The Power of Goldman Sachs
Board: Macro Economics
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies...The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
––Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)
This is one of the most sublimely metaphorical photos I’ve seen in a long time and I’d like to share it with METARites before the link goes dead when Reuters’ Best Photos of the Year 2013 come out. Having to kill nearly three hours at LAX waiting to board an international flight back to Euroland, I flipped through Reuters “Best photos of the year 2012” and came across this stunningly beautiful photograph of lower Manhattan taken by Eduardo Muñoz after mega storm Sandy’s visit: http://blogs.reuters.com/fullfocus/2012/11/30/best-photos-of... (it takes a while to load). I hope you’ll enjoy it as much as I did.
The photograph shows the black waters of the Hudson River, a nearly coal-black skyline of lower Manhattan and its Financial Center, and dramatically draped charcoal grey clouds across the expanse of the sky. Out of this fuliginous gloom rises the golden glow of a brightly lit 44-story building. This beacon of light is a striking metaphor for the owners, those who “do God’s work” and have the power when everybody else is in the dark. It is the company that morphed from a mere investment bank to a traditional bank holding company too big to fail (TBTF) and now entitled to “slurp up anything they can get” at the US government’s trough.
Slurping at the Government’s Trough
GS was one of the heaviest users of the Federal Reserve’s Emergency Liquidity Programs, taking out numerous loans in 2008-2009. Goldmanite power allowed it to borrow $589 billion dollars from the Primary Dealer Credit Facility (PDCF), the first Federal facility ever to provide overnight loans to investment banks and this against collateral such as corporate market instruments and mortgage-backed securities according to Wikipedia. They borrowed another $193 billion from the Term Securities Lending Facility (TSLF) which allows primary dealers to borrow liquid Treasury securities for one month in exchange for less liquid collateral, raising Goldman Sachs’ total borrowings to a whopping $782 billion. Goldman was not alone profiting from taxpayers’ largesse. Other TBTF banks sucked equally vigorously at the Federal teat as did hedge funds, mutual funds and an assortment of industrial and commercial stalwarts, think GM, AIG among others. During the 2008 crisis they queued up for their piece of the trillion-dollar care package graciously prepared by the Federal Reserve to tide them over the financial crisis.
The conspicuously lit Goldman Sachs building in blacked-out Manhattan was erected about a block northwest of Ground Zero between 2006 and 2010 with the generous aid of New York State officials. GS received $115 in tax breaks and cash grants to build the new tower across from their “old” headquarters, an elegant skyscraper in New Jersey, completed only in 2004. New York state and local governments decided GS needed another big subsidy and made $1.65 billion in tax-exempt Liberty Bonds, “intended to stimulate economic development after 9/11, to cover part of the building’s $2.1 billion cost.” In the first quarter of 2010 Goldman Sachs made a profit of nearly $3.5 billion, enough to have paid for the entire building in cash without taxpayers’ help.
The Ties that Bind - GS and the U.S. Government
Close ties between Goldman Sachs and federal, state, and local governments are nothing new. They date back to the 1930s when the amazing Sidney James Weinberg, dubbed “Mr. Wall Street”, a school drop-out who rose from a $3-a-week janitor's assistant to GS partner in 1927, only the second non-family member to do so. He advised the White House on provisions of the 1933 Securities Act and assumed significant responsibilities in the federal government during World War II and later during the Korean war. During war and peace he supported and advised various presidents up to 1969. He sat on 35 corporate boards (and was lauded “as a corporate director, wrote a memorandum during the early 1930s about the ethical responsibilities of corporate board directors and in 1938 denounced Donald Coster, who was president of McKesson and Robbins, for stealing $21 million from this company,” according to his biographer William Weisberger. While assiduously advising the government, “Mr. Wall Street” also managed huge debt and equity transactions for GS, building the firm into what it is today. For details of this rags-to-riches to government advisor story, see the drily factual American National Biography published by Oxford U. Press and the literary version in The New Yorker by Malcolm Gladwell.
