Mainstream financial journalism is doing its level, eye-rolling, heavy-sighing best to stuff Matt Taibbi back into the alt-press hole he came from, but he’s not going along with it, and the mainstreamers in any case are making a big mistake.

The Rolling Stone writer cemented his status as the enfant terrible of the business press with “The Great American Bubble Machine,” a 10,000-word excoriation of Goldman Sachs, a muckraker’s-eye view of Goldman history, exploring the bank’s and Wall Street’s contributions to various financial disasters, starting with the Great Depression, skipping to the Tech Wreck, the Mortgage Wreck, the oil bubble of 2008, the bailout, and the looming cap-and-trade plan. Salted with “fuck”s, “shit”s and written with brio and hyperbole in the New Journalism tradition, it caught the financial community, which very much includes the financial media, utterly off-guard, unused as it is to hearing its flagship described as a “giant vampire squid wrapped around the face of humanity.”

Financial cognoscenti quickly sought to dismiss the piece as so much conspiracy-mongering perpetrated by a financial illiterate. Funny, but that illiterate’s piece ran more than a month ago, and people can’t stop talking about it. Perhaps not coincidentally, it feels like the general financial news has been all-Goldman, all-the-time ever since.

Ex-Deal and Wall Street Journal staffer Heidi Moore stepped into a buzzsaw last week week when she wrote one of the biggest non-sequiturs of the financial crisis, a column in Slate’s Big Money arguing that Goldman’s success comes from the fact it’s better at what it does than everyone else, therefore, apparently, criticism is unwarranted.

Will Everyone Please Shut Up About Goldman Sachs? The bank has a culture that works. So what?

As Taibbi (who needs no help defending himself) pointed out on his own blog, Moore addresses precisely none of the substantive criticisms that have been leveled at the bank, including big ones, like (1) buying predatory loans, (2) selling defective mortgage-backed securities while (3) shorting them at the same time, and (4) buying defective insurance from American International Group, then having those bad bets redeemed in full by government programs ratified by ex-Goldman executives. This is to say nothing of the role ex-Goldman alums played in laying the groundwork for the decade’s financial recklessness—Robert Rubin’s contribution to deconstructing financial regulation and Henry Paulson’s lobbying to loosen capital restrictions in 2004, to name just two.

Or, as Taibbi put it:

And the winner of this month’s Most Retarded Horseshit Written In Defense of Goldman Sachs award goes to… Heidi Moore at Big Money! Come on down, Heidi!

CNBC’s Charlie Gasparino pulled out all the bizpress cliches—Taibbi is not just “dead wrong” but “pretty naive” believed by “half-literate bloggers” (you can add your own eye rolls)—but has to misread Taibbi in order to dismiss him. He says Taibbi says “Goldman either single-handedly or with very little help, was responsible for the financial crisis.” But that’s not what Taibbi actually says, as we’ll see below.

RealClearMarkets’s eyes rolled practically back in its head in this attempted takedown (many things are “laughable,” “laugh-inducing,” etc.—yuck, yuck), pointlessly pointing out, among other things, that other parties were on the other side of Goldman trades, therefore, apparently, everything’s okay. Nothing to see here, folks.

(And yeah, Goldman is an Audit funder, having given us $25,000, or about 10 percent of this year’s budget. What can you do? Deal columnist Yvette Kantrow weakly accused The Audit a few weeks ago of being in the tank for Goldman. Our response to that irresponsible cry for attention is here and here.)

A better use of all this expertise, I’d say, would be to probe what the right Goldman story might be, rather than dwelling on what they think is the wrong one. We’ll be keeping an eye out for those.

The more general reaction to Taibbi’s piece was all over the place and ranged from this rapid and complete dismissal by mainstream-media types leveling their usual charge—”simplistic”—as well as others who found the idea of trying to put any one institution, even Goldman, at the center of a century-long scheme to inflate and profit from bubbles, preposterous on its face. Another camp could express nothing but gratitude that someone had taken on directly an important actor with a sense of fury proportionate to the scope of the financial crisis—“finally!” And then there was the largest camp, people who just said: “Wow, look at that.”

