Sorkin vs. Taibbi

If you've read me for a while, you'll know that I'm a big Matt Taibbi fan. I've excerpted his work at Rolling Stone here several times before, and I could've done so on multiple other occasions. He's crass, highly opinionated, and occasionally unfair--part of that can probably be attributed to the publication he writes for--but as a journalist he's absolutely top notch. He pulls no punches, is unafraid to take on big targets, and sets a new standard for research with his tireless due diligence on his articles.

I've got more complex feelings on the New York Times' Andrew Ross Sorkin (editor of Dealbook). I think he's also a terrific journalist, with incredible connections throughout the financial and business world. I've only read excerpts of Too Big to Fail--and haven't seen the HBO special that it inspired--but I enjoyed what I read and was left with an impression that it was well-researched and mostly fair. That said, Sorkin has a tendency to be a bit inconsistent in his analysis, at times seeming to play favorites in his coverage. It's that tendency that has now led to a showdown between him and Taibbi, which I think is fascinating to watch (and read).

On the topic of Goldman Sachs--Taibbi's biggest, most frequent, and clearly favorite target--Sorkin issued the first salvo with a passionate defense of CEO Lloyd Blankfein (he of the "we're doing God's work" decree).

The vampire squid haters won’t like this column.

For the past several weeks, I have been trying to understand if Lloyd C. Blankfein, Goldman Sachs’s chief executive, could have perjured himself — as Senator Carl Levin has suggested — when he testified last year in front of the Senate’s Permanent Subcommittee on Investigations and declared, “We didn’t have a massive short against the housing market.”

Based on the subcommittee’s report, which was referred to the Justice Department, I wrote a column raising questions about Mr. Blankfein’s comments. At the time, his testimony seemed ridiculous in the face of evidence that Mr. Levin presented, which showed that the firm had regularly made large bets against the subprime market.

But upon further reporting — talking with executives at Goldman, who pointed me to other documents, and with officials in Washington, and then poring through the report, following the footnotes to the original sources and then cross-referencing them against other public records — I have come to a different and perhaps unsatisfying conclusion for those readers looking for a big scalp: Mr. Blankfein wasn’t lying.

The "vampire squid" reference that Sorkin opened his piece with was a direct reference to Taibbi's most famous Goldman Sachs article, and it was probably an ill-advised bit of baiting by Sorkin. Not surprisingly, Taibbi punched back with serious force, tearing apart the foundation of Sorkin's defense of Blankfein.

I've been trying not to say anything bad about Andrew Ross Sorkin. I even made a point of not watching Too Big To Fail so as not to get upset -- and when I heard from friends that the film turned [former Goldman Sachs CEO and Treasury Secretary] Hank Paulson into Joan of Arc, that decision seemed to have been validated.

Now I’m bummed to see that Sorkin has written an elaborate defense of Goldman in the New York Times "Dealbook" section, arguing among other things that Lloyd Blankfein probably did not commit perjury and that the bank did not have a huge directional bet against mortgages in 2007. As evidence, Sorkin cites unsubstantiated Goldman documents and Goldman sources who claim, among other things, that the bank had $5 billion worth of long bets on MBS "in other parts of the company," offsetting the now-notorious "Big Short."

The Sorkin piece reads like it was written by the bank's marketing department, which may not be an accident. In November of last year, the New York Times announced that "Dealbook" was entering into a sponsorship agreement with a variety of companies, including ... Goldman, Sachs.

Yikes. Taibbi's intimation that Sorkin's defense was corporate-led was probably not a particularly careful accusation, and it may end up getting him in a little bit of trouble with the Times' lawyers, but I also don't think it's an irrelevant link.

The fact is, Goldman Sachs is well known for its heavy lobbying efforts in Washington, efforts that have led to a virtual revolving door between Washington and the Goldman executive suite (Hank Paulson being only the most obvious example). Given that dynamic, it's not at all unreasonable to wonder whether they would use similar tactics to exert their influence in the media world, and to therefore question Sorkin and the Times' motivations. Given the factual errors/misrepresentations that Taibbi cites later in his piece, it's pretty tough to come away from the Taibbi-Sorkin back-and-forth without at least feeling a little queasy about the Goldman-Times business partnership.

