Wall Street turns on Wall Street, finally

May 17, 2011, 8:48 PM UTC

By Moshe Silver, Hedgeye

FORTUNE — What could Dick Bove be thinking?

In a break with Wall Street tradition, the Rochedale Securities research analyst issued a very rare sell rating last week — on Goldman Sachs, no less.

Analysts live or die by their access to corporate managements, and corporate managements, like the army in Catch-22, want to be liked. And they like to have their analysts embedded. Like journalists covering a war by traveling with the U.S. army, the analyst at the CEO’s table gets a ringside seat on the corporate story. And also like the reporter, the analyst only gets to see what his hosts want to show him.

Wall Street analysts rarely go off on their own, because they live and die by corporate access — their cherished ability to get the CEO to take their phone calls. Thus, when a high-profile analyst slaps a sell recommendation on a major firm, we have to assume it’s because the relationship has outlived its usefulness to the analyst. Let’s face it: nobody is so powerful that they can put a sell on Goldman Sachs (GS) with impunity.

We won’t ask what tipped Bove that the game is up at Goldman. In the conflicted world of Wall Street, one does not have to have a positive outlook on a stock to maintain a buy recommendation. But there is a creeping sense on Wall Street that the game may be up in a more fundamental way. Wall Street often attracts the Best and the Brightest, but it also turns them into fatuous morons who believe no one else will be smart enough to catch them.

Enter potty-mouthed rock-star gonzo financial journalist, Matt Taibbi, whose series in Rolling Stone have dissected financial and governmental dirty dealings with great precision and clarity. In preparation for his latest piece, Taibbi once again did something practically no “serious” financial journalist would deign to do: he actually read “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” the report of the Levin-Coburn commission’s inquiry into the causes of the financial crisis.

Senators Levin and Coburn have put together a book that is remarkable by Washington standards. It is bluntly forthcoming, explaining in detail a tremendous number of bad deeds, and naming explicitly a large number of bad actors. And it is surprisingly readable. The report is a roadmap to how we got to where we are today and should be required reading for every investor and every voter in this country. If enough people took its message to heart, perhaps Taibbi would see some of his more cherished — and unlikely — scenarios come to pass, such as sending Wall Street CEOs to Riker’s Island.

The thing about Taibbi’s rants is that they are just the kind of thing that people really, really want to see happen. Suddenly, in the age of the Tea Party, tarring and feathering is looking like an option. Call it a groundswell. Popular anger can move mountains. It can certainly empty out the White House.

Just one quote from Taibbi’s latest piece will give you a flavor: he says Goldman marketed paper it knew would fail, and bet massively against it while claiming Goldman’s interest was aligned with the investors’ because Goldman “bought a tiny, $6 million slice of the riskiest portion of the offering. But what it left out is that it had shorted the entire deal, to the tune of a $2 billion bet against its own clients.” Talk about selling worthless securities with impunity — the ultimate naked short?

The Levin report should be read by anyone who receives this screed — it’s thorough, clear, and refreshingly candid. Taibbi’s reporting should also be read — Dick Bove read it and it looks like he got the message.

Some have called Taibbi an “autodidact” financial journalist, a backhanded compliment that implies a lack of clear thought process. The fact is, unlike other journalists writing about Wall Street, Taibbi refuses to be embedded. When they say he’s “self-taught,” what they really mean is he doesn’t parrot what Wall Street and Washington tell him. He tells it like it is.