This week on CounterSpin: Goldman Sachs, Wall Street profiteering and... vampire squids. Wait, what was that last one? Journalist Matt Taibbi wrote a long takedown of the venerable Wall Street firm in Rolling Stone. Business journalists pronounced themselves mostly unimpressed with Taibbi's analysis, and troubled by his language—like calling the company 'a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.' Subtle it is not. But what should we make of the reaction to the piece, from Wall Street and from other reporters? And does reporting like Taibbi's shine a different sort of light on the financial industry, or—as some of Taibbi's critics have it—distract us from more important matters? We'll put those questions to Matt Taibbi today on a special edition of CounterSpin.
All that's coming up, but first we'll take a look back at the week's press.
--The debate over healthcare policy continues to take its twists and turns, some of the most recent reporting suggesting that the White House seems ready to drop its support for the so-called public option. This is precisely the kind of rightward shift many in the press have been seeking; in the August 17 Washington Post, one story led this way: "Racing to regain control of the health-care debate, two top administration officials signaled Sunday that the White House may be willing to jettison a controversial government-run insurance plan favored by liberals."
Well there's a lot there to unpack, but let's try. The White House decision is framed as 'regaining control,' which is a strange euphemism for backtracking; the public option is 'controversial,' and its appeal is apparently restricted mainly to liberals.
A more interesting piece came in the Los Angeles Times, where several paragraphs into the story we read this very simple statement: "Polls have shown that a large majority of Americans favor a public option." Funny, then, that the lead sentence carried a different message: "By dropping his insistence on a public insurance option, President Obama angered some of his most loyal supporters but sharply improved the odds of passing a far-reaching healthcare overhaul."
Now a more coherent media system would try to explain to citizens how and why something that is popularly supported is nonetheless politically impossible, and thus how it is that removing one of the more popular features of a bill 'improves the odds' of passing that bill. Now THAT would be a great story.
-The escalation of the Afghanistan war was the "Topic A" discussion on the Washington Post op-ed page on August 16--that's a regular feature where they ask a panel of Important People to weigh in on an issue of the day. The title of the exchange was 'How Many Troops for Afghanistan?'--one can already spot a problem with that--and the panel they assembled left a lot to be desired. On the one hand, Congressman Dennis Kucinich, a strong critic of escalating the war, was given space to make his argument. But his presence was 'balanced' by four others, three of whom were definitely pro-escalation, and one pollster who addressed the public opinion problem—in other words, the fact that the Afghanistan war isn't supported by most Americans.
So besides Kucinich, the Post gave readers former Bush and Reagan aide Ed Rogers (he wrote that escalation "is necessary to avoid the political and security debacle that would arise from an American failure there"); Scott Keeter of the Pew Research Center (who advised that the "public opinion climate for sending more troops is difficult--but not impossible"), Harvard professor--and former special assistant to George W. Bush--Meghan Sullivan (she suggested Obama "should reject three arguments currently made against accepting a recommendation for more troops"), and Georgetown professor Andrew Natsios (who, in the name of stability, called for "substantially more U.S. and allied troops conducting a classic counterinsurgency campaign to take and hold territory and protect the civilian population"). Little time, then, for much that would reflect the public's dissatisfaction with the Afghanistan war.
-The Tennis Channel recently targeted Cablevision with a hard hitting ad over the cable giant's refusal to carry the station. "Thanks for nothing" begins the ad, admonishing Cablevision for depriving its subscribers: "You've dropped the ball by preventing your subscribers from seeing Tennis Channel's round-the-clock coverage of the U.S. Open."
According to the New York Times, the ad was run by all the papers it was offered to, except for one: Long Island's Newsday--which is owned by...Cablevision.
According to the Times, Cablevision put out a statement saying the ads were "nasty, unfair and intentionally misleading." But the Times was unable to get anyone at Newsday or Cablevision to comment on who made the decision to reject the ad, leaving questions about Newsday's independence from it corporate parent unanswered. It also raises questions about whether a cable company that uses public resources and rightaways should be able to decide what you can watch based on its own narrow interests. Overall, it's another story rife with lessons about how corporate interests trump public interests in the world of conglomerate media.
