Youtube won't let me embed the video; you can watch it and read the transcript here.

Taibbi boils it down, pointing out that there is evidence not only that GS committed fraud but that it lied to Congress under oath.

...[L]ate in 2006, Goldman Sachs realized they were sitting on a time bomb of toxic mortgage assets. That they conspired to unload those assets on their clients and then bet against them at the same time, and then later on, the report also sort of lays out that in the process of investigating this issue, the Senate questioned Goldman. They also had testimony in Congress and it lays out that they believed that Goldman lied about some of these activities.

According to Taibbi -- who, unlike McArdle, has read the report -- there is no doubt that GS pawned off assets it knew were crap and illegally didn't disclose that it was betting on them to fail. Taibbi cites one damning and representative email:

One of the great e-mails in this entire document came after they sold $10 million worth of a deal called Timberwolf on an Australian hedge fund and they're celebrating afterwards. And one guy says, we found a white elephant, a unicorn and a flying pig all at the same time. In other words, we found the ultimate sucker and this kind of stuff is all throughout the report.

McArdle's argument, such as it is, is two-fold. First, she says these cases are hard to prove. That's no doubt true, although this report, with its clear documentation of fraud, seems to take that favored excuse of the plutocrats off the table. Second, she says that most of the clients GS screwed were big investors, who should have known better.

we generally assume that an institutional investor, like a pension fund or a hedge fund has the intelligence, the know-how and the motivation to figure out what's going on in the other side. So we don't offer them the same protections as we offer ordinary investors.

We don't? How does the largeness of the scammed clients change GS's legal responsibility to disclose adverse elements of potential transactions? It doesn't, of course.

At one point, Taibbi asks the question we'd all like to ask people like McArdle:

How you were not ashamed to apologize for these billionaires who ripped off ordinary people?

In response, McArdle shamelessly strikes a populist pose, setting up my favorite exchange of the debate.



MCARDLE: There weren't ordinary people. A hedge fund is not an ordinary -- TAIBBI: How about this? They ripped off a billion dollar from Morgan Stanley, which then in turn took a $10 billion bailout from the taxpayer ergo they ripped us off. How do you answer that? MCARDLE: How do I answer that? I think that, you know, in fact, they do deals with big banks. There are questions about how we should have done those bailouts. But the fact is it's not Goldman Sachs' responsibility to make sure that Morgan Stanley makes money. More than it's the Atlantic's responsibility to make sure that Rolling Stone makes money... TAIBBI: I don't know how that makes sense on any planet in any universe. That is just insane.

McArdle sets up the flimsiest of strawmen, pointing out that GS had no responsibility to make money for its client. Okay -- so what? Equally absurdly, she claims that the relationship between GS and its client is analogous to the relationship between Atlantic and Rolling Stone.

The 635-report focuses on the causes of the financial crisis, but it singles out Goldman Sachs, as does Taibbi in his article in Rolling Stone. He details how GS sought to cleanse itself of poisonous assets and made a killing in the process.

By February 2007...Goldman had gone from betting $6 billion on mortgages to betting $10 billion against them — a shift of $16 billion. Even CEO Lloyd "I'm doing God's work" Blankfein wondered aloud about the bank's progress in "cleaning" its crap. "Could/should we have cleaned up these books before," Blankfein wrote in one e-mail, "and are we doing enough right now to sell off cats and dogs in other books throughout the division?" How did Goldman sell off its "cats and dogs"? Easy: It assembled new batches of risky mortgage bonds and dumped them on their clients, who took Goldman's word that they were buying a product the bank believed in. The names of the deals Goldman used to "clean" its books — chief among them Hudson and Timberwolf — are now notorious on Wall Street. Each of the deals appears to represent a different and innovative brand of shamelessness and deceit.



Taibbi acknowledges that the charge of fraud, though strong, could keep lawyers tied up for years. There's a much cleaner, straightforward case of perjury against execs such as former GS mortgage chief, Daniel Sparks. Also against Mr. God's Work himself:

Blankfein also testified unequivocally to the following: "Much has been said about the supposedly massive short Goldman Sachs had on the U.S. housing market. The fact is, we were not consistently or significantly net-short the market in residential mortgage-related products in 2007 and 2008. We didn't have a massive short against the housing market, and we certainly did not bet against our clients." Levin couldn't believe what he was hearing. "Heck, yes, I was offended," he says. "Goldman's CEO claimed the firm 'didn't have a massive short,' when the opposite was true."

But of course no charges of any kind are about to be filed on this planet in this universe. These are the days of impunity for the rich and ruthless, as the wounds at the center of the country's political, economic, and cultural life continue to bleed.

Goldman, as the Levin report makes clear, remains an ascendant company precisely because it used its canny perception of an upcoming disaster (one which it helped create, incidentally) as an opportunity to enrich itself, not only at the expense of clients but ultimately, through the bailouts and the collateral damage of the wrecked economy, at the expense of society. The bank seemed to count on the unwillingness or inability of federal regulators to stop them — and when called to Washington last year to explain their behavior, Goldman executives brazenly misled Congress, apparently confident that their perjury would carry no serious consequences. Thus, while much of the Levin report describes past history, the Goldman section describes an ongoing? crime — a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.

