Does Goldman Sachs Run the Government?

Everyone agrees that Goldman Sachs pretty much runs the government’s economic and financial agencies.

As the New York Times explained last October in a must-read 4 page article, the presence of Goldman Sachs alumni in virtually all 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

And there are many more Goldman alums who have been – or are soon to be – appointed. For example, Obama has named Gary Gensler to head the Commodity Futures Trading Commission. And Geithner named Mark Patterson as his top aide last January

As Glenn Greenwald writes today:

Here is just one random item this week announcing a couple of standard personnel moves:

Goldman Sachs’ new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank’s committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department. This is not Paese’s first swing through the Wall Street-Congress revolving door: he previously worked at JP Morgan and Mercantile Bankshares, and in between served as senior minority counsel at the Financial Services Committee.

So: Paese went from Chairman Frank’s office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese’s predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That’s all part of what Desmond Lachman — American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) — recently described as “Goldman Sachs’s seeming lock on high-level U.S. Treasury jobs.”

And the Independent wrote last July:

The 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.”

What is interesting is that Geithner did not deny that Goldman players were at the center of the government’s financial decisions, only that their decisions were not bad ones.

So has Government Sachs made selfless decisions for the benefit of the American people? Or has it engaged in some self-dealing?

Well, as 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.

And Marketwatch columnist Paul Farrell literally says that Goldman “rules the world”:

“Obama’s victory and Geithner’s appointment are the completion of Goldman’s meticulously crafted plan to become a superpower. The firm now has the clout to impose its will on the financial markets, and the world.”

GOP or Dems? Conservatives or liberals? It doesn’t matter. We’ll all controlled by “The [Goldman] Conspiracy.” So why not surrender, let them have the power? The truth is, through their lobbyists and surrogates in Washington, they already rule America.
(and he said it again here).

Indeed, Goldman’s influence reaches abroad, as well. For example, the head of the World Bank, Robert Zoellick, was formerly Goldman’s managing director. See also this.

The New York post also claims that Goldman is gaming the stock market.

And Rolling Stone has shown that Goldman gamed the oil market as well.

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  • http://svendnoreply@blogger.com svend

    If the state won’t punish them, the society will. If I were a GS employee, I’d be scared shitless right now. The proletariat is gonna have their heads.

  • http://Anonymousnoreply@blogger.com Anonymous

    Don’t forget Gary Gensler, O’s pick to head the CFTC.

  • http://www.blogger.com/profile/12886649539758133191 Jr Accountant

    I can’t believe the MSM is picking this up like it is. We’ve known GS are the sharks in the water but with MarketWatch, NYT, etc taking this on….. strange.What gives?

  • http://www.blogger.com/profile/07892531198621839798 carlandjerry

    Great piece. I, too, have been writing about it, and been calling it the Wall Street Financial Crime Syndicate. The information is out there. There are several investigative writers scraping beneath the protective crusts of this story being glazed by the Crime Syndicate; but it is oozing out.Andrew Cuomo needs to keep his jaws tightly fastened to this story. If no one plants a skeleton in his closet, he may then just rip it open.This is a crime story. It is not any different than the Mafia story that came out last week about how Italian organized crime is embedded in legitimate businesses with their crime monies, but getting busted by their feds.Nice detail!!! Get it on HuffingtonPost.There is a Pulitzer in this story, and many realize it.

  • http://www.blogger.com/profile/07892531198621839798 carlandjerry

    Now, could there be another reason why Portfolio was shut down? They claimed they were in debt, but is that the only reason?

  • http://Anonymousnoreply@blogger.com Anonymous

    Not only GS runs the government, GS manipulates the stock market.Take a look at this excellent survey: http://zerohedge.blogspot.com/2009/05/observations-on-nyse-program-trading.html

  • http://Anonymousnoreply@blogger.com Anonymous

    GS should be stormed like that Bastille. They made $100 million a day or more (zerohedge.com) on 34 of 58 trading days in the first quarter, 87.5% of days they were profitable. They are the new oligarchs and the market will not be free until this monopoly is broken up. This ends poorly according the former president of the IMF (2007-2008) as we are acting fiscally as a banana republic does.”The Quiet Coup”http://www.theatlantic.com/doc/200905/imf-advice”The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.”

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    very nice post

 

 

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