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“toxic and destructive” Goldman Sachs and the Obama administration
from Edward Fullbrook
As you may have heard in the news, yesterday one of the key directors of Goldman Sachs, Greg Smith, published in the New York Times his long letter of resignation. It begins:
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
Given the degree of attention that the international media is today giving this mini event, it seems appropriate to republish here a table from my RWER paper, published on Monday, “The Political Economy of Bubbles”. The table below, which is largely based on an article by fflambeau, details 32 relationships, financial and otherwise, between Goldman Sachs people (“morally bankrupt” says Smith) and the Obama Administration.
Exhibit 8: The revolving door between Goldman Sachs and the Obama Administration
Name
Relation to Goldman Sachs
and its offshoot the Hamilton Project
Position in Obama Administration1 Obama, Barack Goldman Sachs employees contributed $994,795 to Obama’s presidential bid. President 2 Biden, Joe Goldman has been a major campaign contributor to Biden. Vice President 3 Altman, Roger Hamilton Project member and was Assistant Secretary of the Treasury under “Mr. Goldman Sachs”, Robert Rubin. He is “one of those power brokers with all encompassing contacts within the Democratic Party”. 4 Brainard, Lael Associate and protégé of Robert Rubin. United States Under Secretary of the Treasury for International Affairs 5 Buffett, Warren He has invested billions in Goldman Sachs. He is one of Obama’s fundraisers and economic advisers. 6 Clinton, Hillary In 2008 she received $415,000 (inflation adjusted) from Goldman Sachs. United States Secretary of State 7 Craig, Gregory He left the White House to become Goldman Sach’s chief lawyer in defending against its SEC suit. He was Obama’s White House Counsel. 8 Donilon, Thomas He was a lawyer at O’Melveny and Myers representing meltdown clients including Goldman Sachs. Deputy National Security Adviser to Barack Obama 9 Dudley, Bill He joined Goldman in 1986 and was partner and managing director until 2007. Federal Reserve Bank of New York President since January 2009 10 Elmendorf, Douglas He previously was the Director of the Hamilton Project. He became Obama’s Director of the Congressional Budget Office in January 2009. 11 Emanuel, Rahm Received large contributions from Goldman Sachs as a Congressman and was on a $3,000 a month retainer from Goldman while he worked as Bill Clinton’s chief fund raiser. Obama’s Chief of Staff, the very first person Obama selected to be in his administration. 12 Farrell, Diana She worked for two years at Goldman Sachs. Deputy Director of the National Economic Council 13 Friedman, Stephen He worked for much of his career with Goldman Sachs, holding numerous executive roles and still serves on the company board. Chairman of Obama’s Foreign Intelligence Advisory Board 14 Furman, Jason Former Director of the Hamilton Project He was director of economic policy for the Obama Presidential Campaign. 15 Fudge, Anne Trustee of the Brookings Institution within which the Hamilton Project is embedded Member of Obama’s budget deficit reduction committee 16 Gallogly, Mark He is member of the Hamilton Project’s advisory council. He is a member of President Barack Obama’s President’s Economic Recovery Advisory Board. 17 Geithner, Timothy A protégé of both Henry M. Paulson Jr., a former chief executive of Goldman Sachs, and Robert Rubin, former co-chairman of Goldman Sach. He was Obama’s Secretary of the Treasury. 18 Gensler, Gary He was a Goldman Sachs partner. Obama’s Commodity Futures Trading Commission head. 19 Greenstone, Michael Director of the Hamilton Project He was an economic adviser position to Obama. 20 Hormats, Robert 27 years at Goldman Sachs, including as the Vice Chairman of Goldman’s international arm. The top economics official at Obama’s State Department 21 Kashkari, Neel. Former Vice President of Goldman Sachs He worked for Obama on TARP oversight. 22 Kornbluh, Karen She was Deputy Chief of Staff to Robert Rubin. Obama’s Ambassador to the OECD 23 Lew, Jacob He sits on the Brookings-Rubin funded Hamilton Project Advisory Board. United States Deputy Secretary of State for Management and Resources 24 Orszag, Peter He was the founding director of Goldman Sachs’ Hamilton Project Obama’s Budget Director 25 Patterson, Mark Former lobbyist for Goldman Sachs verseer of TARP bailout funds, $10 billion of which went to Goldman. 26 Rattner, Steve A billionaire financier who sits on the Advisory Council of the Goldman funded Hamilton Project. He oversaw the Obama Administration’s rescues of General Motors and Chrysler, 27 Reischauer, Robert D. He has close ties to Robert Rubin and sits on the Advisory Council of the Goldman funded Hamilton Project. Appointed by Obama as one of the two public trustees of the Social Security and Medicare trust fund. 28 Rivlin, Alice She is a member of the Hamilton Project board and of the board of directors of the New York Stock Exchange. Appointed by Obama to his “deficit reduction commission”. 29 Rubin, James Son of Robert Rubin (see next entry). Served as a headhunter for Obama 30 Rubin, Robert 26 years at Goldman Sachs and its former co-chairman. Also former Chairman of Citigroup. Along with Goldman Sachs, he funded the Hamilton Project. Regarded by insiders as the de facto President of the United States. 31 Sperling, Gene In 2008 he was paid $887,727 by Goldman Sachs as a consultant. Advisor to Obama’sTreasury Secretary Tim Geithner on financial bailouts and other matters. 32 Storch, Adam Former Vice President of Goldman Sachs Obama appointed him Managing Executive of the Security and Exchange Commission’s Division of Enforcement. 32 Summers, Larry He landed a big-time job at Goldman Sachs after crashing as Harvard’s President. In 2008 Goldman Sachs paid him $135,000 for a single speech. Obama’s chief economic adviser and head of the National Economic Counsel. Source: compiled from “A List of Goldman Sachs People in the Obama Government”, by fflambeau, April 27, 2010, http://my.firedoglake.com/fflambeau/2010/04/27/a-list-of-goldman-sachs-people-in-the-obama-government-names-attached-to-the-giant-squids-tentacles/