For all the clamor, criticism of what Taibbi’s actually written has been surprisingly weak. The best critics could offer was that Taibbi exaggerated Goldman’s particular role in this or that crisis and that financial crises are far too complex for this frame (or for them, I suspect, any frame at all) —that and make disparaging remarks about Taibbi’s alleged self-righteousness, amateurism, ignorance, etc. While the attacks on Taibbi aren’t couched as defenses of Goldman, the net effect is the same.

Moore, who with Gasparino, seems intent on playing the role of eye-rolling professional business writer to the hilt, made this comment, which found its way into a New York Times round-up of the reaction to Taibbi—one I suspect is widely shared in the MSM:

For the record, I don’t think any article that contains the line ‘vampire squid sucking the face of humanity’ is real journalism. That’s self-righteous editorializing. If Taibbi wanted to make his point, he would have done great to dig up some, like, “facts.”

The Atlantic’s Megan McArdle, who doesn’t lay a glove on Taibbi in this attack, is unintentionally revealing of a certain strain of financial journalism thinking:

Taibbi is a gifted narrative journalist, whose verbal talents I greatly admire. But financial meltdowns don’t offer villains, for the simple reason that no one person or even one group is powerful enough to take down a whole system.

“Financial meltdowns don’t offer villains?” Does anyone believe that?

And wait a minute: Are we really so sure that “one group,” Wall Street, was not central to this crisis and that its increasing influence over government at all levels—what gives, for instance, with ex-Goldmanite Neil Levin deciding as New York State banking commissioner in 2000 not to regulate credit default swaps as insurance?—was not decisive? And isn’t Goldman Wall Street’s leading firm?

Rather than dismiss Taibbi, the mainstream business press would do well first to read him, learn from him, and above all, refrain from all attempts to outwrite him, because that seems to be a losing game.

So here are a few things to think about.

First, it’s worth noting that the debate about “Bubble” hasn’t been about the accuracy of the facts in the piece (though it’s not, I’m sorry to say, problem-free, as we’ll see below). Instead, the discussion is about the arrangement of the facts and the conclusions drawn from them. Now, manipulation in bad faith of true facts is probably as bad a journalism sin as any other. Still, the facts here are really not the issue. So one question to think about is, when does being “technically right” become simply being “right,” at least in the sense that a piece makes valid points by marshaling true facts?

Indeed, subsequent reporting and events have only provided support for Taibbi’s basic argument—that Goldman and Wall Street have played important roles in a series of harmful events over the years (come to think of it, is this even controversial?). His idea that Goldman gamed the bailout, for instance, got backing from Joe Hagan’s recent piece in New York, which makes a strong case that the AIG bailout saved Goldman from disaster and was not, as some defenders weakly maintain, a matter of indifference to the bank:

Not a single Wall Street executive I spoke with, including several Goldman Sachs alumni, believe those hedges would have survived an overall collapse of the financial system. A large loss would have been inevitable as lending evaporated, and Goldman Sachs would have struggled to shrink the company to a fraction of its size overnight.

Hagan also argues that other government programs saved the firm’s bacon:

Salvation came on November 25, a few days after Goldman’s stock price plunged to $52 a share, down from the year’s high of $200 and the lowest price the company had seen since it went public. Again, the white knight was the government. It turned out that Goldman’s conversion to a garden-variety bank-holding company offered an amazing advantage: Goldman now had access to incredibly cheap money. Exploiting its new status, Goldman became the first financial institution to sell $5 billion in government-backed bonds through the Federal Deposit Insurance Corporation, which allowed Goldman to start doing deals when the markets were at a near standstill.”Goldman was desperate for it,” says a prominent Goldman alumnus.”Everybody knows it. Those FDIC notes they got were lifesaving because they couldn’t issue any debt. If it had gone on another week or two, Goldman would have failed, they would have gone the way of Lehman, and you’d be talking about Lloyd the way you talk about [Lehman CEO] Dick Fuld.”

It should be noted that Goldman disputes, in no uncertain terms, the notion that it was ever in serious trouble and that it has benefited in particular, directly, from any government help. In this, though, Goldman argues not just against Taibbi but against the whole world.