-Bob Novak, the ultra-conservative if quirky commentator, passed away on August 18. His career was a testimony to corporate media's affinity for far-right commentators, whatever their faults. Beginning as a shoe leather reporter, Novak became one of the most widely circulated opinion columnists in the country, and had perches on a number of well-known television shows, including CNN staples like Crossfire, Capital Gang and Evans & Novak.
On the story for which he will likely be best remembered, the hawkish Novak revealed the name of active CIA agent Valerie Plame; then, after stalwart pronouncements that he would never reveal his sources, he caved in when pressure was brought to bear.
There were also Novak's somewhat shifting standards. Following Barack Obama's 2008 election Novak said he was unimpressed by his margin of victory, writing that Obama "neither received a broad mandate from the public nor the needed large congressional majorities." But when asked in 2004 if George W. Bush's smaller margin of victory was a mandate, Novak declared confidently, "Of course it is."
In 2000 Novak complained that the speakers list for the Republican Convention was too diverse: "I was looking at the schedule for tonight's proceedings.... We have tonight four African-Americans, two Jews, five Hispanics and an Asian.... Boy, I thought I was in San Francisco with the Democrats."
When it was explained to Novak that diversity might be a strength, he responded: "What about white people? Not too many." Of the Democratic Convention the same year, Novak said: "The Democrats are skating on very thin ice. They are a party of minorities. They are a party of the African-Americans, the Hispanic-Americans, and a certain percentage of the women."
The fact that Novak thrived in the corporate media for so long might not say as much about his talents as it does about media itself, which never seem to tire of right-wing ideologues.
-And finally, Hillary Clinton recently spent several days in Africa, visiting rape survivors in Congo, meeting with heads of state of various countries and specifically working to focus on women's rights and economic development. But what was the top story in U.S. media? Clinton's testy response to a question about what her husband thought of Chinese business interests in Congo.
That exchange prompted a whole story in the August 13 New York Times—'Clinton's Flash of Pique in Congo' by Jeffrey Gettleman. While that's already kind of sad, it turns out the questioner misspoke; he actually meant to ask what Barack Obama thought of these business deals. But as Gettleman explained, "That interpretation did not dispel the controversy either, since it gave new life to the nagging question of whether Mrs. Clinton felt marginalized in the Obama administration."
So apparently you get to psychoanalyze Clinton either way; if the question was really about Obama, you can take the answer she gave to the question about her husband and use it to gauge her true feelings about her role in the Obama administration.
Gettleman's piece concluded this way: "No matter the issues she was talking about--encouraging good governing, ending Africa's wars, lifting women up from their lowly position in a place like Congo. The interest in this trip, it seemed, was not about the problems facing Africa. It was about her. As one journalist covering her trip put it: 'She is a celebrity. We have a celebrity secretary of state. When you have a celebrity, you get celebrity coverage.'"
Well, you heard it straight from the Gray Lady, folks: with Hillary Clinton as secretary of state, they'll be covering U.S. foreign policy with their paparazzi hats on. Glad to hear those few remaining foreign bureaus will be put to good use.
CounterSpin: Well, there's been no shortage of coverage, much of it too little too late, of the financial meltdown and its myriad consequences for Wall Street, the global economy, and every so often, if there's any time left, the rest of us. But few accounts would, say, liken the venerable investment firm Goldman Sachs to a great vampire squid wrapped around the face of humanity. That's precisely how Matt Taibbi described the company in the pages of Rolling Stone magazine. To say it unsettled many financial beat reporters would probably be an understatement. The article was derided as a patchwork of conspiracy theories, the work of someone who just doesn't understand Wall Street, and so on and so on. There's no surprises, but what's been the most instructive lesson amidst all of the fallout? We're joined now by Matt Taibbi, political reporter for Rolling Stone magazine, where he wrote the piece "The Great American Bubble Machine." Matt, welcome to CounterSpin!
Matt Taibbi: Thanks for having me on.
CS: Now the Goldman Sachs piece is obviously the one that's getting all of this attention, but to understand that piece, it seems to me you have to look back at one you wrote a few months earlier called "The Big Takeover," which was primarily about the government and the collapse of the insurance giant AIG. Without getting too deep in the weeds, tell us where the AIG and the Goldman stories kind of meet up.
