You know that Goldman Sachs is one of Wall Street's financial giants, but you might not realize how much power Goldman wields in Washington.
As the New York Times explained last October, the presence of Goldman Sachs alumni in many of the top government financial posts is so great that their team is dubbed "Government Sachs":
Indeed, Goldman’s presence in the [Treasury] department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.
The Times points out that Goldman alums include:
- Former treasury secretary Hank Paulson
- Paulson's bailout chief Neel Kashkari
- Interim Treasury investment officer Reuben Jeffrey
- Key Treasury players Dan Jester, Steve Shafran, Edward C. Forst, and Robert K. Steel
- Key New York Federal Reserve players Stephen Friedman (head of the New York Fed board of governors, who sat on Goldman's board and owned a substantial stake in Goldman while he was making official decisions - and see this), William C. Dudley (head of the New York Fed's unit that buys and sells government securities), and E. Gerald Corrigan (charged with convening a group to analyze risk on Wall Street)
Obama has also named Gary Gensler to head the Commodity Futures Trading Commission. And Geithner named Mark Patterson as his top aide last January
The Independent wrote in July:
New York Times columnist David Brooks noted that Goldman Sachs employees have given more money to Barack Obama's campaign for president than workers of any other employer in the US. "Over the past few years, people from Goldman Sachs have assumed control over large parts of the federal government," Brooks noted grimly. "Over the next few they might just take over the whole darn thing."
In March, Geithner was questioned by Congresswoman Maxine Waters about the appearance of conflict of interest by Goldman Sachs insiders:
"I am just asking the questions," Waters said, "because the talk is...that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."
Geithner responded: "I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people."
(Geithner, while defending the government's financial decisions, did not deny that Goldman players were at the center of those decisions).
Time magazine notes:
Among the biggest beneficiaries of the AIG pass-through, at $12.9 billion, was Goldman Sachs, the investment-banking house that has been the single largest supplier of financial talent to the government. Critics have been quick to note — and not favorably — the almost uncanny influence of former Goldman executives. Initial phases of the rescue were orchestrated by ex–Goldman chairman Hank Paulson, who was recruited as Treasury Secretary in part by former White House chief of staff and Goldman senior exec Josh Bolten. Goldman's current boss, Lloyd Blankfein, was invited to participate in meetings with the Fed. AIG's Liddy is a former Goldman director and an ex-CEO of Allstate. Another alum, Mark Patterson, once a Goldman lobbyist, serves as chief of staff at the Treasury, while Neel Kashkari, who runs TARP, was a Goldman vice president.
Goldman has repeatedly declared that its exposure to AIG was "immaterial" and fully hedged. But some rivals point to the fact that Goldman had uncharacteristically piled into contracts with a single counterparty. "I am shocked that Goldman had this much exposure [with AIG]," says an analyst at a competing bank. "This was a major failing, but they got bailed."
Goldman got bailed twice: first on its CDS exposure and a second time, to the tune of $4.8 billion, for another AIG fiasco, losses on its securities-lending business.
Indeed, Goldman's current CEO, Lloyd C. Blankfein, apparently participated in several of the important meetings determining which companies the government would save and which would fail.
Comments