And Taibbi’s wild-eyed idea that Goldman (he actually uses Goldman as a proxy for Wall Street) played a role in the oil-price bubble of last summer has now received support from the Commodity Futures Trading Commission, which The Wall Street Journal reported, is set to blame speculators (Goldman isn’t named, but the point is made), not supply and demand.

Second, while some in conventional business journalism may wish to dismiss Taibbi, it’s worth remembering that he is only filling a vacuum left by mainstream outlets themselves. One reason “Bubble” was so shocking, I believe, is that it looks with well-deserved skepticism (okay, red-faced, foaming outrage) on the core business practices of an individual financial institution, by name, and a powerful one at that. Conventional business-press investigations focus too often on marginal infractions, rulebreaking within the game, and too rarely on the game itself. One upside of Taibbi’s approach is its rejection of the false notion peddled by Wall Street and its defenders that crises are like natural disasters, unpreventable and uninfluenced by important actors, political and financial. Just because crises are complicated doesn’t mean individual and institutions didn’t play important roles, and complexity does not give the financial press a pass from its job of calling those actors to account on readers’ behalf. Just the opposite is the case: institutions are decisive, and investigating them is Job One.

As we demonstrated in CJR’s May/June issue, the mainstream media failed in the basic task of singling out out-of-control actors when it might have counted in the years prior to the blow up, particularly during 2004-2006.

And, as we also noted, when the press did perform this basic function in the early part of the decade (in probes of Lehman and its ties to notorious predator First Alliance Mortgage Co., of Citigroup and its acquisition of the rogue Associates First Capital, of Household International, Ameriquest and others) the practices were brought to heel. This was not a coincidence.

Third, like it or not, “Bubble Machine” is an important breakthrough for muckraking alt-media—the non-experts, the anti-business press—in the financial space. Other alts have done good work, which we’ve noted. But this wasn’t a bleat from the left. It was a sonic boom. Look for increased prominence of new players in the financial media, those not steeped in conventional business press culture, for worse and mostly for better, not hamstrung by the need to manage long-term relationships with financial institutions, and freer, indeed, incentivized to burn bridges or not to build them at all. Banks, Fed, Treasury, SEC—you are on notice.

Fourth, Taibbi is subtler than critics give him credit for. The charge is that he pins catastrophes on Goldman alone. But the piece often uses Goldman as a proxy for Wall Street as a whole, and he offers readers plenty of guideposts when he does so.

Fifth, in judging whether a piece is fair journalism or beyond the pale, all benefit of the doubt must go to the reader, who, while not as bright certainly as those sophisticates at CNBC, must be assumed to have enough flickering brain power to understand that just as Goldman Sachs is not literally a “giant vampire squid,” neither is it solely responsible for the Great Depression or anything else. Taibbi is offering polemic—we know this from phrases like, “It fucked the investors who bought their horseshit CDOs.” It is an argument, a frame through which we are invited to view an event. Readers can figure this out.

Sixth, as noted, some of “Bubble Machine” ‘s most damaging facts—about the tech and mortgage wrecks, in particular—are not only true, they aren’t even particularly controversial anymore. For instance, he reminds readers that Wall Street/Goldman threw underwriting standards out the window in both disasters. In the old days, Wall Street required three years’ profitability before bringing a company public. But then:

Of the 24 companies [Goldman] took public in 1997, a third were losing money at the time of the IPO. In 1999, at the height of the boom, it took 47 companies public, including stillborns like Webvan and eToys, investment offerings that were in many ways the modern equivalents of Blue Ridge and Shenandoah [early Goldman vehicles that blew up]. The following year, it underwrote 18 companies in the first four months, 14 of which were money losers at the time.

Which part of this is wrong, naive, or a conspiracy theory? Taibbi here is holding Goldman and Wall Street to its own past standards. That’s just journalism. And he is not out of bounds to suggest that these practices are problematic since we already know full well that they were. The history of the Tech Wreck is in the books. Its outlines are no longer a matter of serious dispute.

What’s the complaint then? That this is old news? That Morgan Stanley, Citigroup and CSFB were worse? So what?