Thus Mr. Weinberg who “worked” for the US government from 1930 to 1969, at times getting paid one USD per year, started the Goldman Sachs tradition of directly influencing and running the US government, see lists below. It is amazing how effortlessly these former, highly placed GS executives enter the highest level of U.S. civil service. These alumni can provide the firm with valuable information on which to act and bet. Gathering accurate information and using it has made GS billions and I do not believe that the clandestine, hour-long meeting of Henry Paulson with the entire board of GS in a Moscow hotel suite at the end of June 2008 while serving as US Secretary of the Treasury just happened to be a totally accidental, informal chat with his former colleagues. It seems beyond a reasonable doubt that he also gave his former colleagues invaluable information about his thoughts on his new job and future developments on which GS could bet. I should not fail to mention that GS also hires ex-government employees as lobbyists as well as members of their own exclusive club of Goldmanites, giving GS staff direct access to their former congressional buddies and any planned legislation.
Goldman Sachs Conquers Europe
By now GS has woven an expansive network of Goldmanites to run the Western World. Not only are the current governors of the Bank of England and the European Central Bank alumni of GS but positions at international institutions like the Bank of International Settlements (BIS), the Financial Stability Board (FSB), the World bank, the IMF, and political positions in Italy and Greece are or have been occupied by members of the Goldman fraternity. When you look at the lists below, note that the US Americans generally worked a lot longer at GS than any of the European Goldmanites.
Marc Roche of Le Monde described these serious and competent “luminaries with a fondness for economics” as the carefully chosen who prefer to remain discreet. They function like a freemasonry, part pressure group, part fraternal association, part mutual aid network. Besides Carney (Bank of England), Draghi (European Central Bank) and several Italian and Greek politicians listed below, there were two other heavyweight members of Goldman’s European network who “figured large in the euro crisis: Otmar Issing, a former member of the Bundesbank board of directors and a one-time chief economist of the European Central Bank, and Ireland’s former Attorney General and EU Competition commissioner, Peter Sutherland, an administrator for Goldman Sachs International, who worked behind the scenes in the Irish bailout.” I bet GS made a bundle here too.
The Independent in an article entitled “What price the new democracy? Goldman Sachs conquers Europe” describes The Goldman Sachs Project thus:”Put simply, it is to hug governments close. Every business wants to advance its interests with the regulators that can stymie them and the politicians who can give them a tax break, but this is no mere lobbying effort. Goldman is there to provide advice for governments and to provide financing, to send its people into public service and to dangle lucrative jobs in front of people coming out of government. The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.” In Europe unlike the US, GS has not been interested in highly placed national or international civil servants. GS’ main goal is to legally collect information on pending initiatives and on interest rates set by central banks allowing them to wager a bundle at a huge profit. That’s why the firm is interested in European commissioners and Central Bankers. The latter GS has already neatly maneuvered into place, first Draghi of the ECB, and now Carney at the Bank of England. Welcome to the Masters of the Universe. They are discreet and prefer to never mention their prior affiliation with those who do God’s work. Those that step out of line like Sergey Aleynikov, ex-programmer of GS, will get to feel the divine wrath of their former bosses. He is the only one of GS who ever spent time in prison.
The golden glow of the brightly lit 44-story Goldman Sachs building arising out of the sooty gloom is a metaphor for all banks to big to fail. From the so far feeble legislative attempts of the European Union and the U.S. to reign in the power of our dysfunctional banking system, I doubt banking power and profits will be significantly diminished. TBTF banks emerged bigger and stronger from the financial meltdown in 2008 just as they did in 1928. They were the same banks, (C, BAC, GS, JPM, Chase National Bank (CCF), Wells Fargo (WWF) and the financial meltdown then had the same consequences it had in 2008 with high unemployment, rising inequality, and the rich getting richer. Nothing much has changed in banking since 1928 and will not change until The People understand the global web of the banking and monetary system and start to revolt against it, peacefully of course :).
