Do We Have Government by Goldman?

As a headline of an article by The Intercept suggests?

A funny thing happened on the road to the White House.

A President who had railed against Goldman Sachs and other TBTF and proclaimed, “For too long, a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost. Washington flourished — but the people did not share in its wealth,” has instead populated his cabinet and administration with the same people he vilified.

Under his leadership, a cadre of former Goldman Sachs executives seem likely to control our economy and financial system in the years to come. Lisa Donner, of Americans for Financial Reform, noted “Wall Street titan Goldman Sachs seems to be taking over financial regulation in the United States, trying to make it easier for them and other big banks like Wells Fargo to steal from their customers and destabilize the economy.” 

At the forefront of this charge is Goldman’s former President and COO, Gary Cohn, who was named director of the National Economic Council and is diligently working on making changes which will directly benefit Goldman. Mr. Cohn is supposed to recuse himself regarding any issue Goldman is a direct party to, unless he has been granted an ethics waiver, but the current administration, in an apparent change from the previous administration, is not making public ethics waivers which have been granted. So it is unknown if a waiver has been granted to Mr. Cohn.

In”Government by Goldman,” a recent Intercept article,  authors Gary Rivlin and Michael Hudson ask, “how exactly can Mr. Cohn recuse himself from matters involving Goldman when almost every aspect of his job has the potential to either grow  Goldman’s  profits and inflate its stock price – or tank them both?” In an area Goldman has a special interest in, the Dodd-Frank reform bill, the authors say, “rather than publicly recuse himself on attempts to undo Dodd-Frank, Cohn has led the charge inside the White House. … Cohn is a walking, talking conflict of interest,” 

The TBTF banks have been systematically gutting the provisions of Dodd–Frank which was originally intended to put controls on the larger banks and which instead has unduly penalized the community banks which simply cannot afford the cost of compliance.

One significant provision of Dodd-Frank is the Volcker Rule, which is supposed to severely restrict the large banks’ ability to make speculative trades with their own money. However, bank lobbyists weakened the Rule and before Dodd-Frank could be adopted the “Senate inserted a loophole that was intended to enable firms like Goldman Sachs to keep a “de minimis” 3 percent stake in hedge funds or private equity firms.” Further, if a “new” investment fund is in its “seeding” phase the bank can own up to 100% up to one year. And the Fed is now granting significant extensions to the banks from having to divest themselves of those speculative investments, thus the Volcker Rule is in name only, with no enforcement.

The Intercept article, a long one and well worth the read, points out many instances of Goldman Sachs long and sordid history of abuses, many of which Mr. Cohn was front and center in. Pension funds and insurance companies were among those losing billions of dollars on securities that Goldman had endorsed as safe triple A investments.

Goldman was in the middle of the AIG situation, directly benefiting by $12.9 billion when it was bailed out, and while they paid back their TARP bailout loan within a year there were many blemishes on their record.  Matt Taibbi of Rolling Stone describes the bank as ”a great vampire squid wrapped around the  face of humanity, relentlessly jamming  its blood funnel into anything that smells like money.”

There is no question that Goldman Sachs and, in many cases, Mr. Cohn have been involved in more than a share of activities during the financial crisis that did not pass ethics tests. They’ve been plagued by class action suits and other lawsuits that, according to Intercept, have accused them of violating trust, making “false and misleading statements “and failing to conduct basic due diligence  on the loans underlying the products it peddled. It’s no surprise that Mr. Cohn was named as defendant in 25 of these suits.

The SEC has accused them of deception regarding their “synthetic collateralized debt obligations.” Mr. Cohn has testified before the Financial Crisis Inquiry Commission and failed to mention the billions of dollars Goldman Sachs pocketed by betting the mortgage market would collapse – Goldman Sach’s infamous, “the big short.” And just a couple of weeks after Mr. Cohn’s testimony, Goldman paid the SEC $550 million to settle charges of securities fraud.

Now, considering the over $30 million the firm has spent in lobbying against regulations in the last 10 years; the switch from campaign donations that formerly went to Democrats, which in this last political campaign went instead to Republicans and other conservative groups, outspending any other banks’ contributions…well, what’s your deduction?

Goldman as ruler, with Mr. Cohn its central player should not come as surprise to any. Deregulation, gutting Dodd-Frank, the corporate tax cuts – which would greatly benefit Goldman, the announced $1 trillion in privatized infrastructure – of which they are front and center – as they are one of the largest infrastructure fund managers in the world!

My guess is that once again we are on the road to financial destruction.

Goldman Sachs now firmly has this administration in hand with a deliberate attempt to influence both legislation and regulation for the benefit of Goldman Sachs.

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