A Conspiracy So Vast

08/08/2009 05:12 am ET | Updated May 25, 2011

Among conspiracy theories, the one about Goldman, Sachs & Co. controlling the world is about as hackneyed as they come. We can all recite the list of Goldman alumni who were behind the mega-meltdown: John Thain, Bob Steele, Robert Rubin. We've all watched a clique of former Goldmanites engineer the subsequent banking bailout -- Hank Paulson, Neel Kashkari, Tim Geithner (who never actually worked at Goldman but was "mentored" by someone who did).

And we've all marveled at the fact that while other Wall Street firms continue to struggle -- the surviving ones, anyway -- "Government Sachs" seems to be doing just fine, thank you. Indeed, whispers about a Goldman Sachs conspiracy are so vast and so commonplace that the last time anyone tried to write about them, the late, not-so-great Portfolio magazine back in Februrary, it called such a theory "insiduously silly."

But it was only a matter of time before somebody wouldn't think a Goldman conspiracy was silly at all. And that somebody would try to connect the dots not just between the usual suspects of former Goldmanites now in government, but between Goldman Sachs and almost every market ill that has befallen us since and including the Great Depression. That somebody is political journalist Matt Taibbi, who, as you've probably heard by now, has produced a 10,000-word invective against Goldman Sachs for Rolling Stone. It's a takedown from the start.

Goldman, according to Taibbi, is "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Thain is "the asshole chief of Merrill Lynch," "the only human feeling you could imagine [Robert Rubin] experiencing was a nightmare about being forced to fly coach." But for all the bombast, Taibbi tells readers they should focus on something else -- "the big picture" -- which is this: "If America is now circling the drain, Goldman Sachs has found a way to be that drain."

To paint that big picture, Taibbi draws us six smaller ones, in the form of six market "bubbles" (the Depression, tech stocks, the housing craze, spiking gas prices, the bailout and global warming, which he sees as the next one), and Goldman's alleged role as mastermind of each. Taibbi explains how each bubble came to be -- for example, discussing how conflicts, IPO standards, laddering and spinning inflated tech stocks -- and then places Goldman squarely at the center of each. It's as if the rest of Wall Street doesn't exist. Taibbi insinuates that Goldman invented everything from the investment trusts of the 1920s to collateralized debt obligations of the housing craze, and if it didn't actually create these things, it took them further than anyone else. And the government enabled it along the way.

Bloggers began devouring the piece immediately (and complaining that Rolling Stone did not post it online). While many took issue with Taibbi's contention that Goldman is the engineer of all bubbles -- "that's a whole lot of crazy," wrote the Atlantic's Daniel Indiviglio -- most took Taibbi's advice and looked "at the big picture." And they mostly liked what they saw. "I don't agree with all of Taibbi's article, but I'm surprised at how much of it I do agree with, especially when it comes to the subject of regulatory capture," wrote Felix Salmon at Magnifo at Daily Kos had a similar reaction: "While I do not agree with some of the conclusions he makes, there is enough in his 9,700 word essay that can make the blood boil."

This is a problem for Goldman, which did not even try to cooperate with Taibbi. The firm has since tried to point out errors in the story via Salmon's blog, which only made things worse, as the blogosphere buzzed about a Taibbi-Goldman feud. Indeed, there's little Goldman can do now to change the minds of anyone inclined to agree with Taibbi. As Salmon noted, "[Y]ou don't read a Taibbi rant for an evenhanded look at both sides of a complex story. It's more a forcefully-put case for the prosecution: some of his charges might not stick, but he'll throw a few chancers in as well for good measure."

True enough. But that makes us a little sad. There's so little long-form journalism these days, especially on finance, that we were hoping for something a little more nuanced and rigorously argued. If we just wanted to see the big picture, we could turn on cable TV.

Yvette Kantrow is executive editor of The Deal.