Matt Taibbi versus Goldman Sachs

Here's Matt Taibbi's Rolling Stone feature article on Goldman Sachs, via Zero Hedge, "The Great American Bubble Machine: 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". And here is Goldman Sachs's response, via Felix Salmon: "Goldman Sachs responds to Taibbi".

Incidentally, when I tried reading Matt Taibbi's article at Zero Hedge yesterday, the Scribd application wouldn't load, perhaps because it was overwhelmed with hits. So I headed to the Hackensack Barnes & Noble. I couldn't find Rolling Stone on the magazine rack, so I asked one of the Barnes & Noble clerks where it was. "Sold out," he said, "There was something important in it, I don't know what". I just started reading the article, so I don't have more to say about it, but you've got links to both sides of the story above. Feel free to add your thoughts in the comment thread.

Update:

A few thoughts, now that I've read Taibbi's article and Salmon's post on Goldman's response:

- There's some truth in Taibbi's article, but it's padded with a good measure of exaggeration. Goldman certainly participated in all the bubbles Taibbi mentions, and profited from them, but the dot-com bubble, the housing bubble, etc., would have happened without Goldman Sachs.

- Taibbi takes the hedge fund manager Masters at his word re: the commodities spike last year. Goldman is an enormous player in commodities, but one problem with blaming the commodity spike on paper speculation, or on firms such as Goldman getting pension funds to pour money into commodity index funds, is that the prices of commodities that aren't traded on futures markets or included in commodity indexes (for example, certain metals) spiked as well.

- Where the actions of Goldman employees and alumni deserve the most scrutiny is in relation to the bailouts of last year (and also the non-bailout of Lehman Brothers).

- Regarding this bit from Felix Salmon,

[Goldman Sachs public relations officer Lucas] Van Praag told me that in the wake of the events of the past year or two, Goldman’s partners have pretty much lost their appetite for going into public service. Maybe that’s for the best. They are generally smart and talented and knowledgeable people, and I daresay that many of them have done a lot of good after leaving the firm and joining government. At the same time, however, we’re supposed to have a government of the people, not a government of multimillionaire Goldman Sachs technocrats.

Two points: 1) I'd hate to think that any Goldman partners have soured on public service, but if they feel the need to do something altruistic, I'm sure no one will object if they decide to teach a high school math class or something after they retire with their managing director money. 2) Contra Salmon, I see no problem with multimillionaire technocrats in key positions in the Treasury department -- most knowledgeable finance types will have accumulated some wealth along the way, (even via side projects and consulting if they are academics). The problem is when so many of these multimillionaire technocrats come from the same firm. This is one case where there would be some inherent value in a little diversity.

An Astronomer with a Sense of Humor

A humorous letter to the editor in today's Financial Times, "Buy me a massive telescope or pay the consequences":

From Dr Charles Beichman

Sir, “Give me a billion dollars for my accelerator or I’ll kill your economy.” These words should strike terror into the hearts of bureaucrats everywhere. And the next time they hear them, those responsible for funding big science should immediately just hand over the money.

As your article (“Of couples and copulas,” April 25) on David Li^[1] describes, the flood of theoretical physicists, aka the “quants”, coming into Wall Street after the cancellation of the SuperConducting Super Collider (SSC) created the financial weapons of mass destruction whose power to annihilate wealth is now obvious.

With the loss of trillions of dollars throughout the world economy, how much safer we all would have been if Congress had just paid the ransom over a decade ago and kept all those physicists safe in their laboratory at the Waxahachie, Texas, site of the SSC. So, please, listen carefully when I say that we have one or two major space telescopes that need funding. Otherwise I might consider moving to Wall Street.

Charles Beichman,
Executive Director,
Nasa ExoPlanet Science Institute,
California Institute Of Technology, US

The image above, of David Li's Gaussian copula function, comes from the Wired article by Felix Salmon linked to in the footnote below.

^[1]Creator of the Gaussian copula default function ("the formula that killed Wall Street").