Matt Taibbi vs the SEC

By Felix Salmon
August 18, 2011
Matt Taibbi's 5,000-word exposé of the SEC's document-shredding is a magnificent piece of journalism, and is the first and last place that you should look to understand what's going on here.

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Matt Taibbi’s 5,000-word exposé of the SEC’s document-shredding is a magnificent piece of journalism, and is the first and last place that you should look to understand what’s going on here. After the piece came out, Senator Chuck Grassley — who’s quoted in the article — made growling noises in the general direction of the SEC, which is now very much on the back foot. But all the news and background that you need can and should be found in Taibbi’s article, rather than Grassley’s 325-word press release.

So how well is the mainstream media reporting this news? Everybody’s reporting Grassley’s statement, of course, as they should be. But the WSJ, Bloomberg, FT newspaper, and even Reuters make no mention of Taibbi or his article at all. The NYT is better, providing a link to the article and saying that the document disposal was “first reported by Rolling Stone magazine on Wednesday”, but the link feels grudging and there’s nothing which indicates that if you follow the link you’ll get a much fuller and richer version of the story than you’ll get from the NYT. Only FT Alphaville draws a direct connection between Taibbi’s article and Grassley’s statement and really encourages you to read the piece.

Blogs and Twitter, of course, are much better. Zero Hedge, Dealbreaker, Naked Capitalism, Daily Intelligencer, Clusterstock, Atlantic Wire, and many others took Taibbi’s article seriously, linked to it prominently, devoted entire posts to it, and mentioned him by name rather than just referencing the name of his publication. The Huffington Post gave the article its standard aggregation treatment, and Arianna tweeted it personally.

As for the substance of the article, Taibbi makes a very strong case. Only Matt Levine has attempted a defense of the SEC, and he says that the agency’s policy of destroying files was “publicly announced”, when in fact it was a secret internal policy which the SEC wouldn’t even admit to when asked point-blank by the National Archives and Records Administration, the agency in charge of all federal document-disposal decisions. Levine says that “the trouble with Big Brother was too much all-pervading surveillance, not too little”; the financial crisis, I think, proves him clearly wrong on that front. The SEC in particular was toothless and ineffective for the entire Bush Administration, effectively giving banks and other fraudsters a green light to do anything they wanted. And its response to these latest allegations has been distressingly defensive and obfuscatory.

I hope this turns into a big scandal and causes significant changes at the SEC — although I’m not holding my breath. But if it does, Taibbi will deserve a huge amount of the credit. And judging by today’s coverage, he won’t get it from the mainstream financial press.


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” How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? ”

Let’s Roll the Tape:

Felix Salmon had an interesting post on Lehman:

“According to its official balance sheet, Lehman Brothers had total stockholder equity, when it went bust, of about $26 billion: assets of about $639 billion minus liabilities of about $613 billion.
Lehman’s shareholders have, of course, been wiped out; its assets, once they’re liquidated and worked out, will go to its bondholders. Those bonds are trading at no more than about 10 cents on the dollar, which implies that the assets, far from being worth $639 billion, are in fact worth only about $60 billion.

Now I understand that things go at a discount when they’re liquidated. But a $580 billion discount? That’s beyond sense. There’s something weird going on here, which I hope someone in the blogosphere will be able to explain to me”

Read the rest and the comments which are interesting. Here’s my comment:

Posted: Nov 03 2008 10:26am ET
“Was it really worth only a tenth of that, by Lehman’s senior management?”

You and the people in comments are making great points, but I still smell fraud given the previous posts and this one about Lehman.

There is simply too much ambiguity in all these transactions for me to credit goodwill. I want to wait and see what litigation and later investigations tell us about this event.

Investments that seem reasonable when described, were compromised by lack of capital and fear of risk. I can’t help but think that many investors in Lehman must have been misled.

I actually feel that fraud will play a major role in the history of this overall crisis.
By DonthelibertarianDemocrat

Given my human agency theory, I believe that fraud is going to be a major issue in this crisis, along with the implicit and explicit government guarantees. It will not be the financial products themselves, or even regulation, because fraud was involved, not simply poor investments.

