Skip to main content

Gary Cohn is giving Goldman Sachs everything it ever wanted from the Trump Administration

Gary Rivlin, Michael Hudson

Part 3 - ALPHA MALES

Donald Trump, the “blue-collar billionaire,” has taken great pains to write grit and toughness into his privileged biography. He talks of military schools and visits to construction sites with his father and wrote in “The Art of the Deal” that in the second grade, “I actually gave a teacher a black eye. I punched my music teacher because I didn’t think he knew anything about music and I almost got expelled.” Yet when the authors of the book “Trump Revealed: An American Journey of Ambition, Ego, Money, and Power” spoke to several of his childhood friends, none of them recalled the incident. Trump himself crumpled when asked about the incident during the 2016 campaign: “When I say ‘punch,’ when you’re that age, nobody punches very hard.

Gary Cohn, however, is the middle-class kid and self-made millionaire Trump imagines himself to be. It appears that Cohn actually did slug a grade-school teacher in the face. “I was being abused,” Cohn told author Malcolm Gladwell, who interviewed him for his book, “David and Goliath: Underdogs, Misfits, and the Art of Battling Giants,” back when Cohn was still president of Goldman Sachs. As a child, Cohn struggled with dyslexia, a reading disorder people didn’t understand much about when Cohn attended school in the 1970s in a suburb outside Cleveland. “You’re a 6- or 7- or 8-year-old-kid, and you’re in a public-school setting, and everyone thinks you’re an idiot,” Cohn confessed to Gladwell. “You’d try to get up every morning and say, today is going to be better, but after you do that a couple of years, you realize that today is going to be no different than yesterday.” One time when he was in the fourth grade, a teacher put him under her desk, rolled her chair close, and started kicking him, Cohn said. “I pushed the chair back, hit her in the face, and walked out.

While Trump’s father was a wealthy real estate developer, Cohn’s father was an electrician. When Trump sought to get into the casino business, his father loaned him $14 million. When Cohn couldn’t find a job after graduating from college, all his father could do was find him one selling aluminum siding. While Trump has the instincts of a reality show producer and an eye for spectacle, Cohn prefers to operate in the shadows.

But they likely recognize much of themselves in the other. Both Cohn and Trump are alpha males — men of action unlikely to be found holed up in an office reading through stacks of policy reports. In fact, neither seems to be much of a reader. Cohn told Gladwell it would take him roughly six hours to read just 22 pages; he ended his time with the author by wishing him luck on “your book I’m not going to read.” Both have a transactional view of politics. Trump switched his voter registration between Democratic, Republican, and independent seven times between 1999 and 2012. In the 2000s, his foundation gave $100,000 to the Clinton Foundation, and he contributed $4,700 to Hillary Clinton’s senatorial campaigns. He even bought and refurbished a golf course in Westchester County a few miles from the Clinton home, in part, Trump once admitted, to ingratiate himself with the Clintons. Cohn is a registered Democrat who has given at least $275,000 to Democrats over the years, including to the campaigns of Hillary Clinton and Barack Obama, but also around $250,000 to Republicans, including Senate Majority Leader Mitch McConnell and Florida Sen. Marco Rubio.

There are also striking similarities in their business histories. Both have a knack for weathering scandals and setbacks and coming out on top. Trump has filed for bankruptcy four times, started a long list of failed businesses (casinos, an airline, a football team, a steak company), but managed, through his best-selling books and highly rated reality TV show, to recast himself as the world’s greatest businessman. During Cohn’s tenure as president, Goldman Sachs faced lawsuits and federal investigations that resulted in $9 billion in fines for misconduct in the run-up to the subprime meltdown. Goldman not only survived but thrived, posting record profits — and Cohn was rewarded with handsome bonuses and a position at the top of the new administration.

Cohn’s path to the White House started with a tale of brass and bluster that would make Trump the salesman proud. Still in his 20s and stuck selling aluminum siding, Cohn made a play that would change his life. In the fall of 1982, while visiting the company’s home office on Long Island, he stole a day from work and headed to the U.S. commodities exchange in Manhattan, hoping to talk himself into a job. He overheard an important-looking man say he was heading to LaGuardia Airport; Cohn blurted out that he was headed there, too. He jumped into a cab with the man and, Cohn told Gladwell, who devoted six pages of “David and Goliath” to Cohn’s underdog rise, “I lied all the way to the airport.” The man confided to Cohn that his firm had just put him in charge of a market, options, that he knew little about. Cohn likely knew even less, but he assured his backseat companion that he could get him up to speed. Cohn then spent the weekend reading and re-reading a book called “Options as a Strategic Investment.” Within the week, he’d been hired as the man’s assistant.

Cohn soon learned enough to venture off on his own and established himself as an independent silver trader on the floor of the New York Commodities Exchange. In 1990, Goldman Sachs, arguably the most elite firm on Wall Street, offered him a job.

