Gary
Rivlin, Michael Hudson
Part
2 - GOLDMAN ALWAYS WINS
Goldman
Sachs had been a favorite cudgel for candidate Trump — the symbol
of a government that favors Wall Street over its citizenry. Trump
proclaimed that Hillary Clinton was in the firm’s pockets, as was
Ted Cruz. It was Goldman Sachs that Trump singled out when he railed
against a system rigged in favor of the global elite — one that
“robbed our working class, stripped our country of wealth, and
put money into the pockets of a handful of large corporations and
political entities.”
Cohn, as
president and chief operating officer of Goldman Sachs, had been at
the heart of it all. Aggressive and relentless, a former aluminum
siding salesman and commodities broker with a nose for making money,
Cohn had turned Goldman’s sleepy home loan unit into what a Senate
staffer called “one of the largest mortgage trading desks in the
world.” There, he aggressively pushed his sales team to sell
mortgage-backed securities to unaware investors even as he watched
over “the big short,” Goldman’s decision to bet billions
of dollars that the market would collapse.
Now Cohn
would be coordinating economic policy for the populist president.
The
conflicts between the two men were striking. Cohn ran a giant
investment bank with offices in financial capitals around the globe,
one deeply committed to a world with few economic borders. Trump’s
nationalist campaign contradicted everything Goldman Sachs and its
top executives represented on the global stage.
Trump raged
against “offshoring” by American companies during the 2016
campaign. He even threatened “retribution,” - a 35 percent tariff
on any goods imported into the United States by a company that had
moved jobs overseas. But Cohn laid out Goldman’s very different
view of offshoring at an investor conference in Naples, Florida, in
November. There, Cohn explained unapologetically that Goldman had
offshored its back-office staff, including payroll and IT, to
Bangalore, India, now home to the firm’s largest office outside New
York City: “We hire people there because they work for cents on
the dollar versus what people work for in the United States.”
Candidate
Trump promised to create millions of new jobs, vowing to be “the
greatest jobs president that God ever created.” Cohn, as
Goldman Sachs’s president and COO, oversaw the firm’s mergers and
acquisitions business that had, over the previous three years, led to
the loss of at least 22,000 U.S. jobs, according to a study by two
advocacy groups. Early in his candidacy, Trump described as
“disgusting” Pfizer’s decision to buy a smaller Irish
competitor in order to execute a “corporate inversion,” a
maneuver in which a U.S. company moves its headquarters overseas to
reduce its tax burden. The Pfizer deal ultimately fell through. But
in 2016, in the heat of the campaign, Goldman advised on a megadeal
that saw Johnson Controls, a Fortune 500 company based in Milwaukee,
buy the Ireland-based Tyco International with the same goal. A few
months later, with Goldman’s help, Johnson Controls had executed
its inversion.
With Cohn’s
appointment, Trump now had three Goldman Sachs alums in top positions
inside his administration: Steve Bannon, who was a vice president at
Goldman when he left the firm in 1990, as chief strategist, and Steve
Mnuchin, who had spent 17 years at Goldman, as Treasury secretary.
And there were more to come. A few weeks later, another Goldman
partner, Dina Powell, joined the White House as a senior counselor
for economic initiatives. Goldman was a longtime client of Jay
Clayton, Trump’s choice to chair the Securities and Exchange
Commission; Clayton had represented Goldman after the 2008 financial
crisis, and his wife Gretchen worked there as a wealth management
adviser. And there was the brief, colorful tenure of Anthony
Scaramucci as White House communications director: Scaramucci had
been a vice president at Goldman Sachs before leaving to co-found his
own investment company.
Even before
Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough
Goldman alum were working for the Trump administration to open a
branch office in the White House.
“There
was a devastating financial crisis just over eight years ago,”
Warren said. “Goldman Sachs was at the heart of that crisis. The
idea that the president is now going to turn over the country’s
economic policy to a senior Goldman executive turns my stomach.”
Prior administrations often had one or two people from Goldman
serving in top positions. George W. Bush at one point had three. At
its peak, the Trump administration effectively had six.
Earlier this
summer, Trump boasted about his team of economic advisers at a rally
in Cedar Rapids, Iowa. “This is the president of Goldman Sachs.
Smart,” Trump said. “Having him represent us! He went from
massive paydays to peanuts.”
