The Goldman Sachs Effect: How a Bank Conquered Washington
Tom Englehardt introduces Naomi Prins’s article at TomDispatch:
We now find ourselves in Donald Trump’s back-to-the-future world. And why should we be surprised? His whole campaign pitch was to do it “again” — to return to his dream of past American greatness, which seems mired in a 1950s America of burning fossil fuels and urban smog. In his very first days in office, through executive orders he’s already moved to revive two pipeline projects: the building of the Keystone XL pipeline from Canada to the Gulf Coast, cancelled by the Obama administration in 2015 after years of massive environmental protests, and the Dakota Access Pipeline, halted by the Obama administration late last year after fierce and effective protests by Native American tribes and others. At the same time, his administration has “frozen” all grants and contracts at the Environmental Protection Agency, a first step toward what will undoubtedly be an attempt to drag us back into an American past that lacked serious environmental protections. The president also took the first step — another executive order — toward rolling back (or simply rolling up) the Affordable Care Act. This was part of what will clearly be an attempt to quite literally roll back history by obliterating the “legacy” of the country’s first black president, including possibly bringing back CIA “black sites” and “enhanced interrogation techniques,” both banned by Obama on entering the Oval Office. (Again, none of this should be surprising since Trump began his political career as the chief spokesman for birtherism, the initial attempt to delegitimize Obama’s presidency.) And we await the new president’s announcement of his Supreme Court nominee to fill the empty seat of Antonin Scalia, knowing that at least one of his leading choices, a fierce opponent of both abortion and gay rights, would be ready to roll the clock back, in the case of Roe v. Wade, to the years before 1973, if not to the 1950s. Clearly, these are just initial steps on the road not to a genuine future but to what, by now, has become a kind of fantasy past.
And speaking of “again,” as TomDispatch regular Nomi Prins, author of All the Presidents’ Bankers, points out today, there’s always Goldman Sachs, which is really a case of again and again and again. Who even remembers the campaign moments when Trump claimed that “the guys at Goldman Sachs… have total control over Hillary Clinton” and tweeted that she was “owned by Wall Street”? Now, The Donald has smashed all past records by appointing six Goldman Sachs alumni to posts in his administration. Think of that as again with a couple of exclamation points attached to it, a coup for an investment bank that has been a government powerhouse, as Prins makes so clear, since the 1930s. So buckle up, settle into that time machine, and head back to the future in an unprecedented way. Tom
The Goldman Sachs Effect
How a Bank Conquered Washington
By Nomi Prins
Irony isn’t a concept with which President Donald J. Trump is familiar. In his Inaugural Address, having nominated the wealthiest cabinet in American history, he 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.” Under Trump, an even smaller group will flourish — in particular, a cadre of former Goldman Sachs executives. To put the matter bluntly, two of them (along with the Federal Reserve) are likely to control our economy and financial system in the years to come.
Infusing Washington with Goldman alums isn’t exactly an original idea. Three of the last four presidents, including The Donald, have handed the wheel of the U.S. economy to ex-Goldmanites. But in true Trumpian style, after attacking Hillary Clinton for her Goldman ties, he wasn’t satisfied to do just that. He had to do it bigger and better. Unlike Bill Clinton and George W. Bush, just a sole Goldman figure lording it over economic policy wasn’t enough for him. Only two would do.
The Great Vampire Squid Revisited
Whether you voted for or against Donald Trump, whether you’re gearing up for the revolution or waiting for his next tweet to drop, rest assured that, in the years to come, the ideology that matters most won’t be that of the “forgotten” Americans of his Inaugural Address. It will be that of Goldman Sachs and it will dominate the domestic economy and, by extension, the global one.
At the dawn of the twentieth century, when President Teddy Roosevelt governed the country on a platform of trust busting aimed at reducing corporate power, even he could not bring himself to bust up the banks. That was a mistake born of his collaboration with the financier J.P. Morgan to mitigate the effects of the Bank Panic of 1907. Roosevelt feared that if he didn’t enlist the influence of the country’s major banker, the crisis would be even longer and more disastrous. It’s an error he might not have made had he foreseen the effect that one particular investment bank would have on America’s economy and political system.
There have been hundreds of articles written about the “world’s most powerful investment bank,” or as journalist Matt Taibbi famously called it back in 2010, the “great vampire squid.” That squid is now about to wrap its tentacles around our world in a way previously not imagined by Bill Clinton or George W. Bush.
No less than six Trump administration appointments already hail from that single banking outfit. Of those, two will impact your life strikingly: former Goldman partner and soon-to-be Treasury Secretary Steven Mnuchin and incoming top economic adviser and National Economic Council Chair Gary Cohn, former president and “number two” at Goldman. (The Council he will head has been responsible for “policy-making for domestic and international economic issues.”)
Now, let’s take a step into history to get the full Monty on why this matters more than you might imagine. In New York, circa 1932, then-Governor Franklin Delano Roosevelt announced his bid for the presidency. At the time, our nation was in the throes of the Great Depression. Goldman Sachs had, in fact, been one of the banks at the core of the infamous crash of 1929 that crippled the financial system and nearly destroyed the economy. It was then run by a dynamic figure, Sidney Weinberg, dubbed “the Politician” by Roosevelt because of his smooth tongue and “Mr. Wall Street” by the New York Times because of his range of connections there. Weinberg quickly grasped that, to have a chance of redeeming his firm’s reputation from the ashes of public opinion, he would need to aim high indeed. So he made himself indispensable to Roosevelt’s campaign for the presidency, soon embedding himself on the Democratic National Campaign Executive Committee.
After victory, he was not forgotten. FDR named him to the Business Advisory Council of the Department of Commerce, even as he continued to run Goldman Sachs. He would, in fact, go on to serve as an advisor to five more presidents, while Goldman would be transformed from a boutique banking operation into a global leviathan with a direct phone line to whichever president held office and a permanent seat at the table in political and financial Washington.
Now, let’s jump forward to the 1990s when Robert Rubin, co-chairman of Goldman Sachs, took a page from Weinberg’s playbook. He recognized the potential in a young, charismatic governor from Arkansas with a favorable attitude toward banks. Since Bill Clinton was far less well known than FDR had been, Rubin didn’t actually cozy up to him from the get-go. It was another Goldman Sachs executive, Ken Brody, who introduced them, but Rubin would eventually help Clinton gain Wall Street cred and the kind of funding that would make his successful 1992 run for the presidency possible. Those were favors that the new president wouldn’t forget. As a reward, and because he felt comfortable with Rubin’s economic philosophy, Clinton created a special post just for him: first chair of the new National Economic Council.
It was then only a matter of time until he was elevated to Treasury Secretary. In that position, he would accomplish something Ronald Reagan — the first president to appoint a Treasury Secretary directly from Wall Street (former CEO of Merrill Lynch Donald Regan) — and George H.W. Bush failed to do. He would get the Glass-Steagall Act of 1933 repealed by hustling President Clinton into backing such a move. FDR had signed the act in order to separate investment banks from commercial banks, ensuring that risky and speculative banking practices would not be funded with the deposits of hard-working Americans. The act did what it was intended to do. It inoculated the nation against the previously reckless behavior of its biggest banks.
Rubin, who had left government service six months earlier, wasn’t even in Washington when, on November 12, 1999, Clinton signed the Gramm-Leach-Bliley Act that repealed Glass-Steagall. He had, however, become a board member of Citigroup, one of the key beneficiaries of that repeal, about two weeks earlier.
As Treasury Secretary, Rubin also . . .