MT: Well, they assigned me to do a story about, you know, the causes of the financial crises and we decided to focus on the AIG collapse as a narrative to sort of hang the whole story of the collapse of Wall Street around. And then, you know, I had no background at all in any of this stuff going into that story, and when I started to research what happened with AIG, I kept getting people pointing me in the direction of, you know, look what Goldman Sachs
managed to achieve the weekend of the AIG bailout. The important thing to remember about AIG and Goldman Sachs is that AIG owed Goldman about $20 billion, and had AIG gone to a normal bankruptcy without government intervention, Goldman Sachs might have been out of business. Instead Goldman ended up with a massive influx of taxpayer money, and it also saw that same weekend its primary competitor Lehman Brothers not rescued by the goverment, so it ended up triumphant that weekend as opposed to out of business. So we noticed that and we decided to follow it up with a story on Goldman.
CS: The basic outline of that doesn't seem very controversial. Goldman's AIG money, though, doesn't get much attention in the rest of the press. The media do those kind of regular tallies of all the bailout funds and the TARP money for given companies, and AIG money that Goldman received usually doesn't seem to make it into the total. It's sort of invisible assistance.
MT: Well, it's creeping into the total. I think people are beginning to recognize that 13 billion of the dollars that went to AIG during that bailout went directly to Goldman Sachs, and that's sort of a--that's a
combination of money that AIG owed it via the notorious division AIGFP, which was sort of like--it was dealing in derivatives and credit default swaps, and also the securities lending wing of AIG, so those two departments total owed Goldman, at the time of the bailout about $13 billion, and they got all of that money. They got 100 cents on the dollar on that. And that was brought up by a number of Congressional representatives, and people started to get a little bit upset about that, I think earlier this year. I know there were several Congressmen who were looking into that. Especially since it was a former head of Goldman Sachs who greenlighted the bailout - Hank Paulson - so I think that it was that aspect of it that was shocking to most people.
CS: And that's where your piece, I guess, kind of steps into this. Everywhere you look in this story, you find guys who either still work at Goldman in some fashion or just finished working at Goldman who are now in charge of the bailout or any other sort of goverment responsibilities. What is it about Goldman, bubble economies, and the government?
MT: They just have an extraordinary record of placing people in high-ranking positions, especially in the regulatory framework. I mean if you just look at
the AIG bailout, in and around that whole mess, you had Paulson, obviously, who's the former Secretary of the Treasury. The head of the New York Fed at the time of that bailout was Stephen Friedman, who was also a former head of Goldman Sachs. Timothy Geithner, who never worked for Goldman Sachs but worked for, worked under, at least five different high-ranking Goldman Sachs executives. Of
course, they weren't at Goldman at the time, but people like Bob Rubin and Friedman, who worked at the Treasury and various other places. The person who was eventually put in charge of AIG, Ed Liddy, was a former Goldman Sachs banker. The guy who administered the TARP program, Neil Kashkari, was a Goldman banker. They're just all over the place, and, you know, also the CEO of Goldman Sachs, Lloyd Blankfein, was in the room when the AIG bailout was being negotiated, and he didn't really have an official role there, so that's also kind of mysterious that that happened. So they were everywhere.
CS: And knowing this, I guess, you're not as surprised a couple of weeks ago when Goldman announces, hey in the midst of this worldwide economic recession, at the very least, we just made gobs of money. I guess it goes without saying that that's what they do?
MT: Well, the thing that people don't really understand about Goldman, yeah, that's true, about a month and a half ago, they announced that they had made a second
quarter profit of $3.4 billion, which is just an enormous amount of money given where they were this time last year or a little bit later. But, you know, it's almost purely state subsidy, those monies. In addition to the 13 billion that they got through AIG, they got 10 billion from the TARP program, which, of course, they paid back, but that was kind of inconsequential. The most important money that they got was through something called a temporary liquidity guarantee program, and when Goldman last year converted from an investment bank to a commercial bank--and incidentally they were given a waiver to do that overnight, whereas usually you have to wait a full week to do that--that made them eligible for FDIC backing for about $29 billion in loans that they put out last year. So basically Goldman Sachs, and all the other banks on Wall Street too, were basically getting their money for very cheaply, almost for free, from the goverment, and then they were lending it out at market rates. And it's not hard for a bank to make money when the spreads were like that. The cost of the capital was so low that they virturally couldn't avoid making money, and that's how they made those profits.
