubble think. For instance, in discussing the flaws with a Goldman Sachs economist’s analysis he says, “Among them were his hypothesis that home prices would fall an average of 15 per cent nationwide (an event that has never happened since the Depression, although we surely could be headed in that direction), and that this would lead to a drastic increase in defaults and losses by lenders.”
Matt Taibbi enjoys an advantage over Stein: he wrote his Goldman conspiracy thesis two years later. So Matt didn’t suffer from the delusion that things wouldn’t get too bad. But much of his analysis, including citing a 1929 mutual fund started by Goldman, is basically an expansion of Stein’s.
“Should Henry M. Paulson Jr., who formerly ran a firm that engaged in this kind of conduct, be serving as Treasury secretary? Should there not be some inquiry into what the invisible government of Goldman (and the rest of Wall Street) did to create this disaster, which has caught up with some Wall Street firms but not the nimble Goldman?” one of them said. It really doesn’t matter whether it was Taibbi or Stein. Either one of them could have written those words.
Want to know something really kooky? Back in 2007, CNBC’s Charlie Gasparino was one of Stein’s biggest defenders.
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