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Real-World Economics Review Blog 
The question of individual moral responsibility is important, but surely the problem is systemic, as I discuss it in a small ebook Management from Hell: How Financial Investor Logic Hijacked Firm Governance (Boostzone Editions, 2012). Whether it is Goldman Sachs or Bain Capital or some other firm governed by institutions operating through investor logic, the remedy needs to be reform of the system of firm governance.that permits them to control the firm and devote its energies to such nefariouis manipulations.
The financial “way of life” is now endemic. Its agents are everywhere, as one might expect. This is no different than the “Roman way of life” or the “Catholic way of life” in other periods ot time. It’s not an evil thing any more than the Roman or Catholic ways were in their time. But it cannot and should not be ignored. Its consequences are widespread and very real. Among them are income inequality, plutocracy, failures of democracy, and a new form of economic slavery. Screaming against these may be self satisfying but it will not change them. As with the Roman and Catholic ways of life alternatives that can win over them must be put forward and not just defended but actively promoted, up to and including battling over money, converts, and strategic resources, as well as the reworking of morality and ethics.
I think we should just stop feeding this financial sector…its a classic case of government intervention taken too far and one sector growing inordinately fat.
Super has done this – legislated enforced savings taken from people and given to the financial sector and then the people given back a very limited choice (and by limited I mean super fund A or super fund B or C – all in the financial markets – so its still fed).
What if I wanted ton save for my retirement by buying a farm and banking the profits, or a cafe and banking the profits or paying off my home loan so I can house more of my family who might just look after me? Oh no…..sorry – the money I worked for is tied upun till I retire (and in the mean time I cant retire because the financial super fund managers have lost so much of my quarantined savings).
Having to fight for alternative is a silly notion. Its my money and I object top having it quarantined from my decisions.
Its just about making the government wake up and say…hang on – “who are we to take people’s money and tell them how to save for their old age?”. Instead they have handed our savings over to pirates who now account for an extraordinary amount of the inequality (incomes accruing to the “new elite” – financial sector CEOs and their management top and middle and likely lower – earnings in this fat sector are obscene and have been for decades)..
Stupid government. When you need them to be smart, they are completel and utterlyy stupid and when you need them to spend they are all singing the gospel of austerity (taugh to them by the financial sector CEOs) and when you need them to change its like trying to whip a snail to go faster.
As for a U turn on a stupid policy implanted twentyu years ago – forget it. Its forged into the wheels of a stubborn bureaucracy now….so much for flexibility and the need for change. Things will get a lot a worse in my childrens’s lives before government wakes up to the fact that its not all aboiut listening to the new powerful. Im not a bank basher. I just want banks to be banks and not rulers of political parties. Its not too much to ask and its the minimum we should all expect.
Excuse my spelling above but it just seems so perfectly obvious – the financial sector wouldnt be so damned powerful if legislation hadnt enabled it.
Not only that – I object to the financial stealing my savings for thats what it boils down to (and paying themslves huge bonuses).
I can do better on the stockmarket myself – than my own super fund where I dont have the choice to take it out (call it a market when the top 20% of shareholders own most of the shares in a company ?? and JP Morgan trades them up and down every three minutes at will, or Goldman?). Its ridiculous, overpriced and rigged. Although these days people are waking up and withdrawing.
As an American I have always been puzzeled, Alice, to find my compatriots always blaming the government for our problems. I know that this tendency is deeply ingrained in American history because we revolted from an “oppressive” government in the 18th century. But it seems to me that the major problems that Americans face today are rooted in the nstitutions of civil society and that reform of these institutions, i.e., firm goverrnance, is necessary. So don’t go after the government as the cause, but the inequities that our civil society breeds to find remedies. Goverrnment’s actual role in changing things will be quite limited. Just some framework legislation.
