GUY RAZ, host:

Here's a quote from one of the most explosive articles that ran last year: "The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Journalist Matt Taibbi wrote that about Goldman Sachs. Taibbi is not a financial writer, but his reporting of the financial meltdown of 2008 is some of the most lucid, jargon-free and incendiary on the subject.

His new book about covering the meltdown is called "Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America." Taibbi is a contributing editor at Rolling Stone magazine, and he was covering John McCain's presidential campaign for Rolling Stone when the economy started to unravel.

Mr. MATT TAIBBI (Contributing Editor, Rolling Stone; Author, "Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America"): John McCain was giving a speech in, I think the town is Kenner, Louisiana. It was in the middle of the summer of 2008. I was on the campaign trail with all the reporters.

And McCain was up there and he was talking about the spike in gas prices. And he was going into his whole drill, baby, drill routine, you know, we need to drill in the Gulf of Mexico, blah, blah, blah. Rousing applause.

And the reporters, the press corps were all joking about it afterwards. And one of them was saying, boy, that McCain, you know, what an idiot, as if our failure to drill in the Gulf of Mexico is what was causing the spike in gas prices. And everybody was sort of laughing about that.

And then a few minutes later, I said, do we actually know what's causing the spike in gas prices? And it was like, you know, the cartoons with the cricket noises. You know, nobody knew the answer. I didn't know the answer. And then it occurred to me at that moment that here we are covering an exploding economy and none of us have any idea about what actually caused any of this stuff.

RAZ: You and your fellow journalists, and some of the best journalists in the country covering the presidential campaign.

Mr. TAIBBI: Right. It's like the all-star team, you know?

RAZ: And nobody really knew a whole lot about finance and economics.

Mr. TAIBBI: Yeah, none of us.

RAZ: Which is understandable. But at that moment you realized, hang on, I've got to learn about this.

Mr. TAIBBI: Yeah. You know, the traditional way that political reporters, especially campaign reporters, the way we cover the economy is we look at a couple of statistics. We look at unemployment rates, and then we look at things like how the stock market is doing.

Stock market is going up, unemployment is hovering at a relatively normal level, then the economy is good. But we don't - we don't really understand anything else. And it quickly became apparent to me that there was this whole world that I knew absolutely nothing about and that we had to get into.

RAZ: You wrote an article, a now famous article on Goldman Sachs for Rolling Stone magazine back in - last summer, summer of 2009. And this article traced how, as you say, that bank was involved in almost every major financial crisis over the past decades. Your description of it, famously again, was a giant vampire squid. What makes Goldman Sachs any worse than other big financial firms on Wall Street?

Mr. TAIBBI: They aren't on the one hand. One the one hand, they didn't do anything that Morgan Stanley didn't do or JPMorgan Chase didn't do. They were all kind of involved in the same stuff, these banks.

RAZ: And they didn't do anything illegal except for what they're...

Mr. TAIBBI: Except for a few things, yeah, except for a few things. But they were unique in the sense that they had an extraordinary amount of political influence that was over and above the other banks.

No other bank has the same record as Goldman Sachs does in terms of taking former executives and placing them in high-ranking positions in the government, whether it's Bob Rubin who was, again, the Treasury secretary under Clinton, to Hank Paulson who was right there in the middle of the bailouts during the latter stages of the Bush presidency.

We picked them both as a symbol of everything that was commonplace throughout the investment banking industry, but also as a unique case of kind of oligarchal influence.

RAZ: You're hearing the voice of Matt Taibbi. He's a contributing editor at Rolling Stone magazine and the author of a new book called "Griftopia."

Describe a specific example of how you believe Goldman manipulates the financial system.

Mr. TAIBBI: A really good example is Goldman was clearly shorting the mortgage market even as it was selling billions and billions of dollars of mortgage-backed securities to clients all over the world. They were taking big bundles of subprime mortgages that were lent out largely to low-income, highly risky borrowers. They were taking that and applying this kind of a magic pixie dust math to these bundles of securities, slapping AAA ratings on them. They got -they had...

RAZ: The highest rating.

Mr. TAIBBI: The highest rating, which means credit risk almost zero. And they were taking the stuff and they were selling it off to big institutional investors like pension funds, I mean, foreign trade unions, insurance companies.

All of these big institutional investors essentially got sold oregano when they thought they were buying weed. That's really what basically happened to these guys. After they did that, they turned around and they placed massive bets against the mortgage market, knowing that it was going to collapse. So, they stuck buyers with worthless stuff calling it AAA.

And then they turn around and they took suckers like AIG, and they placed massive debts with them that this stuff was going to fail. And AIG took -stupidly took the bet and that's what ended up blowing them up.

RAZ: It seems to me that one of the purposes of this book is to explain these complex systems to the rest of us, people who just - who haven't buried our heads in the documents and the books and taken the time to understand these ideas. Do you think that this world of financial journalism is a closed world and it's closed intentionally?

Mr. TAIBBI: Yes, I think the financial journalists, the people who cover this stuff for a living and have been for decades, it's a very closed incestuous community. And I think they very purposefully don't cover Wall Street for people outside of Wall Street.

If you tune in to financial news or pick up the Wall Street Journal, it's written in language for people who are in that business. Unless you do it for a living, you're not going to be able to penetrate most of these articles.

And there needed to be somebody who does it for the rest of us. And I think in political journalism, we just had gotten so far from really understanding the economy that there just wasn't a place where people could do that.

RAZ: How do you change the system? How does it change? How does it change to allow ordinary Americans not to be taken advantage of?

Mr. TAIBBI: That's a really difficult question. I think we need to restore, first and foremost, good capitalist values. I mean, this is going to sound strange coming from someone who's been criticized as a socialist, but I really believe that if you just go with the absolute Adam Smith basics here and make sure the companies that aren't good businessmen, that they go under when they make mistakes.

But the problem is we can't allow that to happen with the companies as big as they are right now because allowing a Goldman Sachs or a Chase or a Citigroup to fail would be catastrophic to our economy. So we have to find a way to break up the companies first and then expose them to consequence again.

RAZ: That's Matt Taibbi. He's a contributing editor at Rolling Stone magazine. His new book is called "Griftopia: Bubble Machines, Vampire Squids and the Long Con That is Breaking America."

Matt, thank you so much.

Mr. TAIBBI: Thank you very much.

Copyright © 2010 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.