Here is my list of The Alumni of Goldman Sachs (GS) now working for U.S. and European Political Entities, compiled from several sources and most likely incomplete. Perhaps it answers at least part of RaptorD2’s question posed many months ago, “And which ones [Goldman alumni in government] are they?”
Former Goldman Executives Working in U. S. Government and Institutions
U.S. TREASURY DEPARTMENT
–– Henry Paulson – Served as United States Secretary of the Treasury (2006–2009). [Paulson met with the entire board of Goldman Sachs in a Moscow hotel suite for an hour at the end of June 2008, no doubt giving them invaluable information about his thoughts in his new job!]
GS: 32 years (1974-2006), CEO from 1999 to 2006.
–– Kendrick Wilson – Advisor to the US Department of the Treasury, brought by Henry Paulson (they have known each other since their time together at Dartmouth) to advise him on how to fix the financial markets – after a personal call from Wilson’s old Harvard Business School classmate, George W. Bush. Paulson also brought Wilson to Goldman in 1998 from Lazard Freres. Wilson’s imprint has been on many major deals of the current crisis. As part of Goldman’s team, he advised National City on its investment led by Corsair Capital. Wilson also advised Bank of America on its takeover of Countrywide Financial. He advised Wachovia on its options for its loan portfolio. (See his connections: http://news.muckety.com/2008/07/24/kendrick-wilson-iii-bushs... ) The man brought in to fend off a financial crisis appears to be a protege of one of the men who helped cause it.
GS: 10 years (1998-2008)
–– Robert Rubin – Former United States Treasury Secretary 1993 to 1995, also served in the White House as Assistant to the President for Economic Policy, directed the National Economic Council; richly compensated ex-Chairman of Citigroup. Rubin together with Alan Greenspan overruled head of CTFC Brooksley Born’s attempts to regulate credit-default swaps in the late 1990s.
GS: 26 years (1990-1992)
–– Robert K. Steel – Served as Under Secretary of the Treasury for Domestic Finance (2006-2008), the principal adviser to the secretary on
matters of domestic finance, led the department's activities with respect to the domestic financial system, fiscal policy and operations, governmental assets and liabilities, and related economic and financial matters.
GS: 28 years (1976-2004)
–– Mark Patterson – Chief of Staff to Secretary Tim Geithner
GS: director of government affairs at Goldman.
–– Dan Jester – Key adviser to Geithner, who played a key role in shaping the takeover of Fannie Mae and Freddie Mac.
GS: Was strategic officer at Goldman.
–– Steve Shafran – Adviser helping to shape Treasury's effort to guarantee money market funds.
GS: Was expert in corporate restructuring
NB: Timothy Franz Geithner never worked for Goldman Sachs
–– Neel Kashkari – Former Interim Assistant Secretary of the Treasury for Financial Stability (2008-2009). Appointed by Paulson to oversee the $700 billion TARP fund and was considered Paulson's right hand man during the crisis, all at the tender age of 35. Kashkari was criticized for the lack of oversight of the funds disbursement, which he said would have been impossible since the funds are fungible. This assertion has been largely refuted by Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program. Kashkari was also responsible for recruiting Reuben Jeffrey.
GS: 2 years (2004 to 2006), technology investment banker
–– Reuben Jeffery III – Senior advisor at Center for Strategic and International Studies (CSIS); former Under Secretary of State for Economic, Business, and Agricultural Affairs (2007–2009). Selected by fellow Goldman alumnus Kashkari as the interim chief investment officer for the bailout; was chairman of the CFTC 2005, a role currently held by fellow Goldmanite Gary Gensler.
GS: 24 years (1983-2007)
–– Edward C. Forst – Left his post as executive vice president at Harvard to serve as an advisor on setting up TARP, but has since
returned to the school.
GS: 14 years (1994-2008), global head of the Investment Management Division
–– William C. Dudley – President of the Federal Reserve Bank of New York since 2009.
GS: 21 years (1986 to 2007), former chief economist and advisory director
–– Stephen Friedman – Chairman of the Federal Reserve Bank of New York until May 2009, when he was pressured to resign after buying Goldman shares in December and January. Previously, he was director of President George W. Bush's National Economic Council.
