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Rolling Stone writer rips Goldman Sachs in new book

In "Griftopia: Bubble Machines, Vampire Squids and the Long Con That Is Breaking America," Matt Taibbi apportions blame for financial crisis.
/ Source: Reuters

Rolling Stone writer Matt Taibbi famously compared investment bank Goldman Sachs to a giant money-sucking vampire squid a year and a half ago. Now his new book "Griftopia" apportions more blame for the financial crisis and fallout.

The new "grifter class" of America who have successfully defrauded the average Joe are the major players on Wall Street propped up by willing politicians, Taibbi says in his recently published, "Griftopia: Bubble Machines, Vampire Squids and the Long Con That Is Breaking America."

The 250-page book employs the colloquial style of Rolling Stone magazine to detail the roles of major players such as former U.S. Federal Reserve Chairman Alan Greenspan in the destabilization of the economy in the lead up to the 2008 crisis, and why Goldman Sachs got a $10 billion federal bailout while other banks were allowed to fail.

Taibbi says "a concentrated group of connected financial companies that are growing bigger and bigger all the time," now wield "enormous political influence." He compared them to powerful interests in developing countries who "write the rules of the game so that they can't lose."

"They are the dominant political powers in the country now," he told Reuters in an interview. "When you get so much political influence that you can't not make money, it's just like a license to steal and that is what the book is about."

Goldman Sachs, he added, became a favored target of his partly because former Goldman officials crossed over to government positions. Hank Paulson, a former Goldman CEO, was U.S. Treasury Secretary when he decided to bailout Goldman Sachs while rival Lehman Brothers was allowed to fail.

"I don't think there is a parallel in American history that is worse than that," he said. "There is a particular culture at that bank that is different from other banks, they cultivate this air of superiority."

Taibbi said he is not surprised Goldman soon posted record profits after the bailout since they were allowed to borrow from the government at near zero percent interest and lend that money back to the government in the form of U.S. Treasury bonds at a higher rate.

"It's like hooking an ATM machine up to the United States Treasury -- that is one of a dozen different ways Goldman got money from the government," he said.

Goldman Sachs declined requests to comment on the book.

Shotgun weddings
Taibbi said the period between August and November 2008, and details of government help for the "explosion of shotgun weddings" between institutions such as Bank Of America and Merrill Lynch, should be on the public record.

"These things were all orchestrated behind the scenes. I seriously doubt that they were legal. That's not capitalism, that's oligarchy when that happens," he said.

Besides Goldman Sachs, Taibbi's book devotes a chapter to Greenspan. Taibbi argues that Greenspan gave big banks greater power, deregulated the markets and dangerously sheltered Wall Street by lowering interest rates after each stock bubble leading up to the 2008 crisis.

Arguing for the collapse of financial regulatory laws was another fault, he said. A spokeswoman for Greenspan did not return a query seeking comment on the book.

Most people "don't understand the Fed" including the fact that "every time Wall Street blows itself up with a speculative bubble, the Fed slashes interest rates to zero, that that is essentially a bail-out mechanism," he said. "When banks can borrow money for nothing, that is a bailout."

Americans should be angry, said Taibbi, but instead of understanding the complexities of what happened, political groups such as the Tea Party offer "bad, simplistic explanations" while the Democrats offered none.

The financial media were also to blame, as they "mostly write for the people who work in Wall Street," he said, meaning they have lost their objectivity.

He offers a tiny glimmer of hope with appointments such as Elizabeth Warren, a fierce critic of Wall Street who is helping set up a new government watchdog to protect consumers, in a world where most politicians are either "willing or ignorant."

"When we get to the point when we have to save them every time they screw up, then we are no longer regulating them, we are no longer governing them, we are servicing them," he said.