According to Rolling Stone political reporter Matt Taibbi, financial firm Goldman Sachs is intentionally spreading misinformation through its lobbying practices.
In the upcoming issue of the magazine, Taibbi claims Goldman is misleading senators and their staffers by lobbying in favor of a practice known as "naked short-selling" through showing the market impact of short selling, which is a different practice altogether, asserting that further restrictions would hurt the market. He says conflating the two practices is like "like trying to draw conclusions about the frequency of date rape by looking at the number of weddings held."
From Taibbi's sneak peek at his story yesterday in True/Slant:
Naked short-selling is a kind of counterfeiting scheme in which short-sellers sell shares of stock they either don't have or won't deliver to the buyer.
The real significance of the naked short-selling issue isn't so much the actual volume of the behavior, i.e. the concrete effect it has on the market and on individual companies -- and that has been significant, don't get me wrong -- but the fact that the practice is absurdly widespread and takes place right under the noses of the regulators, and really nothing is ever done about it.
As with Taibbi's big Goldman story earlier this year, there's plenty of people accusing him of bad reporting.
BusinessInsider says Taibbi has the Goldman-naked short selling story wrong, claiming his view is "based on a misunderstanding of the mechanics and effects of naked shorting."
The practice can, according to BusinessInsider, benefit the broader market giving buyers more efficient pricing on securities.
Since most investors hold diversified portfolios, they win out from having better pricing at the cost of some stocks going down.
The New York Times DealBook Blog reports that data Taibbi used to report on Goldman's lobbying practices is without interpretation and doesn't necessarily show any misleading information was used.
DealBook quotes a Goldman spokesman:
"Yes, we do refute his assertion that we conflated short-selling with naked short-selling," a Goldman spokesman, Ed Canaday, told DealBook. "The document we left with legislators is very clear on that point -- and is considerably longer than the three pages that Mr. Taibbi posted along with his blog."
Mr. Canaday added, "If you read the documents, you will see that we made general comments on market structure, short-selling and highlighted the effectiveness of S.E.C. regulation to curb naked short-selling."