GS: 28 years, joined firm in 1966 and was co-chairman from 1990 to 1994.
COMMODITIIES FUTURES TRADING COMMISSION (CFTC)
–– Gary Gensler – chairman of the U.S. Commodity Futures Trading Commission (2009- ). He was confirmed by Congress despite his role “as a high-level Treasury official in a 2000 law that exempted the $58 trillion credit default swap market from oversight. [The CFTC was the commission headed by Brooksley Born in the late 1990's, when Alan Greenspan and Robert Rubin overruled her attempts to regulate credit-default swaps.] Assistant Secretary of the Treasury from 1997-1999; Under Secretary from 1999-2001.
GS: 18 years (1979-1996). Worked under Jon Corzine of later MF Global infamy.
–– Reuben Jeffrey III – Chairman of the CFTC 2005-2007, Under Secretary of State for Economic Business, and Agricultural Affairs 2007-2009.
GS: 19 years (1983-2002)
OTHER FEDERAL OR STATE GOVERNMENT POSITIONS
–– Robert Hormats US Under Secretary of State for Economic, Business, and Agricultural Affairs since 2009.
GS: 27 years (1982-2009)
–– Joshua Bolten – Former White House Chief of Staff with the Bush administration as well as former director of the Office of Management and Budget until 2006. Bolten was instrumental in recruiting his fellow Goldman alumnus Henry Paulson as Treasury Secretary.
5 years (1994-1999), Executive director of Government Affairs.
–– Robert Zoellick– United States Trade Representative (2001–2005), Deputy Secretary of State (2005–2006), World Bank President (2007-2012)
GS: joined 2006 as managing director at Goldman.
–– Jon Corzine – Former CEO of MF Global, Inc., former Democratic Governor of New Jersey (2006–2010). New Jersey representative to the U.S. Congress from 2001-2006, where he served on the Banking and Budget Committees. At GS, worked his way up to chairman and co-CEO before being pushed out in 1998.
GS: 24 years (1975-1998)
–– Bradley Abelow – Former Chief of Staff and Treasurer of New Jersey under Jon Corzine, and President of MF Global, Inc.
Worked with Jon Corzine, GS's former CEO. While at Goldman Sachs, Abelow served on the Board of Directors of The Depository Trust & Clearing Corporation, the world’s largest post-trade financial services company.
GS: 15 years, served in executive position at firm.
–– Sonal Shah – Appointed to Office of Social Innovation and Civic Participation and an Advisory Board Member for the administration’s Transition Project in 2008. Shah had previously held a variety of positions in the Treasury Department from 1995 to early 2002.
GS: 3 years (2004-2007), Vice President
–– James Johnson – Served as president and CEO of Fannie Mae. Was involved in the vice-presidential selection process for the current President’s campaign.
GS: Board member.
–– Philip Murphy US ambassador to Germany until a few months ago
GS: 23 years
Note that Margaret C. Whitman, private client of GS was also mightily supported by the firm in her bid for California governorship.
GOLDMANITES IN U.S. Financial Sector and Media:
–– Fischer Black – Co-author of the Black–Scholes equation published with Myron Scholes in the famous paper entitled The Pricing of Options and Corporate Liabilities and the Black–Derman–Toy model.
GS: joined 1984, became partner and worked there until his death.
–– Emanuel Derman – Co-developer of the Black-Derman-Toy interest rate model while at GS.
GS: joined 1985-1988the fixed income division, left 1988 and was rehired from 1990 to 2002 where he led the Quantitative Strategies group in the Equities division, which pioneered the study of local volatility models. In 2000 he became head of the firm’s Quantitative Risk Strategies group and retired from Goldman Sachs in 2002 and took up his current positions at Columbia University and Prisma Capital Partners.
–– Sergey Aleynikov – GS Programmer. Successfully appealed federal conviction of stealing Goldman's code for High Frequency Trading. Rearrested by the Manhattan District Attorney on similar charges on August 9, 2012.