Goldman Sachs was founded in the years just after the American Civil War. Marcus Goldman, a Jewish immigrant from Germany, leased a cellar office next to a coal chute in 1869. There, in an office one block from Wall Street, he bought the bad debt of local businesses that needed quick cash. His son-in-law, Samuel Sachs, joined the firm in 1882. A generation later, in 1906, the firm made its first mark, arranging for the public sale of shares in Sears, Roebuck. Goldman Sachs’s influence over politics dates back at least to 1914. That year, Henry Goldman, the founder’s son, was invited to advise Woodrow Wilson’s administration about the creation of a central bank, mandated by the Federal Reserve Act, which had passed the previous year. Goldman Sachs men have played important roles in U.S. government ever since.

There was the occasional scandal, such as Goldman Sachs’s role in the 1970 collapse of Penn Central railroad, then the largest corporate bankruptcy in U.S. history. Still, the firm built a reputation as a sober, elite partnership that served its clients ably. In 1979, when John Whitehead, a senior partner and co-chairman, set to paper what he called Goldman’s “Business Principles,” he began with the firm’s most cherished belief: The client’s interests come before all else.

Two years later, Goldman took a step that signaled the beginning of the end of that culture. In the fall of 1981, Goldman purchased J. Aron & Co., a commodities trading firm. Some within the partnership were against the acquisition, worried over how profane, often crude, trading culture would mix with Goldman’s restrained, well-mannered way of doing business. “We were street fighters,” one former J. Aron partner told Fortune magazine in 2008.

The J. Aron team moved into the Goldman Sachs offices in lower Manhattan, but didn’t adopt its culture. Within a few years, it was producing well over $1 billion a year in profits. They were 300 employees inside a firm of 6,000, but were posting one-third of Goldman’s total profits. The cultural shift, it turned out, was moving in the other direction. J. Aron, according to a book by Charles D. Ellis, a former Goldman consultant, brought to Goldman “a trading culture that would become dominant in the firm.

Lloyd Blankfein, who ascended to chairman and CEO in in 2006, started his Goldman career at J. Aron, a year after Goldman acquired the firm. “We didn’t have the word ‘client’ or ‘customer’ at the old J. Aron,” Blankfein told Fortune magazine two years after taking over as CEO. “We had counter-parties.” Cohn joined J. Aron eight years after Blankfein did, in 1990. Four years later, Blankfein was put in charge of the firm’s Fixed Income, Currency, and Commodities division, which included J. Aron. Cohn, loyal and hard-working, with an instinct for connecting with people who can help him, became Blankfein’s “corporate problem solver.

The emergence of “Bad Goldman” — and Cohn’s central role in that drama — is really the story of the rise of the traders inside the firm. “As trading came to be a bigger part of Wall Street, I noticed that the vision changed,” said Robert Kaplan, a former Goldman Sachs vice chairman, who left in 2006 after working at the firm for 23 years. “The leaders were saying the same words, but they started to change incentives away from the value-added vision and tilt more to making money first. If making money is your vision, what lengths will you not go?

At the height of the dot-com years, a debate raged within the firm. The firm underwrote dozens of technology IPOs, including Microsoft and Yahoo, in the 1980s and 1990s, minting an untold number of multimillionaires and the occasional billionaire. Some of the companies they were bringing public generated no profits at all, while Goldman was generating up to $3 billion in profits a year. It seemed inevitable that some within Goldman Sachs began to dream of jettisoning the Goldman’s century-old partnership structure and taking their firm public, too. Jon Corzine was running the firm then — he would later go into politics in the Goldman tradition, first as a U.S. senator and then as New Jersey governor — and was four-square in favor of going public. Corzine’s second in command, Henry Paulson — who would go on to serve as Treasury secretary — was against the idea. But Corzine ordered up a study that supported his view that remaining private stifled Goldman’s competitive opportunities and promoted Paulson to co-senior partner. Paulson soon got on board. In May 1999, Goldman sold $3.7 billion worth of shares in the company. At the end of the first day of trading, Corzine’s and Paulson’s stakes in the firm were each worth $205 million. Cohn’s and Mnuchin’s shares were each worth $112 million. And Blankfein ended up with $168 million in company stock.

Like any publicly traded company, there would now be pressure on Goldman Sachs to make its quarterly numbers and “maximize shareholder value.” Discarding the partner model also meant the loss of a valuable restraint on risk-taking and bad behavior. Under the old system, any losses or fines came out of the partners’ pockets. In the early 1990s, for example, the firm was involved in transactions with Robert Maxwell, a London-based media mogul who was accused of stealing hundreds of millions of pounds from his companies’ pension funds. The $253 million that Goldman Sachs paid to settle lawsuits brought by pension funds over its involvement was split among the firm’s 84 limited partners. Now any losses are paid by a publicly traded entity owned by shareholders, with no direct financial liability for the decision-makers themselves. In theory, Goldman could claw back bonuses in response to executives’ bad behavior. But in 2016, when Goldman paid over $5 billion to settle charges brought by the Justice Department that the firm misled customers in the sale of a subprime mortgage product during Cohn’s time overseeing that unit, the Goldman board declined to dock Cohn’s pay. Instead, the company awarded him a $5.5 million cash bonus and another $12.6 million in company stock.