CS: And there is a bit of light shining there now, just reading all of these accounts about how Goldman has these special computers that can make any trade a fraction of a second faster than any other bank, and now there are regulators saying well maybe that's unfair as well.
MT: Well, yeah, there was an extraordinary story--and we have not heard the end of this yet--there was a Russian fellow named Sergey Aleynikov who worked for Goldman's program trading desk, and he was involved in the computerized training operation at Goldman. He left the company and attempted to steal their program and take it to a competitor. Goldman reached out to the FBI, who, of course, immediately had him arrested, like the next day. And what was amazing about this story is when the prosecutor got up at the arraignment to describe this crime, he said that the program that Aleynikov stole, in the words of the prosecutor, he said, in the wrong hands could be used to manipulate the New York Stock Exchange, so it could be used to unfairly manipulate the New York Stock Exchange--so apparently in the right hands it's okay, but in the wrong hands it's something that they could have used to cheat. And I think we haven't heard the end of that story yet. We're going to find out what that program was, and that should be pretty interesting.
CS: Yeah, well, reporting this piece, you're obviously a business correspondent, you're not a financial reporter per se--this is not exactly lost on your critics--how hard was it to get people in this Wall Street world to talk about Goldman Sachs, and was it difficult to sort of filter out the sour grapes?
MT: Initially the problem wasn't getting people to talk to me, initially the problem was for me understanding what people were saying to me. I think anybody who's covered Wall Street knows that it's almost like a foreign language when people talk about this material, especially the, you know, the derivatives, commodities trading, which can be an incredibly complex type of business. And, you know, I needed to do a sort of a crash course in all this stuff and until you've learned that language, it's really, really hard to get people to talk to you. It was hard for me initially, but after the AIG piece came out, we started
to get people calling in and saying, hey look, I've been working at this bank for a while or at X Bank, Y Bank, Z Bank, and you know, I've seen some ugly stuff and I want to talk about it. And that's been happening more and more often in the last--since the last two pieces came out.
CS: You've written about the political element to that, that if these supposed experts in this field are really under no obligation to explain this stuff to people, and when they try to they say, well, see, you just can't follow it because you've got to be really smart to make this kind of money, it does basically send a message to people that what we do here is our business and the goverment is going to sort it out if this thing goes belly up.
MT: Well I think this is a huge issue, because the economy has gotten to the point where it's simply, it's too complex for ordinary people to grasp what's going on. And as a result the companies who are involved in a lot of these transactions have a natural defense against public inquiry, because the public can't understand it. They can't read the financial news and understand what's going on. They don't have the wherewithall to really know when they're being manipulated or mistreated. So they ignore a lot of what goes on on Wall Street, and at this point it's become almost like an act of dissent or a revolutionary act just to explain Wall Street machinations to the general reading public. And that's kind of what we see our role as right now. It's not so much, you know, breaking news, or publishing exposes, it's just kind of explaining how everything works. And what we found is, once you do that there's an enormous response, because people just find out that they've, a lot of stuff they didn't understand is really offensive and that they would've liked to have
known more about it before.
CS: I remember reading, I think, you did a--maybe a two paragraph summary of what a collateralized debt obligation was, and to someone who doesn't do that for a living, you just look at that description of it and say, well that's crazy. If everyone understood this, I guess it would be different. Well, it's no surprise that Goldman Sachs didn't like the piece, but talk about the reaction from other journalists and pundits. I was listening to Don Imus one morning, and he was talking about how he was trying to arrange a debate with you and I think Neil Cavuto from the Fox Business channel.
MT: Yeah, what I've found is that, surprisingly, most of the financial people that I talked to have been very supportive about the reporting that I've done, and I run into very few people when I'm just cold calling various financial organizations who are hostile to what I'm saying. But it's a small kind of insider group of financial journalists who I think were offended not so much at the content of the article but more at the notion, you know, here's a music magazine that's attempting to come in and say something important about the financial world, and they just don't see that as being our role. And I think that's where most of the frustration has come from. It's cause there's an implication in our piece, of course, that the reason we're doing this is because the financial press hasn't been doing it's job. And so there's some resentment there, too.