GS: 2007-2009, computer programmer
–– R. Scott Morris – Former CEO of Boston Options Exchange
GS: 1999 to 2006, joined when his employer, Blair Hull Company, was acquired by GS. He managed the equity trading financial engineering groups and continued his work on trading systems and statistical modeling. After two years, he became a Managing Director and led the firm's algorithmic trading division at the Automated Execution Strategies desk.
–– John Thain – Chairman and cEO of CIT Group. Former Chairman and CEO, Merrill Lynch, former chairman of the NYSE
1985 to 2004, head of its mortgage securities division from 1985 to 1990, president and co-chief operating officer from 1999 to 2004.
–– Robert Steel– he had served as Under Secretary for Domestic Finance of the United States Treasury, as the last president and CEO of Wachovia Corporation, and as vice chair of Goldman Sachs.Former Chairman and President, Wachovia
GS: 1976 to 2004
–– George Herbert Walker IV – Managing director at Neuberger Berman and member of the Bush family
GS: 1992 to 2006. Walker began his career on Wall Street when he joined Goldman Sachs in the Merger Department in 1992 and six years later, in 1998, became of one of the firm's youngest partners ever. He held several senior positions at Goldman, including co-head of the firm's Wealth Management business, and head of Alternative Investment strategies. In May 2006
–– Michael D. Fascitelli – President & Trustee of Vornado Realty Trust, 1996 to February 2013. Wife is partner at GS.
GS: 1985 to 1996, partner in charge of its real estate practice
–– Guy Hands – CEO of Terra Firma Capital Partners, one of the largest private equity firms
GS: 1982 to 1994, initially head of Eurobond trading in 1986 and later head of global asset structuring world-wide for Goldman's European division in 1990.
–– Edward Lampert – Hedge Fund Manager of ESL Investments. Brought K-Mart out of Bankruptcy in 2003
GS: 1984 to 1988 in risk arbitrage department.
–– Jim Cramer – Founder of TheStreet.com, best selling author, and host of Mad Money on CNBC
GS: 1984 to 1987 as a stockbroker with Goldman Sachs' Private Wealth Management.
–– Erin Burnett – CNN host
GS: financial analyst in the investment banking division, where she worked on mergers and acquisitions and corporate finance.
–– Guy Adami– CNBC's Fast Money
Other Former Goldman Alumni in the Public Eye
–– Ashwin Navin – President and co-founder of BitTorrent, Inc.
GS: Investment banker
–– Chetan Bhagat – Author
GS: 12 years, left 2004
–– Scott Mead – Photographer and an Investment Banker
GS: 17 years (1986-2003)
–– Raymond Lee – Former CEO from middle late 80's to 1990, net value over 1 billion dollars. Still owns a small percentage of the company
GS: 3 years as credit analyst focusing on acquisitions
–– Charlie Haas – Wrestler, who is working for World Wrestling Entertainment
GS: 1999 to 2001, asset management and analysis of fixed income portfolios
–– Dambisa Moyo – Zambian economist and author of Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa
–– Chris Grigg – CEO of British Land (2009- ), president of British Property Federation, 2012
GS: began 1985 to 2005, partner, worked in capital markets and derivatives
U. S. GOVERNMENT ––> GOLDMAN
–– Henry H. Fowler – Former United States Under Secretary of the Treasury (1961-1964), Secretary of the Treasury (1965–1968) said to have been recommended by his longtime friend Sidney J. Weinberg of Goldman Sachs. He is an example of Government > GS
GS: 31 years (1968-1984), partner for 16 years, then limited partner for another 15 years until Goldman Sachs went public in 1999.
E. Gerald Corrigan: president of the New York Fed from 1985 to 1993. He joined Goldman Sachs in 1994 and currently is a partner and managing director; he was also appointed chairman of GS Bank USA, the firm's holding company, in September 2008.
Lori E Laudien: Former counsel for the Senate Finance Committee in 1996-1997
Has been a lobbyist for Goldman since 2005.
