Dec/Jan 2011

Giant Sucking Sound

Felix Salmon


Matt Taibbi is, by some margin, the best polemical journalist in America. His dispatches for Rolling Stone—long, carefully reported, deeply angry, and chock-full of information and vitriol—throw complex policy debates into stark relief and are loud and powerful enough to compete with the sex and celebrity filling up the rest of the magazine.

One of Taibbi's signal talents is that he repeats this feat on a regular basis: He's no one-trick pony. But the undoubted high point of his career—the phrase that will make it into the first paragraph of his obituary, no matter how long he lives—came in his July 2009 article on Goldman Sachs, when he described the venerable investment bank as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Never mind that the vampire squid is only a few inches long, poses no threat to humans, is more prey than predator, and has no such thing as a blood funnel. The moniker attached itself to Goldman Sachs like an ardent barnacle (I'm telling you, these marine metaphors are harder than they look). It didn't take long before Goldman employees stopped responding to calamari jokes in good humor and began greeting them instead with dead stares.

Among those who follow the bank closely (which is just about everybody in finance), the meme of Goldman Sachs as vampire squid has proved much more durable even than the record $550 million fine Goldman paid after getting into hot water with the SEC over a dodgy collateralized debt obligation. Indeed, since the SEC investigation resulted in a $10 billion loss in Goldman's market capitalization, it's no great stretch to say that the shift in public perception ushered in by Taibbi's scorching takedown has likely deprived Goldman's partners of hundreds of millions of dollars in net worth.

The Goldman chapter is the climax of Taibbi's new book, Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America. You can see why that might be the case from the title alone: "Bubble machines" is also a reference to Goldman. But in fact the Goldman chapter is far from the strongest entry in this collection of seven self-contained essays, all loosely connected by the theme of rich and powerful people growing richer and more powerful at the expense of the rest of us.

The first, on the Tea Party, is the most politically astute, a keenly observed and whip-smart take on the familiar thesis that the Republican party's rank and file is being expertly manipulated by a small group of plutocrats. I'd forgotten, but Taibbi forcefully reminded me, that the very name of the Tea Party comes from a bonkers rant by CNBC contributor Rick Santelli on the floor of a Chicago futures exchange, where he was egged on by millionaires in loud jackets while addressing an audience of Wall Street idiots. (You actually need to be an idiot to listen to the cacophonous sloganizing that makes up substantially all the debate on CNBC.)

The second is the most tightly argued, a compelling excoriation of Alan Greenspan that ought to be required reading for anybody who still has respect for the man. With classic Taibbi hyperbole, the chapter is entitled "The Biggest Asshole in the Universe" (Greenspan's bad, but he has a lot of competition for that distinction)—but if anybody can make the case, Taibbi can. He certainly tries.

The third is Taibbi's strongest, an evisceration of pretty much the entire financial system that focuses on the little-known story of AIG's securities-lending operation and its stupid head, Win Neuger. Up until now, most examinations of the AIG debacle have concentrated on how the firm wrote credit-default swaps—but as Taibbi makes painfully clear, the way it lent out shares and invested the collateral in increasingly dangerous long-term securities is, if anything, even more scandalous.

After that, the book weakens a bit: The chapters on commodities and infrastructure privatization pack little wallop. But Taibbi perks up in his penultimate chapter, on health insurers. It's not exactly difficult to find insurance horror stories, of course, and Taibbi stretches a bit in his attempt to paint the Obama administration's health-carereform bill as a craven capitulation to Big Insurance. But he's absolutely right that the lack of federal regulation of health insurers is scandalous, and it's good for the book to move out of the realm of finance, even if only to take the few small steps to the insurance industry.

Taibbi's at his most rhetorically colorful here, talking about how a nation "divided into red and blue should start paying attention to a third color that rules the day in Washington"—i.e., the color of puke. He continues: "The defining characteristic of puke politics is that . . . the government should be purposefully ineffectual . . . in terms of the functions we usually ascribe to the state and really only competent in . . . giving away taxpayer money in return for campaign contributions."

Many journalists—most journalists, actually—consider this kind of material to lie somewhere between unappetizing, disgusting, and unethical. It's certainly not the kind of thing you learn in J-school. But if muck is going to be raked, you want Taibbi to be doing the raking: He's never fair, exactly, but he always afflicts the comfortable, and in no uncertain terms. I have no particular desire to see a slew of copycats come along. But having one Matt Taibbi is vastly preferable to having none.

Felix Salmon is the financial blogger at Reuters.

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