Trump waved
off anyone who might question his decision to rely on the very people
he had demonized. “Somebody said, ‘Why did you appoint a rich
person to be in charge of the economy?’ … I said: ‘Because
that’s the kind of thinking we want.’” He needed “great,
brilliant business minds … so the world doesn’t take advantage of
us.” How else could he get the job done? “I love all
people, rich or poor, but in those particular positions, I just don’t
want a poor person.”
“Does
that make sense?” Trump asked. The crowd cheered.
Years of
financial disclosure forms confirm that Cohn is indeed very rich. At
the end of 2016, he owned some 900,000 shares of Goldman Sachs stock,
a stake worth around $220 million on the day Trump announced his
appointment. Plus, he’d sold a million more Goldman shares over the
previous half-dozen years. In 2007 alone, the year of the big short,
Goldman Sachs paid him nearly $73 million — more than the firm paid
CEO Lloyd Blankfein. The disclosure forms Cohn filled out to join the
administration indicate he owned assets valued at $252 million to
$611 million. That may or may not include the $65 million parting
gift Goldman’s board of directors gave him for “outstanding
leadership” just days before Trump was sworn in.
Like anyone
taking a top job in the Trump administration, Cohn was required to
sign a pledge vowing not to participate for the next two years in any
matter “that is directly and substantially related to my former
employer or former clients, including regulations and contracts.”
But presidents have sometimes issued waivers to these requirements,
and it is unclear whether the Trump administration is making such
waivers public.
Sens. Warren
and Tammy Baldwin, a Democrat from Wisconsin, sent Cohn a letter a
few days later. They brought up the $65 million bonus and asked him
to publicly recuse himself from any issue that could have a direct or
“significant indirect” impact on his old firm. Cohn never
responded to the letter, and if he has ever received a waiver, it has
not been made available to the public or the Office of Government
Ethics.
“Consistent
with the Trump administration’s stringent ethics rules, Mr. Cohn
will recuse himself from participating in any matter directly
involving his former employer, Goldman Sachs,” White House
spokesperson Natalie Strom said. “The White House will not
comment further.”
The White
House declined requests to make Cohn available for an interview and
declined to answer a detailed set of questions.
Cohn shared
the podium with fellow Goldman alum Mnuchin (the two made partner
there the same year) when the administration unveiled its new tax
plan, one that, if the past is prelude, had the potential to save
Goldman more than $1 billion a year in corporate taxes. The president
had promised to “do a number” on financial reforms implemented
after the 2008 subprime crisis, including one that threatened to cost
Goldman several billion dollars a year in revenues. Under Cohn, the
administration has introduced new rules easing initial public
offerings — a Goldman Sachs specialty dating back to the start of
the last century, when the firm handled the IPOs of Sears, Roebuck;
F. W. Woolworth; and Studebaker. As Trump’s top economic policy
adviser, Cohn can exert influence over regulatory agencies that have
shaken billions in penalties and settlements out of Goldman Sachs in
recent years. And his former colleagues inside Goldman’s Public
Sector and Infrastructure group likely appreciate the Trump
administration’s infrastructure plan, which is more or less exactly
as Cohn first pitched it inside Trump Tower in November.
“It’s
hard to see how Gary Cohn recusing himself would solve a lot of these
conflicts because nearly every major decision of his job would have a
significant impact, likely billions of dollars, on Goldman Sachs and
its executives,” said Tyler Gellasch, an attorney and former
Senate staffer who helped draft Dodd-Frank, the landmark financial
reform law passed in the wake of the financial meltdown. “Goldman
touches nearly every aspect of the economy, from selling U.S.
treasuries to helping companies go public, and the National Economic
Council advises on all of that.”
In the wake
of last month’s white supremacist rally in Charlottesville,
Virginia, Cohn confessed to the Financial Times that he has “come
under enormous pressure both to resign and to remain.” But the
man who the Washington Post has dubbed Trump’s “moderate voice”
declared that neo-Nazis would not force “this Jew” to leave his
job. “As a patriotic American, I am reluctant to leave my post
as director of the National Economic Council,” Cohn told FT. “I
feel a duty to fulfill my commitment to work on behalf of the
American people.”
Or at least
a few of them. The Trump economic agenda, it turns out, is largely
the Goldman agenda, one with the potential to deliver any number of
gifts to the firm that made Cohn colossally rich. If Cohn stays, it
will be to pursue an agenda of aggressive financial deregulation and
massive corporate tax cuts — he seeks to slash rates by 57 percent
— that would dramatically increase profits for large financial
players like Goldman. It is an agenda as radical in its scope and
impact as Bannon’s was.
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