Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America

by Matt Taibbi

But any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. So what you

The bank’s unprecedented reach and power has enabled it to manipulate 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—high gas prices, rising consumer credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bailouts. All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense Goldman Sachs is where it’s going: the bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on earth, pure profit for rich individuals.

“The problem I have with Goldman as opposed to all these other banks is that all the other banks, they were just stupid,” says a hedge fund CEO. “They bought this stuff and they actually believed it. But Goldman knew it was crap.” Indeed, Goldman CFO David Viniar in 2007 boasted that Goldman was covered in the mortgage area because it had shorted the market. “The mortgage sector continues to be challenged,” he said. “As a result, we took significant write-downs on our long inventory positions … However, our risk bias in that market was to be short and that net short position was profitable.” I asked the hedge fund CEO how it could be that selling something to customers that you’re actually betting against, particularly when you know more about the weaknesses of those products than the customer, how that isn’t securities fraud. “It’s absolutely securities fraud,” he said. “It’s the heart of securities fraud.”

This is part of the reason that the AIG bailout is so troubling: when at least $13 billion worth of taxpayer money given to AIG in the bailout ultimately went to Goldman, some of that money was doubtless going to cover the bets Goldman had made against the stuff the bank itself was selling to old people and cities and states. In other words, Goldman made out on the housing bubble twice: it fucked the investors who bought their horseshit CDOs by betting against its own crappy product, then it turned around and fucked the taxpayer by making him pay off those same bets. Again, while the world crashed down all around the bank in 2006, gross employee pay went up to $16.5 billion that year for 26,000 employees, an average of $634,000 per employee. A Goldman spokesman explained: “We work very hard here.”

would always rescue Goldman.” All of this government aid belies the myth of Goldman as a collection of the smartest cats in the world. All of this stuff sounds complicated, but when you get right down to it, it isn’t. Ask yourself how hard it would be for you to make money if someone fronted you a billion free dollars a week, and you get a rough idea of how Goldman’s relationship to the government pays off. “It takes skill to borrow money at three percent and lend it at five and make a profit,” says Peter Morici, a professor at the University of Maryland. “It takes less skill to borrow at two percent and lend at five and make a profit. And that’s what’s going on.”

Here’s the real punch line. After playing an intimate role in three historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ in the early part of the 2000s, after pawning off thousands of toxic mortgages on pensioners and cities, after helping drive the price of gas up above $4.60 a gallon for half a year, and helping 100 million new people around the world join the ranks of the hungry, and securing tens of billions of taxpayer dollars through a series of bailouts, what did Goldman Sachs give back to the people of the United States in the year 2008? Fourteen million dollars.

That is what the firm paid in taxes in 2008: an effective tax rate of exactly 1, read it, one, percent. The bank paid out $10 billion in compensation and bonuses that year and made a profit above $2 billion, and yet it paid the government less than a third of what it paid Lloyd Blankfein, who made $42.9 million in 2008.

theme of the criticism was not that my reporting was factually wrong, but that I’d missed the larger, meta-Randian truth, which is that while Goldman might be corrupt and might have used government influence to bail itself out, this was necessary for the country, because our best and our brightest must be saved at all costs.

They were like a bunch of husbands caught bonking thousand-dollar hookers who, under questioning later on by their wives, could only admit to being sorry they got caught.

this point, it’s easy to win a public relations fight with the bank, the same way it’s easy to win the public relations battle against Stalin, Charlie Manson, Union Carbide, and syphilis—because what the bank does is indefensible. They’re criminals.

Banks like Goldman remain largely shielded from the impact of public opinion because while the public’s only link to power is through the clumsy and highly imperfect avenue of elections, a bank of this size has a whole network of intimate connections with direct access to policy.