Or take this passage about the current crisis and the Goldman role in issuing junk mortgage-backed debt:

By the peak of the housing boom in 2006, Goldman was underwriting $76.5 billion worth of mortgage-backed securities — a third of which were subprime — much of it to institutional investors like pensions and insurance companies. And in these massive issues of real estate were vast swamps of crap.

What is the argument here? That these securities were chicken salad?

Take one $494 million issue that year, GSAMP Trust 2006S3. Many of the mortgages belonged to second mortgage borrowers, and the average equity they had in their homes was 0.71 percent. Moreover, 58 percent of the loans included little or no documentation — no names of the borrowers, no addresses of the homes, just zip codes. Yet both of the major ratings agencies, Moody’s and Standard & Poor’s, rated 93 percent of the issue as investment grade. Moody’s projected that less than 10 percent of the loans would default. In reality, 18 percent of the mortgages were in default within 18 months. [Taibbi’s emphasis.]

Where are the errors in that passage? Is it wrong to suggest that this is problematic? If others were worse—this is an excuse?

Bloomberg’s Mark Pittman back in 2007 explored Goldman’s contribution to the mortgage mess while Hank Paulson ran it; The New York Times’s Gretchen Morgenson was first to reveal Goldman’s stake in the AIG bailout; and Kate Kelly of the WSJ probed whether Goldman favored its shareholders over its clients in mortgage trading, But no one can argue with a straight face that the mainstream business press, which purports to cover Goldman 24/7, has mustered its considerable resources to directly address this institution’s role in the current crisis.

(For more, read this account by The Audit’s Elinore Longobardi of business press hagiography of Paulson last fall. The photos alone are worth a click.)

Taibbi’s critics make the same argument that Wall Street makes—that investors/borrowers/insurance policyholders etc. are responsible for what they buy. True, but is that really the end of the argument? If we were talking about cars or heart stents, would we say the same thing? If the argument is that pension funds and other CDO buyers are sophisticated players, that is true, but again, is that the end of the argument? What about the consequences for the rest of us?

And is it out-of-bounds to point out, as Taibbi does, that Goldman was selling securities that would explode at the same time it was betting against them? Many in the business press think so. I don’t.

That all said, “Bubble Machine” poses all sorts of problems from a journalism standpoint, and they aren’t small. Here’s how I see them:

One, the piece pushes language past the breaking point, as, for example, in the subhed:

From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they’re about to do it again.

“Contributed to,” “participated in, “profited from,” “been around at,” “—All these are words that could have been used in place of “engineered.” Rolling Stone didn’t go that way.

American Heritage Dictionary defines “engineer” as, “To plan, manage, and put through by skillful acts or contrivance; maneuver.” If that’s true of Goldman, or even Wall Street as whole, and these bubbles, it’s only in the broadest, most cosmic sense. The hyperbole hurts rather than helps.

As for “manipulation,” are bubbles the result of manipulations? And does exacerbating a bubble constitute manipulation? I don’t know, but the language is rough. Of course, Wall Street-backed predatory lending is rough, but this is where Taibbi leaves conventional investigative reporting behind.

But there’s something else to consider. As Taibbi’s piece forcefully reminds us, Goldman alumni, notably Rubin, Paulson, Ed Liddy (who is leaving AIG, mission accomplished), Goldman-influenced Tim Geithner, and others, have been all over the government’s policy and regulatory apparatus. Even assuming all acted in good faith as public servants, all are certainly fair game for robust attack for policy choices that either cost the country, benefited Goldman, or both. If decisions made by officials with whom you have a relationship that is less than arms-length end up benefiting you, someone’s going to take issue.

That all said, stretchers undermine argument.

Two, as others have too eagerly noted, the piece kills itself to put Goldman at the center of things, including the tech and mortgage wrecks, when it really means “Wall Street.” Other actors were much worse in various crises, as many have pointed out. To which, Taibbi has responded, So What? Still, there it is. The contortions create dissonance that harms the piece.

Three, it was a mistake to go back to the Great Depression. Taibbi is trying to establish a pattern of selling leveraged investments that eventually crashed, but there’s a limit. That was a different world. By collapsing the timeline into the last 10 years, the piece would have been stronger.

