A Rolling Stone Gathers Two Blades

My Cousin sent me this article about the financial crisis by Matt Taibbi in Rolling Stone: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/ (Parental Guidance Suggested due to Strong Language). She says "he tells the half of the story that makes the average citizen's eyes glaze over", i.e., the half of the story that involves the complex financial instruments that brought so many Wall Street giants to the brink of ruin. (For another good account of that half of the story, see The Subprime Primer at http://www.businesspundit.com/sub-prime/. It uses stick figures. Parental Guidance Suggested due to Strong Language. For the other half of the story, the half about how government created the glut of subprime mortgages on which these financial instruments were based, see some of my recent blog entries (Rated G): ../../2009/03/in-case-theres-any-doubt.html,../../2009/02/four-ideas-to-blame-for-financial.html, http://blogs.myspace.com/index.cfm?fuseaction=blog.view&friendId=159934779&blogId=435179173)

Mr. Taibbi does indeed tell the complex part of the story with minimal eye glaze. However, the gist of his article is that the government bailout funds have been hijacked by large companies run by friends of former Treasury Secretary Paulson (FOPs?), at the expense of deserving but smaller and less connected firms. This is always a danger when Big Government unites with Big Business (Ayn Rand called this "The Aristocracy of Pull") and Mr. Taibbi is right to point it out. However, ultimately he fails to show that it is true in the case of TARP. The evidence he provides is entirely anecdotal – he drops the names of a few of Paulson's buddies from his Goldman Sachs days, but he never provides any statistics as to how much of the $645B in TARP funds committed to date actually went to these FOPs (technically that's the Fallacy of the Hasty Generalization). A closer look is definitely warranted. But in the meantime, the Logic Critic gives Matt Taibbi…

2 Blades - Wrong.