Felix Salmon Shakes His Head at Ben Stein
A New York Times that prints things like this from Ben Stein isn't long for this world. Just sayin'.
Let's give the mike to Felix Salmon:
Finance Blog - Market Movers by Felix Salmon: Ben Stein Watch: December 2, 2007 - Portfolio.com: The invisible government of Goldman? Do you think they have a secret handshake, too?
Stein, in this column, is accusing the honest and blameless Goldman economist Jan Hatzius of much more than mere intellectual dishonesty: he's saying that Goldman and Hatzius are using economic research notes to drive down the bond market and make profits on the firm's bearish trades. He compares their conduct to that of Henry Blodget, who was charged with securities fraud and is now banned from the securities industry for life. And he says that anyone who used to run such a shop should never have been considered for the job of Treasury secretary.
It's not illegal – in this country – for Stein to make such allegations. But it is quite shocking, and depressing, that the Gray Lady would willingly allow herself to be used as a vehicle for this kind of yellow journalism – and would place it on the front page of its business section, no less.
Do I have to slowly explain why Stein's column is in fact unmitigated garbage? Thankfully, I don't, because Dean Baker and Yves Smith have got there before me. In a nutshell: Goldman sold the CMO that Stein complains about in mid-2006; it made its big profit on subprime shorts a full year later. Stein's ridiculous assertion that a credit crunch and growth slowdown "has not happened on any scale in the postwar world" can be refuted with one word: Japan. And as for Stein's statement that a correspondent of his in Florida "may be right, but he’s not", I'm sure that that will turn out to be false as well, the minute that anybody can work out what on earth it's supposed to mean.
More generally, macroeconomic research notes do not move markets. And a mortgage-bond origination team is hardly likely to disband and retire for a life of sheep farming just because an economist employed by the same organization is bearish on the housing market. Is that really what Stein would have had them do? By all means criticize Goldman for underwriting nuclear waste, as Allan Sloan did – that's fine. But there's an oceanic gulf between that and securities fraud.
: Stein's NYT stablemate, Paul Krugman, weighs in.
Maybe I don’t have what it takes to be a serious columnist. I mean, it would never have occurred to me to suggest that the only way to explain an economic forecast I don’t agree with is to say that it must be part of an evil plot to drive down the market, so that Goldman Sachs can make money off its short position — and to suggest that Goldman should be the subject of a federal investigation.