Fourth, Taibbi plays pretty rough, even with true facts. He says Goldman’s 2008 tax bill was just $14 million. But it was higher in the years before and will be higher in the future. Again, Taibbi might say, so what? But again, there you are.

More of a problem: he also attributes the low bill to Goldman off-shoring its income. The absolute bill was low mostly because of U.S. credit losses. And while, it is true that its effective rate that year was 1 percent, due, as he accurately quotes Goldman’s annual report, to “changes in geographic earnings mix,” Goldman spokesman Lucas van Praag points out in an email that the “geography” here was the U.S., where the losses lowered both the tax rate and the tax bill itself.

So, Taibbi was free to use the hilariously low tax bill as an indictment of the U.S. tax system, but off-shoring doesn’t seem to have been the problem he makes it out to be here:

In other words, the bank moved its money around so that most of its earnings took place in foreign countries with low tax rates. Thanks to our completely fucked corporate tax system, companies like Goldman can ship their revenues offshore and defer taxes on those revenues indefinitely, even while they claim deductions upfront on that same untaxed income. This is why any corporation with an at least occasionally sober accountant can usually find a way to zero out its taxes. A GAO report, in fact, found that between 1998 and 2005, roughly two thirds of all corporations operating in the U.S. paid no taxes at all.

In fact, foreign earnings weren’t the issue. While Goldman could have helped itself by cooperating with Taibbi, it declined to talk to him. Still, it’s a slip.

Reached on the phone, Taibbi acknowledges that the low bill may not have come from offshoring after all. He notes that Congressman Lloyd Doggett was among those in the story attributing the tax bill to offshoring and that the tax question was one of those asked and unanswered by Goldman.

Taibbi’s critics might say that it’s ridiculous to point to a small factual error if the entire thesis of the story is preposterous.

But if you believe as I do that the argument is defensible—namely that Goldman/Wall Street contributions can be found in major crackups, and that Goldman is fairly singled out as Wall Street’s leader—it strikes me that there’s a difference between using facts selectively in a polemical piece (e.g. Goldman paid a tiny tax in 2008 without mentioning it might have paid a lot in other years) and mistakenly attributing a true outrage to the wrong cause.

There are other arguable nits—one fact-crammed passage seems to imply Goldman become a bank holding company to qualify for TARP when it would have qualified anyway. But the fact is, anyone who thinks these quibbles sink this 10,000-word piece is wrong.

The main and misunderstood strength of “Bubble Machine” is that Taibbi is taking a backward look at events that we already know were problems and/or catastrophes for millions of Americans, the financial system and the economy—the Tech Wreck, the Mortgage Wreck, last summer’s oil bubble, etc.—and looks at whether and how Goldman and Wall Street fit in. In each case, he finds that Goldman and Wall Street are there and seeks to explain how they contributed. To argue that their roles might be exaggerated is one thing. To argue that these events aren’t problems or these actors played no role is not credible.

The outrage that fuels the piece is not only welcome but strangely missing from the conventional business press, which, with few exceptions, has been numb to the moral dimension of the crisis.

The weakness of the piece is where others might find strength, its polemical nature and its hyperbole. When you call Goldman a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” you’re in a sense offering a big fat disclaimer—this piece is not to be taken literally and perhaps not even seriously. You make it easy for the Gasparinos of the world. When you say Goldman engineered various crises when you mean something perhaps more nuanced, that’s a problem. It’s not that you lose cognoscenti—that’s fine—but readers then are left to figure out where the case against Goldman ends and license begins. It doesn ‘t seem fair to them.

In the end, like the grandmother who worries whether something is “good for the Jews,” I worry about whether Taibbi-ism is good for accountability-oriented journalism in the financial space.

I think it most certainly will be. But in any case, mainstreamers dismiss him at their peril. Taibbi represents a challenge to the conventional business press’s increasingly narrow focus, its incrementalism, its concern with petty scoops at the expense of asking the big questions of the big institutions on its beat.

The lesson of Taibbi is that if conventional business journalism is unwilling or unable to step back and take in the sweep of this crisis, and the systemic distortions that underlie it, somebody else will.

Dean Starkman writes and edits The Audit. He is CJR's Kingsford Capital Fellow.