Posted by DonthelibertDem | Report as abusive

I think our overlords are a bunch if douchebags.

Posted by SouthernBeale | Report as abusive

Taibbi can be kind of a jerk, scratch that, rather full of hate as witnessed in his “The 52 Funniest Things About The Upcoming Death of The Pope” a few years ago.

And yet, when it comes to reporters actually doing hard work and trying to actually do investigative reporting, it is this guy who actually shows up to do his job, of all the thousands out there.

Posted by DanHess | Report as abusive

All of the records were recorded for the record, however, we did not record that record being, for the record, they were not recorded as official record and so do not apply.

Posted by hsvkitty | Report as abusive

My comments to Senate Banking Ranking Member Richard Shelby:

After reading the recent article by Matt Taibbi of Rolling Stone link – s/is-the-sec-covering-up-wall-street-cri mes-20110817

I wonder what your response will be. I can tell you this is the swan song for the Wall Street friendly congress. I fully expect you and the banking committee to disembowel these ivory tower SEC officials for the unforgivable cover up they have been so blatantly been part to. I would like to know what actions will be taken by your offices in order to protect the common man – who you are there to protect. Yes, I do think this is an indictment of a system that includes your office 100%, and I do expect action or removal of the folks that are responsible.

Posted by Anonymous | Report as abusive

Remember the wild parties Dept of Interior was throwing back then; the regulation-free unbridled avarice parties? If you think this kind of stuff wasn’t going on at Comptroller of the Currency and Treasury you’re an idiot (and I’m sure the Fed threw the best regulation-free money orgies, and still is). Boy when Bernanke, Paulson and Geithner threw a legal free-for-all no financial law or regulation was sacred(just ask Kenneth Lewis). The breadth and scope of laws that got broken in this Country by the Financial Industry between 2002 and 2008 is absolutely unfathomable. And who have we seen hung out to dry – Madoff? Whoop-dee-doo! And then O’bama puts the same guys in charge who caused the mess. Don’t think for a minute there aren’t a lot of people still extremely pissed about this. How can anyone expect this economy to pull out strongly when its carrying so much putrid, cancerous dead-weight along with it ..

Posted by Woltmann | Report as abusive

@hsvkitty: Most excellent! You must have worked for a government at some point.

Posted by Curmudgeon | Report as abusive

what about wikipedia!!! i spent a whole 10 minutes (minus a pee break) editing the SEC article.

Posted by decora | Report as abusive

It’s difficult for the mainstreamers to credit a journalist who inhabits the Hunter S. Thompson desk at Rolling Stone magazine.

Posted by AndyDiogenes | Report as abusive

*cough* Pulitzer Committee? *cough* Wonder what they are reading on their August vacations…

Posted by melior | Report as abusive

Wehave a serious problem,here. For decades, the MSM has dismissed the investigative journalism of Rolling Stone Magazine. Dismiss this source at your peril. Yes! Matt Taibbi may be perceived as a journalist who has enherited the seat of Hunter S. Thompson. But he brings more to the table – without a trunkful of various uppers/downers on a road trip to Las Vegas.
Matt Taibbi is the real thing, and I feel inclined to bring aboard Tim Dickerson. Don’t like them? Don’t like the truth?
Who likes to be faced with our stupidity?
Well, I do! I love Matt Taibbi and the truth which with he smacks me right dab in the face….

Posted by cqsallie | Report as abusive

Matt Taibbi is a rock star investigative reporter. He sets the current day example of what EVERY reporter should strive for in the service of their jobs and public interest.

He’s smart, funny, accurate, revealing, insightful and makes all the right connection along with just the right amount of tongue in cheek sarcasm.

It is not hyperbole to put him in the same league at Woodward and Bernstein and you have to look long and wide to find another reporter with the skill and courage to “tell it like it is” clearly and bluntly. Howard Cosell comes to mind.

Posted by Someman | Report as abusive

I want to commend you on your work regarding the SEC. It is dispicable what is going on there. Please keep on them. Let me know if there is anything I can do to support you.
thank you

Posted by johnplatero | Report as abusive