Graphic courtesy of McClatchy

I should mention here that I am an unabashed Goldman hater, and my leanings thus put me squarely in the Taibbi camp in this debate. While I have many close friends who either work or worked for Goldman, my experiences with the firm's behavior on the American Stock Exchange trading floor (via the "independent" brokers they retained) soured my opinion of them and their tactics, and the events of the past 3-4 years have only steeled my nauseous response to the Goldman name. Their duplicitous nature, their constant bullying, and their incessant insistence that they are vital to the world's existence and survival have turned me off for good, and the revelations of illegal (or at least unethical) behavior within the firm don't surprise me at all.

Regardless of your feelings, though, I find the showdown between two of the financial world's best journalists to be fascinating on multiple levels. It's the establishment paper (Times) versus the alternative-culture icon (Rolling Stone), the product of the Ivory Tower (Sorkin) against the working-class hero (Taibbi), et cetera, ad nauseum. And the fact that the target of so many people's ire (Goldman) finds itself caught in the middle only adds to the intrigue. Good stuff.

[NY Times]
[Rolling Stone]

Quote of the Week

Whoops. Wrote the Quote of the Week post yesterday but then forgot to post it. My bad. This one is another one of those out-of-the-blue Quote of the Week recipients, from a random article that was too amusing not to share.

I've touched on the issue of the ridiculous spending habits of people and their pets before, and I'm constantly shaking my head at the things that people will do for their animals (yes, I'm looking at you, Paris Hilton). As I wrote in my previous post on the topic, it's a little ridiculous to see people spending millions of dollars pampering their pets--in ways that those animals are completely incapable of appreciating--while thousands of dogs and cats are being euthanized for no good reason at shelters throughout the country.

Anyway, without further ado, here's your Quote of the Week, from a New York Times article that I highly suggest you read in its entirety.

This week's QUOTE OF THE WEEK

“We actually saw that there was a gap in the market for beverages for dogs.”
            - Bonnie Senior, manager of Pet Pop of Australia

Pet Pop of Australia's response to this "gap in the market" was to introduce and sell a vitamin-infused "mountain spring water" for dogs, at an absolutely absurd price (the Times article says $3.30 a bottle, but the cheapest price I could find online was $4.95 AUD--over $5 US--for a 12-ounce bottle... so, more expensive than a beer at a typical bar).

In my humble opinion, sometimes there's a gap in a market for a reason--namely, it isn't a real market, or shouldn't be. No dog in the world needs vitamin-infused water, and any pet owner who pays that kind of a premium to get it deserves to be shot.

I'm sure there's plenty of "gaps" in the feline hospice care market, and I'm pretty sure they're not gaps that need to be filled. But good work, Bonnie Senior--you've got a great business there.

[NY Times]  
(h/t Marginal Revolution)

Changing living patterns in America

On his Freakonomics blog, Stephen Dubner cited an interesting and thought-provoking statistic (well, more a projection than a statistic, but so be it) about the housing market from this CNN.com article.

The National Association of Homebuilders predicts that by 2015, 60% of new homes will be designed with "dual master bedrooms."

The CNN article brings up the statistic--and Dubner analyzes it--in the context of "mediocre marriages", indicating that the predicted growth in dual master setups is a response to increasingly loveless marriages and couples who don't want to share a bed. I think that may have something to do with it, but there certainly aren't enough mediocre marriages out there to justify that many new dual master homes (are there?).

More likely, the NAHB projection is reflective of a changing mindset and economic reality among those in the upcoming generations. For one, the housing crash that precipitated the financial crisis of 2007-2008 has eroded a long-standing belief that housing is a stable investment and that home ownership is a laudable goal for all Americans. An increasing number of younger people (including well-regarded journalist and hedge fund manager James Altucher) have begun to question the wisdom of owning real estate at all, and have turned to renting instead. A dual master setup would seem to lend itself particularly well to a renting situation, where two people could share the rent on a house without having to share a bathroom or a primary living space.

