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.