Opinion

Felix Salmon

Gasparino’s bizarre defense of Goldman Sachs (and Ben Stein)

By Felix Salmon
August 3, 2009

Charlie Gasparino knows that a well-argued print column is a much better tool for building credibility than any number of high-volume television appearances. Unfortunately, he seems to have a problem with the “well-argued” bit:

If AIG is imploding and you’re the government and you need help restructuring the company or figuring out ways the government can fix the problem, Goldman is a good place to start. Of course the firm had conflicts of interest—given its exposure to AIG insured debt and all its connections in government—but so did just about everyone else in this sordid mess, and at least the guys at Goldman are smart as hell. … (Ben Stein, it should be pointed out, once made a far more reasoned and persuasive attack against the firm in a column suggesting that Goldman had used its research to drive down the subprime market when it put on the short sale).

First, Goldman’s exposure/conflict when it came to AIG was a lot bigger than anybody else’s. The Goldman chaps may or may not have been “smart as hell”, but they were in a pretty pickle when it came to their $13 billion AIG exposure, and they really should have been barred from advising the government on AIG. Instead, as Joe Hagan puts it, they were “on every side of the large conference table, with triple the number of representatives as other banks” when the decision to bail out AIG was made. Yes, the other banks might have been conflicted, but they weren’t as conflicted as Goldman. And they weren’t nearly as zealous as Goldman when it came to lobbying the government to get what they wanted, either.

Second, just because its partners are “smart as hell”, in the words of TED, “doesn’t mean that Goldman Sachs isn’t out to get you.” Indeed, quite the opposite. That’s how they make their billions.

And most importantly, anybody who calls Ben Stein’s December 2007 column “reasoned and persuasive” is on crack. Obviously, I didn’t think much of it. But don’t take my word for it: ask Paul Krugman, Dean Baker, Yves Smith, Roger Ehrenberg, Brad DeLong, Calculated Risk, Chew Your Grouse, Ryan Avent, Talking Biz News, John Gapper, Mark Thoma, Herb Greenberg, or any of many others, including pretty much everybody at DealBreaker including John Carney (1, 2, 3, 4, 5, 6).

One of the more notable aspects of Matt Taibbi’s attack on Goldman Sachs is that although at first glance it looked as though he was taking an everything-and-the-kitchen-sink approach, in fact he stopped short of reiterating the craziest conspiracy theories, such as those of Ben Stein. If Gasparino chooses to take aim at Taibbi while defending Stein, he’s doomed to be considered as a blowhard at best, and a laughingstock at worst.

Comments
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Ben Stein would seem to be the poster child for the notion that having been graduated from elite educational institutions is no guarantee of intelligence.

 

The so-called conspiracy theories of Ben Stein really amount to no more than his suspicion that people at Goldman is involved in market manipulation, no? I’m not sure why that should be considered crazy.

Posted by Sterling | Report as abusive
 

Ben Stein compared “the invisible government of Goldman Sachs” to the KGB. I don’t think that’s market manipulation as usual.

 

Don’t pay much attention to Ben Stein usually.

I liked this Mother Jones story about Goldman Sachs:

http://www.motherjones.com/politics/2009  /07/how-you-finance-goldman-sachs’-pr ofits

But I have to say, I’ve read a whole lotta MSM stories talking about how Goldman’s fabulously profitable quarter means finance is healthy again – which seems odd when Goldman’s profits (and continued existence) are thanks entirely to federal subsidies and loan guarantees.

All of which makes Goldman Sachs the most profitable welfare recipient this nation has ever seen.

They are very bright, those Goldman boys – and when they were in the room with Paulson, discussing the disposition of AIG, they got exactly what they wanted (though, as they’re quick to note, they didn’t need the feds to give them 100 percent on the dollar – they didn’t need to be the biggest recipient of TARP’s AIG funds – but they were…)

 

Felix,

It’s flat-out untrue that Goldman had $13bn in exposure to AIG. It’s disappointing that after all this time, and all the controversy over Goldman’s relationship with AIG, you’re still repeating that line. The fact that Goldman received $13bn from AIG after it was bailed out says absolutely nothing about Goldman’s exposure to AIG. Surely you understand that. (At the very very least, you understand that securities lending is HIGHLY collateralized, right? Well, $4.8bn of that $13bn in cash flows to GS came from AIG’s securities lending unit, which had lent GS $4.8bn of agencies. That wasn’t terribly difficult analysis, was it?)

Also, why does no one ever mention that the Fed actually hired Morgan Stanley to advise them on whether to save AIG? You don’t think that’s just a little relevant?

Please, for the sake of minimal accuracy, stop repeating obviously false claims about the Goldman-AIG relationship. It’s impossible to have a real debate when people insist on making up their own facts.

 

I understand that you disagree with ben stein’s politics, but didn’t matt taibbi make basically the same argument ben stein did? that goldman manipulates markets in questionable ways?
frankly, i think the case against goldman for shorting subprime bonds while selling billions of them to unsuspecting investors is a lot bigger issue than high frequency trading, and stein was the first to bring this up.

but you are very proud of having “taken him down”, just like gasparino is doing to taibbi.

both stein and taibbi raise interesting points about the “culture” of goldman and their connections to the government, which basically makes the notion of them being prosecuted for such questionable behavior unthinkable.
rather than fanning the flames of some bogus controversy, you should be spending your valuable resources and prominent position thinking and writing about the important issues that lie beneath the surface. instead, like gasparino, you prefer name calling, especially for people who disagree with you politically.
your position and prominence is wasted on you otherwise.

Posted by hey there | Report as abusive
 

Let’s see, Gasparino is wrong about Heidi Taibbi because Gasparino is wrong about Ben Stein. A tad illogical.

As far as I can see, the 12.9 billion was a square deal. Maybe if I took some LSD I would see what all the conspiracy theorists are seeing.

Economics of Contempt, the dizzy media could really use you.

Posted by JCH | Report as abusive
 

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