Furthermore, economic realities affecting two important groups of people may force a trend toward co-habitation over the coming years. The first of these groups is the elderly--while they likely don't have to worry about suspensions of Social Security payments any time soon, it is clear that the Federal Reserve's low-interest rate policy has made life very difficult for "savers", those who rely on interest payments to generate income. Many of the elderly are of course in this category, and without a steady stream of income, they may be forced to move in with their children, as was commonplace in previous generations.

The second such group is on the other end of the spectrum, but no less impacted by the economic recession. With an ever-increasing number of college graduates unable to find adequate employment upon graduation--and many others accepting much lower-paying jobs out of necessity--young professionals may be forced to move back in with their parents on a semi-permanent basis as they try to whittle away at their mountains of student loan debt. This dynamic has of course already begun, and homebuilders may just be trying to get ahead of the curve.

Ultimately, I think that the housing-led recession of the early 2000s will have a long-lasting effect on the way that Americans view housing and homeownership. I've already written here before about how I think the culture of homeownership is limiting economic flexibility, and this dynamic seems bound to reverse itself.

After the Great Depression, a generation of workers shunned banks, unwilling to place their deposits with them or take loans out from them. I think it's possible--if not likely--that the next generation will have a similar response with respect to homeownership, shunning the traditional American dream in favor of a more mobile (renter's) lifestyle. This, combined with the economic factors that I discussed above, will have a dramatic impact on how homebuilders and real estate agents approach their jobs.

If not, then there's gonna have to be a lot more mediocre marriages to fill all those second master bedrooms...

[Freakonomics]

How do Americans measure up?

This is always fun stuff. I don't know exactly how the Economist or the OECD went about collecting and compiling this data, so I can't say how reliable these stats are (and I'm always suspicious of summary statistics anyway--I think that the variation within a population is almost as important if not more so than the summary or "average", but I digress...), but it's interesting to look at anyway, especially as it feeds some of the stereotypes we might already be operating under.

It probably doesn't surprise any of us in the States to see that the French spend the most time eating and sleeping, or that we and our British friends spend the most time on "leisure". But it's definitely surprising to see that the French work more paid hours than the Germans (perhaps because the Germans are so famously efficient), and that the Americans spend less time on "personal care" than the Germans (that one I really can't figure out).

And what the hell are the Japanese doing with all of their extra work hours? Because it's certainly not showing up in their GDP data...

One final question: the Germans lead the group in "Other"... do I want to know why?

[Economist]  
(h/t Barry Ritholtz)

Clip of the Week

Well, The Red Cowboy may or may not have stolen my Clip of the Week this morning... he'll never know for sure what I intended to do here today, so I'll just let this public shaming make him feel bad about himself and proceed.

Luckily, I've always got a few tricks up my sleeve for this most cherished of weekly posting traditions, so I've got some options at my disposal. The cubed halfpipe is fantastic, but so is this awesome living music video from the people of Grand Rapids, MI--a big "eff you" response to the Newsweek writers who referred to Grand Rapids as a "dying city". Amazing coordination and a cool concept. I also considered posting this video about... good lord, what is that thing?... but, no.

Ultimately, I'm a big homer when it comes to sports (not as big as John Sterling, but pretty big), and it's not every day that the home team brings home a title. So while I may not be the biggest lacrosse fan in the world, and I'd trade 5 lacrosse championships for one College World Series title (the pursuit starts tomorrow), I have to give some recognition to the Virginia Lacrosse team for this most unexpected of national championships.



To say that the UVA lacrosse team has had a strange last 12 months would be an extreme understatement. After last May's murder of women's lacrosse player Yeardley Love--apparently at the hand of men's lacrosse player George Huguely--both programs were thrown into disarray.

The men's team put in place some fairly strict team rules--with the goal of rehabilitating its image and making sure nothing similar ever happened again--and then stood by those rules when two of the team's best players violated them, kicking them off the team. In doing so, the team immediately went from favorite to underdog, but did so knowing that it was placing team unity and solidarity above all else.

Apparently, their gamble paid off, and the team deserves a significant amount of credit for their actions. Many (or most) of the players on the team deserve no blame whatsoever for what happened last year between Huguely and Love, but they nevertheless recognized the need to step up and lay down the law.

It's fairly amazing to see the last 12 months of turmoil end in triumph, and I applaud the players who saw the value in doing things the right way, regardless of the likely outcomes. Congrats to them.