CS: I guess Jim Cramer is the one who's supposed to explain this to the public?
MT: Well, Jim Cramer, Aaron Burnett, again these are former Goldman Sachs executives. I mean, they're everywhere.
CS: I remember Gary Webb running into this when he was writing about the CIA and crack cocaine--that big foot reporters were coming in and saying no no, we're the ones who write about the CIA, not you, you're sort of second-string daily newspaper. I did notice that one of the defenses this Heidi Moore wrote at The Big Money website that--and, you know, it's been hard to try to follow their logic through some of this--she was saying well, if Goldman's so powerful, how come people from Goldman aren't as effective and powerful when they confront or become part of the government, and also Goldman men don't dress to impress. How do you, is there a way to respond to this stuff?
MT: I actually, when I read that whole thing about how the criticisms of Goldman and their role in, you know, manipulation of the commodities markets can't be true
because they dress frumpily--there's just no way to respond to that kind of thing intelligently. But, you know, that was kind of the substance of the criticism that we got, and in a way it was kind of surprising because what we
expected given the fact that I don't have a finanacial background is that someone would put out, like a 20-page primer on every single mistake that I had made or misconception and instead most of what we got was stuff like that--it was really amateurish and bizarre more than anything else.
CS: Well, there is a certain kind of reaction from others in the press that's to be expected--you know, "you're not one of us" is what you hear a lot of people saying--but on another level, and maybe this is too kind to the reporters, there is this sense that, well yeah the story's there, the facts are all in order, but gosh does he have to use the f-word? This cannot be the first time you've ever thought about this or heard this, but what do you say to people who ask about that?
MT: I understand that, and, you know, I do think about that. As you get older, and I'm, you know, I'm pushing 40 now so, I don't think there's anything like a rule about when you can and cannot use that kind of language. It's either appropriate and it works as writing or it doesn't. I've had people argue to me that they don't have any intrinsic objection to it, it's just that it doesn't work as well. And I'm staring to listen to that a little bit. I think when I was younger, that's just the way that I talked. I'm trying to create a kind of style where people feel like it's someone who's a friend of theirs who
they're just having a conversation with, and that's the way people talk. But, you know, as I get older, I might be reconsidering that a little bit.
CS: I guess the flip side of it is there are a hundred stories anyone can read about Goldman Sachs and people are talking about this one and not the other 99, so...
MT: Right, clearly, whether you're talking about the profanity or not, the kind of extreme rhetoric that I do use is, you know, I think it has its place. I think, obviously, journalism is sometimes supposed to be even-handed, it's supposed to present both sides of the case. That's not what I do. I try to kind of make a case for the prosecution, and I try to make it hit as hard as possible in one direction, and, you know, that's part of the technique that you use is very strong language, and I think it can be effective. I think there's a place for it.
CS: Reading this history of Ramparts magazine--which in a way is sort of a precursor to Rolling Stone--and the impression you got from that, from the people who were around Ramparts, was that the journalism of the late '60s was so lacking that this magazine could come forward and write these really out-there pieces and they would take hold because the rest of the media were kind of sleeping through this.
MT: Yeah, I think--well, certainly with regards to Wall Street, that situation exists because I don't think there's any question that the mainstream financial press has gotten too close to its subject. There's an enormous amount of money in this community, and there are a lot of reporters who think that if they stay tight with their subjects, they're eventually going to get a job or they're going to be included in that society. And there just isn't enough adversarial reporting in Wall Street. And there needs to be, I think as we've seen. It's turned into this massive crisis because there isn't any check at all on what goes on there--so yeah, I would agree with that. I think there's a vacuum that allows people like me, and we've also seen Joe Hagan now from New York step in and do that kind of stuff. And it's Wall Street's own fault that that's happening.
CS: Well, we've been speaking to Matt Taibbi. You can read his piece, "The Great American Bubble Machine," at rollingstone.com. He also blogs at trueslant.com and his most recent book is The Great Derangement: A Terrifying True Story of War, Politics and Religion. Matt Taibbi, thanks so much for joining us this week on CounterSpin!
MT: Thanks for having me on.