Marti Thomas: Executive Floor Assistant to Dick Gephardt from 1989-1998, he went on to serve in the Treasury Department as
Deputy Assistant Secretary for Tax and Budget from 1998-1999, and as Assistant Secretary in Legal Affairs and Public Policy in
Joined Goldman as the Federal Legislative Affairs Leader from 2007-2009.
Kenneth Connolly: Was staff director of the Senate Environment & Public Works Committee).
Became a Vice President at Goldman in 2008.
Arthur Levitt: The longest-serving SEC chairman (1993 to 2001).
Hired by Goldman in June 2009 as an adviser on public policy and other matters.
Former Goldman Executives Working in International Governments and Institutions
–– Mark Carney – governor of the Bank of England as of July 1, 2013; former Governor of the Bank of Canada (2008-2013), He serves as Chairman of the Financial Stability Board (FSB) and as a member of the Board of Directors of the Bank for International Settlements (BIS). Mr. Carney is also a member of the Group of Thirty ( http://en.wikipedia.org/wiki/Group_of_Thirty ), and of the Foundation Board of the World Economic Forum.
GS: 13 years at GS in London, Tokyo, New York, Toronto
–– Mario Draghi – Governor of the European Central Banksince November 1, 2011. head of Bank of Italy, the country's central bank, 2005 to 2011; headed the Financial Stability Board, formerly the Financial Stability Forum, from 2006 to 2011; Director general, Italian Treasury, 1991-2001
GS: 2002 to 2005, Vice chairman and managing director and member of the firm-wide management committee
––Romano Prodi – Prime Minister of Italy (1996–1998, 2006–2008) and President of the European Commission (1999–2004) and (2006-2008)
GS: 3 years (1990-1993)
–– Massimo Tononi – Italian deputy treasury chief (2006–2008), Partner and Managing Director of Investment Banking Division, London Investment Banking Division
GS: ~2 years (2008-2010)
–– Lucas Papademos Worked as Senior Economist at the Federal Reserve Bank of Boston in 1985. He joined the Bank of Greece in 1985 as Chief Economist. Governor of the Greek Central Bank from 1994 to 2002. In early November 2011, he was proposed as a potential caretaker Prime Minister of Greece, after Prime Minister George Papandreou offered to resign and allow a provisional coalition government to deal with the major political turmoil caused by the country's debt crisis.
–– Michael Cohrs – Member of Court and the Financial Policy Committee at the Bank of England
GS: 4 years (1991-1995)
–– Malcolm Turnbull– Australian politician, former federal leader of the Liberal Party of Australia
GS: 1997 to 2001, managing director and later a partner
–– Robert Zoellick– World Bank President (2007-2012), United States Trade Representative (2001–2005), Deputy Secretary of State (2005–2006).
–– António Borges - Invited by Pedro Passos Coelho to be responsible for most of enterprise privatizations in Portugal since 2011. Worked in International Monetary Fund and Bank of Portugal.
GS: 2000 to 2008, Vice Chairman and Managing Director in London.
–– Olusegun Olutoyin Aganga – Former Nigerian Finance Minister, current Nigerian Minister for Trade and Investments
 Paul Goldberger (2010), “Shadow Building - The house that Goldman built,” The New Yorker, www.newyorker.com/arts/critics/skyline/2010/05/17/100517crsk...
 William Weisberger. "Weinberg, Sidney James," American National Biography Online, http://www.anb.org/articles/10/10-02276.html
 Malcolm Gladwell (2008), “The Uses of Adversity,” The New Yorker, http://www.newyorker.com/reporting/2008/11/10/081110fa_fact_...
 Marc Roche (2011), Our friends from Goldman Sachs…, Le Monde, http://www.presseurop.eu/en/content/article/1177241-our-frie...
 Stephen Foley (2011), “What price the new democracy? Goldman Sachs conquers Europe,” The Independent, http://www.independent.co.uk/news/business/analysis-and-feat...