Conspiracies Confirmed

Let it not be said that authorities never accept conspiracy theories. At the Post Gary Weiss endorsed two:

Here’s a field guide to prevalent Wall Street conspiracy theories, with each one graded … on a sliding scale from 1 to 5, with 1 being “fugetaboutit” and 5 being “damn right.”

— Goldman Sachs as giant vampire squid

Rolling Stone writer Matt Taibbi seemed to touch a raw nerve in the yammering classes with his July 2009 article on the breadth of Goldman Sachs’ influence in Washington, on Wall Street, and everywhere.

Goldman Sachs, as described by Taibbi, was a “giant vampire squid wrapped around the face of humanity.” … the general thrust of his piece was correct. Goldman does have a way of coming out on top in every bad situation. Taibbi didn’t mention it, but Goldman was instrumental in ousting New York Stock Exchange chief executive Richard Grasso when he proved to be an embarrassment. … Goldman did have a key role in the mortgage-derivatives fiasco, and its tentacles have spread through government for eons. It’s a classic case of overconcentration of power. And if you don’t believe me, just ask Adam Storch, 29, the ex-Goldman executive who just became chief operating officer of the Securities and Exchange Commission enforcement division. …

Category: Alternate history, Scope: 5, Durability: 3, Crowd Appeal: 5, Plausibility: 4

— Tim Geithner is in the pocket of the big bankers

I debated whether to even include this in the list of conspiracy theories, because the evidence for it is so overwhelming. There’s no question that Tim Geithner likes to talk to people who run major financial institutions, and this was long before e-mails were released showing that as Treasury secretary his telephone buddies included all the major CEOs of the big banks. That was the case as well when Geithner was president of the New York Fed. No secret about it. The bankers freely admitted that they chat it up with Geithner.

One can argue that there’s nothing wrong with this, that it’s not at all surprising for a financial neophyte to lean on people at, for instance, the aforementioned Goldman Sachs — particularly when it employs one of Geithner’s predecessors, his confidant E. Gerald Corrigan. The price of getting all this terrific expertise is that it makes you seem beholden to the people from whom you’re getting all this terrific expertise, and so it is with Geithner. While it isn’t kind to say that Geithner is in the pocket of Wall Street, there’s a bit too much lint flying around to ignore.

Category: Hidden factors, Scope: 2, Durability: 5, Crowd Appeal: 3, Plausibility: 5

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  • Bill

    If Geithner were in the pocket of Wall Street, the Republican party would not be after him. Counterfactually, I like it when people say that he is in the pocket of Wall Street, because that will make him more sensitive. And, frankly, to show he wasn’t in their pocket he did not do what they wanted in February–buy bad assets willy, nilly ala Resolution Trust Corp–but rather strung it out with the Pipp. We would have really transferred a lot of money to banks if we had done otherwise in February.

    • I don’t get your point about the Republican party. The financial sector (Goldman Sachs in particular) donated more to Obama & the Dems than McCain & the GOP last election. Michael Milken and Martha Stewart are both Democrats (and no, they’re not former Republicans mugged by the justice system). I don’t take that to mean that Wall Street is tight with Dems, just that one’s relationship with it has little to do with how the GOP acts toward you.

      • Bill

        Ever heard of Paulson? Ever read Too Big to Fail?

      • I have not read Too Big to Fail but I am aware of Paulson. He does not seem that different to me from Geithner.

      • Bill

        By transitivity, if Paulson is not different then Geithner, and Paulson is a Republican, then what you said about the financial sector liking democrats means they like Republicans.

      • They did give money to some Republicans, and so we can say to some extent they like them. They gave even more money to Democrats (perhaps they figured it was a Dem year, so best to donate to them, perhaps they’re just concentrated in “blue states”). I don’t think being in the pocket of Wall Street would make a Republican immune from attacks from Democrats and I don’t think being in the pocket of Wall Street would immunize a Democrat against Republican attacks. There is no reason to conclude that based on Republican attacks on Geithner he cannot be in the pocket of Wall Street. It would seem more sensible to conclude that Democrats and Republicans will attack each other no matter what, decrying policies/actions they supported when the shoe was on the other foot.

  • anon2

    Goldman Sachs was just about the only investment bank which had the good sense of betting against the financial/real estate bubble once the evidence for its bubblicious character had become overwhelming. So the first ‘conspiracy theory’ is quite right, but it’s also not really surprising that GS would have a lot of market power and political influence right now.

  • Russ Roberts and Paul Krugman have both posted editorials criticizing Goldman Sachs. In fact, I’ll just post two quotes, one from each author, and encourage readers to guess who said what.

    “The cronies in crony capitalism are the creditors and the people who make money along the way borrowing the money. That includes Bear and Lehman execs and Goldman execs and many more.”

    “Goldman has made a lot of money in its trading operations, but it was only able to stay in that game thanks to policies that put vast amounts of public money at risk, from the bailout of A.I.G. to the guarantees extended to many of Goldman’s bonds. ”

    Anytime Russ Roberts and Paul Krugman agree that a government action is bad, it must be really, really, bad.