Published: Friday, 7 Aug 2009 | 1:16 PM ET

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Can one firm create a bubble? Can one firm create four bubbles?

Maybe, but it's damn hard to prove. That's why it's so unimpressive that a fervent 10,000-word rant by Matt Taibbi in Rolling Stone's July 9 issue-devoted purely to "Goldman's big scam"-spent 12 pages on the subject of Goldman Sachs'

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[GS  Loading...      ()   ] "Great American Bubble Machine" but never delivered any plausible proof. The mammoth article disappointingly failed to provide the smoking gun that so many people on Wall Street-who have envied and admired and hated Goldman for much of this decade-would have been delighted to see.

Context and good facts were in short supply in favor of a lively, if incoherent, narrative. As a fellow financial journalist put it: "If you read the article without knowing anything about finance, by the end you would still not know anything about finance-but you would hate Goldman Sachs."

True. Goldman's reputation is its own business-I've never owned any of its stock and don't have any friends who work there-but as someone who's written about Wall Street for a decade, it annoys me to see the public that wasn't fully educated about the financial crisis before it happened get snookered again by misleading reporting afterwards. Megan McArdle of the Atlantic apparently feels the same way, having dubbed Taibbi "the Sarah Palin of journalism" and pointing out intelligently that "[i]t's not that everything he says is wrong, but the bits that are true aren't interesting, and the bits that are interesting aren't true. The whole thing dissolves into the kind of conspiracy theory he so ably lampooned in The Great Derangement. The result is something that's not even wrong. It's just incoherent." In his rebuttal, Charlie Gasparino of CNBC said the article made him "ill" in his "Stop Blaming Goldman Sachs" rebuttal to Taibbi. (Allegedly, Gasparino and Taibbi will settle their differences with the modern-day version of pistols at dawn, which is a dual appearance on Imus.)

Here's why I'm on record as siding with the skeptics: Taibbi set himself an impossible task in trying to prove that one firm is that evil and that smart. The thing about bubbles is that they take a village-everyone has to become disinhibited, and greedy, on a mass scale to buy into a really bad idea. The whole history of Wall Street is guys with homes in Greenwich complaining about guys with ranches in Telluride, billionaires bashing millionaires, and in the end, the whole Street is in on it together because they all get paid the same way. The idea that one person or firm could be behind any of it is at most a distant delusion. It is not a conspiracy launched in one place and foisted on others-it is people responding to the incentives we give them. (And, by the way, there are some good people in there, too, although that often gets forgotten.) All Wall Street firms and their hedge fund friends played a part in fueling the tech bubble, got involved in unsavory amounts of trading in mortgage-backed securities, and toyed with credit-default swaps, because that's how they could make money at the time. Wall Street almost always moves in lockstep. That's why the bailouts that helped Goldman actually helped other firms even more: They're too interconnected to fail.

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Not too many people, however, have addressed the bulk of the actual factual and contextual inconsistencies in Taibbi's Rolling Stone article. The facts won't change the debate-as Barry Ritholtz points out, the Goldman article is more about having someone to blame for the credit crisis, one target, fair or not, for all of society's frustrations-but it's still useful to get them out there. So here's a little factual perspective about Wall Street and its bubbles that I wish more readers had had with them as they were reading the Rolling Stone article.

Let's start with the AIG

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[AIG  Loading...      ()   ] thing. Everyone has read about how Goldman received $12.9 billion from AIG to cover money AIG owed Goldman on credit-default swaps. That $12.9 billion, in turn, came from the government via the first bailout of AIG. The conspiracy theory says that the government paid out all of AIG's debts because Goldman alone would have failed without that $12.9 billion in hand. That's hard to believe: AIG's bailout went to pay several firms, not just Goldman: Bank of America

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[BAC  Loading...      ()   ] Merrill Lynch received $12 billion, as did France's Societe Generale and Germany's Deutsche Bank. England's Barclays Plc received about $6 billion, and Switzerland's UBS received about $5 billion, all of your taxpayer dollars. Goldman says it would have been fine regardless (which is admittedly hard to believe, since $12.9 billion is, after all, real money). But whether Goldman would be fine is beside the point. The point is that when AIG collapsed-in fact, because AIG collapsed-it owed money to several banks, and when the government took over AIG, it owed that money to the banks, too.

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