A snapshot of America

Before I launch into this post, a disclaimer: much like in this post on racial profiling, the study I am going to cite here suffers from self-selection bias--that is to say, it's not necessarily reflective of the population at large, and it should therefore be taken with a large grain of salt. But it's still a little troubling.

Times Square and Rockefeller Center often top the must-see list for New York City-bound tourists, but the Lourve-inspired [sic] Apple store on Fifth Avenue is surprisingly the number one most photographed attraction in Manhattan.

Researcher Eric Fischer mapped and analyzed millions of photos on Flickr that were taken throughout the city and looked at their geo-tagged information -- such as time and date they were shot --to determine patterns of interest.

Although the sleek glass exterior of the Fifth Avenue Apple store gets the most pictures, Rockefeller Center (no. 2), Columbus Circle (no. 3) and Times Square (no. 4) were also on the list.

Oh, dear God, people... really? Okay, look, I get that the Apple Store is right at the base of Central Park, and therefore it's a heavy traffic area, and so it's very recognizable and hard to miss, and... and... really!??! You go to New York City for a weekend to see the sights, and you take a picture of... THE APPLE STORE?!??! That's like going around the country taking a picture of all the great Wal-Marts throughout the nation. Hey, look! There's the Wal-Mart in Las Vegas! And there's the Wal-Mart by the Golden Gate Bridge!

I guess I shouldn't be surprised, since recent research suggests that love for Apple lights up the same part of the brain as religion--in that case, the Apple Store on 5th Avenue is for Apple lovers what St. Peter's is for a Catholic. Pardon me while I throw up a little bit.

Yup, this is America.

[LiveScience]
(h/t Barry Ritholtz)

Hidden victims of the auto bailout

Didn't hate the auto bailout yet? Still weren't sure if it was a net positive or negative for our country at large? Maybe this article will help you make up your mind.

Vicki Denton died several years ago after the airbag in her 1998 Dodge Caravan minivan failed to deploy during a head-on collision in the Georgia mountains. In 2009, a jury found Chrysler responsible for her death because of a manufacturing defect, awarding her surviving son and other relatives $2.2 million.

The family was near collecting those damages on the eve of Chrysler's government-brokered bankruptcy. Now, two years removed from a $12.5 billion bailout, Chrysler Group LLC still hasn't paid the damages, and doesn't have to.

The reason: The company's restructuring allowed it to wash away legal responsibility for car-accident victims who had won damages or had pending lawsuits before its bankruptcy filing. The same holds true for General Motors Co., which discarded the liabilities as part of its own $50 billion bailout and restructuring.

In rescuing the car makers, the U.S. government prevented a potential meltdown of the auto industry and further shocks to the economy. But in the process, it created a wide universe of relative winners and losers. The U.S. Treasury received large ownerships stakes in the restructured auto makers, as did union retiree trusts. Chrysler's banks got some, not all, of their loans repaid in cash, and GM's lenders were fully repaid. On the other side, thousands of dealers, asbestos victims and other creditors received little to no recompense.

Among the creditors who suffered most, car-accident victims represent a distinct mold. Unlike banks and bondholders, this group didn't choose to extend credit to the auto makers. As consumers, they became creditors only after suffering injuries in vehicles they purchased.

Wow. This is pretty disgusting, and the judges who allowed these debts to be erased (both of whom are named and quoted in the article, which deserves to be read in its entirety) should be ashamed of themselves.

Of all the terrible precedents set during the financial and auto bailouts (and there are tons of them, some of which--like this one--we're just now finding out about), this might be the worst I've come across so far. It makes me sick to my stomach that a company can be excused of responsibility for its negligence...simply by becoming even more negligent to the point of bankruptcy. The fact that something like this was explicitly allowed (and in fact endorsed) by our federal government only makes it that much worse.

I was anti-bailout from the get-go, and this sends me over the top. Buy American? No thanks.

UPDATE: A commenter correctly pointed out that Ford did not accept bailout funds, and therefore should not be included in my snarky "don't buy American" conclusion. Fair point. I have much respect for Ford for fixing their own problems. GM & Chrysler? Not so much. Buy Ford.

[Wall Street Journal]