Taibbi and Morgenson

By Felix Salmon
November 3, 2010
My review of Matt Taibbi's new book is up at Bookforum; I enjoyed it a lot, and even learned from it.

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My review of Matt Taibbi’s new book is up at Bookforum; I enjoyed it a lot, and even learned from it. Meanwhile, Justin’s fair take on Gretchen Morgenson received a lot of pushback in the comments, much of which was unhelpfully ad hominem. (No, Justin is not a sexist misogynist, and criticizing Morgenson doesn’t make him one.)

I actually stand by my March 2007 criticism of Morgenson, in which I said that she didn’t provide any evidence of a looming crisis in the mortgage market. Certainly, with hindsight, I was too bullish back then, but so was Morgenson, whose prognostication was far from being remotely apocalyptic:

Fewer lenders means many potential homebuyers will find it more difficult to get credit, while hundreds of thousands of homes will go up for sale as borrowers default, further swamping a stalled market…

If home prices do not appreciate or if they fall, defaults will rise, and pension funds and others that embraced the mortgage securities market will have to record losses. And they will likely retreat from the market, analysts said, affecting consumers and the overall economy.

I was covering the housing market a fair amount back then, and indeed linked to an earlier post in which I spoke at length to one of Morgenson’s favorite sources, Josh Rosner, and said that “there are lots of reasons to be worried about the future of the mortgage market”. My issue with Morgenson was simply that her arguments didn’t make any sense, and that often her facts were simply incorrect.

If you wanted good reasons to be worried about the mortgage market in early 2007, you went to Rosner, or to Calculated Risk, or to Nouriel Roubini. If you wanted bad reasons to be worried about the mortgage market, you went to Morgenson. Yet still she asks for and gets lots of credit for her columns back then, simply by dint of her prominent perch at the NYT. If she was the blogger and Tanta had the NYT column, no one would have paid any attention to Morgenson at all.

That can’t be said of Taibbi, whose fierce and excoriating journalism for Rolling Stone has performed a very important function: it helped to get people angry, and to really care about issues which can become incredibly dry and boring very quickly.

What’s more, Taibbi’s stuff is fact-checked in a way that Morgenson’s isn’t. He doesn’t make the enormous howlers that Morgenson does, partly because he cares more about the nitty-gritty of this stuff, partly because he spends much more time on each piece, and partly because the RS lead times allow him lots of editorial support.

I can highly recommend that readers of this blog read two chapters in particular in Taibbi’s book: the one on Greenspan, and the one on AIG. The former is the most comprehensive take-down of the Maestro you’ll ever see; I’d be especially interested to see Brad DeLong’s take on Taibbi’s shrillness. And the AIG chapter, which concentrates on the securities-lending operation rather than on AIG Financial Products, actually breaks news about just how incompetent and stupid AIG was, particularly its securities-lending head Win Neuger.

Justin’s point was that if you ignore the detail in Morgenson’s pieces, the big picture is often correct. Taibbi is pretty much the other way around: the detail is fact-checked and correct, but he massively over-eggs the big picture. (Goldman Sachs did not singlehandedly engineer every financial bubble in living memory; Alan Greenspan is not “The Biggest Asshole in the Universe”.)

It’s easy, however, to read Taibbi and even to enjoy the hyperbole without taking it at face value. It’s much harder to separate the useful from the contentious with Morgenson. Which is why I think she’d benefit greatly from much more active, hands-on editing. The question is: who at the NYT has the time, the desire, and the ability to do that?

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