Taking Stock

Rolling Stone's Matt Taibbi can be vulgar, crude and beyond incendiary and usually I love him all the more for it. Especially with the piece he wrote in the October 15th issue (RS 1089). Dude might want to relax on some of the heavier drugs though because he is getting super paranoid, and yet frankly I fear he may be on to something.

He addresses the unknown figure who gambled on March 11, 2008 that Bear Stearns' shares value would precipitously drop and was right. Taibbi calls it as insider manipulation, an effort on behalf of this mystery figure to cause Bear Stearn's demise. Adding to the general X-Files aura of the whole thing, there was a meeting that same day of the Federal Reserve Bank of NY which was attended by Both Ben Bernanke, Timothy Geithner and all the major Wall Street investment banks EXCEPT Bear Stearns. And the plot thickens.

It isn't known exactly what happened at the meeting, but by the time it ended Bear Stearns' fate was sealed and investors started banking that the company was going down. Apparently it all has to do with a practice called naked shortselling. Taibbi explains it and I almost understood it which says a lot of his powers of explanation, because banking ain't something Broad gets. I won't bore you with the details or try to explain it myself, but suffice it to say it is dirty and underhanded and generally kind of illegal (you can check out the link to the article above to get the scoop yourselves).

But it doesn't stop there. Apparently someone later tried this with Lehman Brothers and it of course worked again. Vanity Fair addressed the topic in an excerpt from Andrew Ross Sorkin's upcoming book in its November issue. Of course Sorkin is more deferential, polite, etc. than Taibbi and he also doesn't have the paranoid "they are all out to get us" ideas behind his article, but he adds that Morgan Stanley and Goldman Sachs feared they were next. From the tenor of Taibbi's piece I would say that just ain't so, that those two were in on the death of Bear Stearns and Lehman Brothers, but I don't want to fall into complete conjecture.

The takeaway for me is that the banking and investment worlds are dark, murky places and the inside folks like it that way. They don't want the average American to know or understand what they are up to because once we understood it, we would be appalled. It appears that much of what is going on Wall Street is legalized stealing and lying in many ways, but I guess that shouldn't come as too much of a surprise to any of us anymore.

What I can't help but wonder is if we had allowed these banks and investment companies that were deemed "too big to fail" to actually fail, how much would the average American have been hurt? Or would if have just wondered those people who will be fingering their six figure bonuses come this Christmas?