Peter Brimelow: Is grousing about Goldman reaching critical mass?

Peter Brimelow: Is grousing about Goldman reaching critical mass?

Submitted by cpowell on 11:05AM ET Monday, July 20, 2009.
Section: Daily Dispatches
By Peter Brimelow
MarketWatch.com
Monday, July 20, 2009
http://www.marketwatch.com/story/is-grousing-about-goldman-reaching-crit...
NEW YORK -- I'm amazed: Grousing about Goldman Sachs, and fury at the
financial sector, is actually reaching the point where something might happen --
maybe even answers to questions we've been asking for a while.
As Jim Bianco of Bianco Research just noted in his News Clips/Daily
Commentary service: "The amount of bad news that [Goldman Sachs Group] is
generating with its record earnings is incredible. We cannot remember a company
that has received so much scorn for making money."
Bianco linked to critical stories in the Economist (http://www.economist.com/businessfinance/displaystory.cfm?story_id=14034...)
and the New York Times (http://www.economist.com/businessfinance/displaystory.cfm?story_id=14034...)
and a scathing op-ed column ("The Joy of Sachs") by Paul Krugman (http://www.nytimes.com/2009/07/17/opinion/17krugman.html?ref=opinion).

And that's only the beginning. Last week, Arianna Huffington in her liberal
Huffington Post Webzine actually issued bipartisan praise of two Wall Street
Journal pieces critical of Goldman and the bailout. Her article is here:
http://www.huffingtonpost.com/arianna-huffington/shattering-the-right-vs...
The Wall Street Journal articles are here:
http://online.wsj.com/article/SB124762129423442667.html
And here:
http://online.wsj.com/article/SB124762005061042587.html
It's many years since Arianna and I were on the same politically incorrect
side of one of William F. Buckley's "Firing Line" debates. She has since
adroitly changed sides, and if she now thinks it's time to attack Goldman Sachs
-- a major Democratic donor -- the firm is in trouble.
The most spectacular attack on Goldman Sachs: Matthew Taibbi's Rolling Stone
article "The Great American Bubble Machine," posted in Rolling Stone magazine
July 13:
http://www.rollingstone.com/politics/story/29127316/the_great_american_b...

This is a follow-up to Taibbi's earlier attack on the bailout, which he
portrayed all too convincingly as a sort of Wall Street coup d'etat.
Taibbi describes the extraordinary personnel interlock between Goldman Sachs
and Washington, apparently regardless of the party in power. He thinks that a
key development was the emergence of Robert Rubin, who became Goldman's
co-chairman and then Bill Clinton's Treasury secretary.
Taibbi writes: "If America is circling the drain, Goldman Sachs has found a
way to be that drain. ... The bank's unprecedented reach and power have enabled
it to turn all of America into a giant pump-and-dump scam, manipulating whole
economic sectors for years at a time, moving the dice game as this or that
market collapses, and all the time gorging itself on the unseen costs that are
breaking families everywhere."
Of the bailout, he writes: "The numbers show that Goldman essentially
borrowed a $5 billion salary payout for its executives in the middle of the
global economic crisis it helped cause, using half-baked accounting to reel in
investors, just months after receiving billions in a taxpayer bailout."
Sounds wild, but Taibbi makes a case. As a Rolling Stone reader says in the
article's comment thread: "The last time I read anything this scary was the New
Yorker article about Burmese pythons taking over Florida."
I've been reporting for years that key investment letters had come to the
conclusion that the financial markets have been manipulated. Now this suspicion
is all over the mainstream media. Hmmm.
The scale that would be involved is so spectacular that it dwarfs another
issue the letters have been asking about for years: whether the gold price has
been systematically suppressed. (See my April 20
column:http://www.marketwatch.com/story/gloom-about-gold-except-among.)
Manipulating gold is an afterthought compared to what was allegedly going on.

I continue to think that a key part of this story is the mysterious 1998
Rubin-orchestrated rescue of Long Term Capital.
And I'm increasingly confident all this will end with the appointment of
another Pujo Committee, paralleling the one which investigated the so-called
"Money Trust" in the wake of the Panic of 1907.
The consequences will be monumental.

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