With Memorial Day right around the corner, you're no doubt ready to settle into a beach chair with a copy of the Senate Subcommittee on Investigations’ 639-page Wall Street and the Financial Crisis: Anatomy of a Financial Collapse.
Well maybe you're not actually going to read the report [pdf], which was co-authored by Sens. Carl Levin (D-Michigan) and Tom Coburn (R-Oklahoma). But you still might enjoy Matt Taibbi's gloss on it in Rolling Stone:
Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences...
Defenders of Goldman have been quick to insist that while the bank may have had a few ethical slips here and there, its only real offense was being too good at making money. We now know, unequivocally, that this is bullshit. Goldman isn't a pudgy housewife who broke her diet with a few Nilla Wafers between meals — it's an advanced-stage, 1,100-pound medical emergency who hasn't left his apartment in six years, and is found by paramedics buried up to his eyes in cupcake wrappers and pizza boxes. If the evidence in the Levin report is ignored, then Goldman will have achieved a kind of corrupt-enterprise nirvana. Caught, but still free: above the law.
I thought the claim that Goldman was too good at making money died three years ago, when American taxpayers were, against their will, committed to paying $700 billion so the investment bank and its direct counterparties would not lose money on their bad bets. Had that not happened, we would now be looking at a poorer, wiser Goldman Sachs, several fewer financial behemoths of both U.S. and European vintage, and a true price for properties in the American real estate market.
Instead we get Taibbi fulminating in his wooly way about Goldman’s escape – “as its clients roasted to death in a raging conflagration of losses,” and so on. He rightly reviles the bank for dumping “a huge lot of deadly mortgages on its clients.” He stands up for corner-store Arabs:
Yes, they will say, it may very well be a prosecutable crime for a corner-store Arab to take $2 from a customer selling tap water as Perrier. But that does not mean it's a crime for Goldman Sachs to take $100 million from a foreign hedge fund doing the same thing!
While Taibbi’s foot-stomping Rumpelstiltskin rants are always enjoyable, this is just woolgathering. The Great Disappointment occurred in 2008, when a banking system that needed to die was allegedly saved. It’s fine for Taibbi to get his Irish up about the bailouts that all, in one way or another, ended up keeping Goldman from losing money. It’s fine for him to call for fraud indictments – though I’m less confident than he is about the prospect for justice in a world where famous-enough people can be imprisoned for acting on a good stock tip, and the full RICO-invoking, wiretapping power of the state can be initiated (against a big Democratic donor by a Republican Justice Department – just sayin’) over the made-up crime of “insider trading.” (Like all made-up crimes, insider trading is advertised as a subdivision of an actual crime – fraud – but is in practice used to criminalize behavior that falls short of the actual crime.)
But there’s no way to prosecute $700 billion back into our pockets. Which is why Taibbi’s fulsome praise of Levin (a “Harvard-educated lawyer,” don’tcha know) is not to be taken seriously. Levin showed where he stood in October 2008, when he joined 73 other senators in approving the TARP.
Prior to that vote, Levin in June supported the $300 billion Housing and Economic Recovery Act of 2008. This first effort to rescue the GSEs Fannie Mae and Freddie Mac put taxpayers on the hook for a much broader range of bad mortgages, while also encouraging home buyers to take on larger piles of taxpayer-guaranteed debt. It also failed to make Fannie and Freddie solvent; they were put under a Treasury Department conservatorship in September of that year and have gone on to suck hundreds of billions of dollars more out of the taxpayers. Arguing for an auto industry bailout later in the year, Levin used the logic that it was only fair given the above bailouts for the financial industry.
In 2008, Levin was one of the most powerful people in a broad-daylight conspiracy to prevent nature from taking its course and punishing malefactors. Now we’re supposed to be grateful because his subsequent grandstanding resulted in the word “shitty” being uttered in the U.S. Senate? Even knowing his taste for potty language, I’d expect Taibbi to have a higher standard for what he lets past his bullshit detector.