I agree entirely Robert but it really seems to me that the problem in financial markets globally is much deeper than just a lack of supervision and inadequate framework legislation to prevent what has basically been monumental fraud –
the sheer growth in the financial services sectors in many advanced nations over the past few decades must and should be questioned. I believe the industry has in fact been benefitting from a form of subsidy (guaranteed by legislation inflows of $$) when many other sectors have been losing their protections relative to the pre 1970s years. Had the financial services industry struck a river of gold, the results would have been no different – all sorts of new firms would have sprung up hawking all sorts of fancy financial derivatives as has happened. Its the river of gold that is the problem and that can be traced back to government decision making and not foreseeing the consequences of such decisions.
Ed, RRL & Allies, Bravo & thanks. However, until we have a nonprofit economic system (or a hybrid with a nonprofit side, at least) and nonprofit political systems (based on the ancient Haudenosaunee Iriquois Confederacy’s model) we will enjoy no systemically superior phenomena. For pragmatically practicable options, please see The Greenbook blogsite
Amen, Alice, couldn’tg agree more, when certain interests in civil ociety capture governemnt, goverrnment reform is the solution.
We are in accord robert. When regulatory capture is as pervasive as it is now – it matters little the colour of the political party when both are substantially figurehead hostages for financial sector interests no matter how persuasive and erudite the political rhetoric.The list of financial sector “names”,( in this case Goldman Sachs but there will be other large financial firm names as well) in Edwards post above with close links and advisory roles to government – the “names:” may change when the political leadership changes but their financial sector associations and motivations dont – government reform is the only solution.
A few more remarks, Alice, just to make my position clear. I don’t believe in government running things, as for example, in government bureaucrats running the financial system. I believe that the system should run inself without much government interference. The problem lies in the inequities in civil society. Wilhelm Roepke, a free-marketeer anti-Leviathianist, said that there is a great difference between a free market that operates in a country with a large middle class community and one where there is an immense gap between a small super rich class and a mass of poverty-stricken, debt ridden people, So he accepted that the civil society should be regulated by the state in order to prevent it from developing the rich-poor divide that hampers free markets. That is what I think needs to be done today and why I advocate reforming the institutions in civil society through, for example, altering firm governance to give stakeholders more voice in decision-making. Then the firms themselves could prevent the sort of buyouts and takeovers that allow firm’s like Bain capital, to suck value out of a firm and distribute it to the takeover artists at the expense of the firm’s employees. This would stop the machinations I descfribe in my short ebook: Management from Hell: How Financial Investor Logic Hijacked Firm Governance. Government would have to participate in reformiing firm governance, but then leave the system to function on its own to attain a more equitable wealth-distribution in society upon which any free market depends. If you live in a country with a strong bureaucratic tradition, you’ll understand that you don’t want to let the bureaucrats run thiings.
re yr comment “So he accepted that the civil society should be regulated by the state in order to prevent it from developing the rich-poor divide that hampers free markets.”
I have no disagreement with you there. I agree the machinarions within firms and the stock markets need altering somehow, I dont know how many firms Ive researched in the stock market only to find other firms like JP Morgan buying and selling tranches of their shares, week in and week out, and often multiple times daily. Of course I realise they are large super funds trading on the shares of a single firm until they pumpn the price up – do a capital raising, dilute the existing shares and then buy back in when they are cheap again. That doesnt much appeal to me. There isnt one bubble, there are thousands upon thousands of bubbles being blown up in stock prices everywhere.
Yes there are now financial sector firms that their sole existance is to suck value out of some value producing firm (and in many cases destroy it) just to skive off into the sunset, leave the emplyees out of work, the firm destroyed and the money in the takeover specialists hands, who have no intention of keeping the value going. Its called a pump and dump, but its toxic and destructive.
I dont know how the majority of civilian US population can achieve the firm governance over its financial institutions (and lets just call them banks shall we because that is their true role?), when so many of governments “financial” advisors who sit so close inside the apparatus of the White House and Congress also have such close links to Wall street firms, who clearly dont want “firm governance” and they advise governments accordingly.,Ultimately I see that one fault lies with the entire nmodus operandi of political appointments in the US, so inextricably caught up as it is with private funding sources Wall Street sources of funds, and that is a very deep problem.
No – I certainly dont want an overly striong bureacratic role in civil society and nor do I want an overly strong corporate role model as a framework.
I agree. In order to see positive results, reforming the government is the best first step.
I didn’t fact-check all of these, but #10 leaves me immediately puzzled.
How can one be “Obama’s Director of the Congressional Budget Office”? That’s an oxymoron.
In fact, the President has no say in the appointment of the CBO Director, which is made by the Speaker of the House and the Senate Majority Leader. The executive branch’s budgeting folks are, of course, to be found at OMB.
Mr. Elmendorf may indeed have been at the Hamilton Project, but he has spent the majority of his professional years gainfully employed in academe, at the Fed and even in previous positions at the CBO.