As Blankfein moved up the corporate hierarchy, Cohn rose along with him. When Blankfein was made vice chairman in charge of the firm’s multibillion-dollar global commodities business and its equities division, Cohn took over as co-head of FICC, Blankfein’s previous position. That meant Cohn was overseeing not just J. Aron and the firm’s commodities business, but also its currency trades and bond sales. By the start of 2004, Blankfein was promoted to president and COO, and Cohn was named co-head of global securities. At that point, Cohn had authority over the mortgage-trading desk. Under Cohn, the firm aggressively moved into the subprime mortgage market, using Goldman’s own money and that of its customers to help stoke the housing bubble.

Goldman was already enabling subprime predators, such as Ameriquest and New Century Financial, by providing them with the cash infusions they needed to scale up their lending to individual home buyers. Cohn would steer the firm deeper into the subprime frenzy by setting up Goldman as a patron of some of these same mortgage originators. During his tenure, Goldman snapped up loans from New Century, Countrywide, and other notorious mortgage originators and bundled them into deals with opaque names, such as ABACUS and GSAMP. Under Cohn’s watchful eye, Goldman’s brokers then funneled slices to customers they sold on the wisdom of holding mortgage-backed securities in their portfolios.

One such creation, GSAA Home Equity Trust 2006-2, illustrates Goldman’s disregard for the quality of loans it was buying and packaging into security deals. Created in early 2006, the investment vehicle was made up of more than $1 billion in home loans Goldman had bought from Ameriquest, one of the nation’s largest and most aggressive subprime lenders. By that point, the lender already had set aside $325 million to settle a probe by attorneys general and banking regulators in 49 states, who accused Ameriquest of misleading thousands of borrowers about the costs of their loans and falsifying home appraisals and other key documents. Yet GSAA Home Equity Trust 2006-2 was filled with Ameriquest loans made to more than 3,000 homeowners in Arizona, Illinois, Florida, and elsewhere. By the end of 2008, 65 percent of the roughly 1,400 borrowers whose loans remained in the deal were in default, had filed for bankruptcy, or had been targeted for foreclosure.

In just three years, Goldman Sachs had increased its trading volume by a factor of 50, which the Wall Street Journal attributed to “Cohn’s successful push to rev up risk-taking and use of Goldman’s own capital to make a profit” — what the industry calls proprietary trading, or prop trading. The 2010 Journal article quoted Justin Gmelich, then the firm’s mortgage chief, who said of Cohn, “He reshaped the culture of the mortgage department into more of a trading environment.” In 2005, with Cohn overseeing the firm’s home loan desk, Goldman underwrote $103 billion in mortgage-backed securities and other more esoteric products, such as collateralized debt obligations, which often were priced based on giant pools of home loans. The following year, the firm underwrote deals worth $131 billion.

In 2006, CEO Henry Paulson left the firm to join George W. Bush’s cabinet as Treasury secretary. Blankfein, Cohn’s mentor and friend, took Paulson’s place. By tradition, Blankfein, a trader, should have elevated someone from the investment banking side to serve as his No. 2, so both sides of the firm would be represented in the top leadership. Instead he named Cohn, his long-time loyalist, and Jon Winkelried, who also had history on the trading side, as co-presidents and co-COOs. Winkelried, who had started at Goldman eight years before Cohn, had probably earned the right to hold those titles by himself. But Cohn had the advantage of his relationship with the CEO. Blankfein and Cohn vacationed together in the Caribbean and Mexico, owned homes near each other in the Hamptons, and their children attended the same school. Winkelreid was out in two years. The bromance between his fellow No. 2 and the top boss may have proved too much.

With Blankfein and Cohn at the top, the transformation of Goldman Sachs was complete. By 2009, investment banking had shrunk to barely 10 percent of the firm’s revenues. Richard Marin, a former executive at Bear Stearns, a Goldman competitor that wouldn’t survive the mortgage meltdown, saw Cohn as “the root of the problem.” Explained Marin, “When you become arrogant in a trading sense, you begin to think that everybody’s a counterparty, not a customer, not a client. And as a counterparty, you’re allowed to rip their face off.

Source, links:


[1] [2] [4] [5] [6]

Related:


Comments

Popular posts from this blog

Trump's "brigades" are ready to start a civil war in case he loses November's election

globinfo freexchange
Signs show an extremely explosive situation now in the America of Donald Trump. 
Starting with the murder of George Floyd, we witness almost in daily basis some very disturbing incidents, which unveil a deeply divided society that was hiding for decades behind the "American dream" facade. As the facade now rapidly collapses, due to a major financial crisis and a pandemic, in less than fifteen years, the reality looks terrifying.
In a latest incident, Common Dreamsreported that members of a far right militia group were arrested Monday evening in Albuquerque after a standoff at a statue of a notoriously brutal conquistador in the New Mexico city turned violent with a demonstrator advocating for the removal of the monument shot and sent to the hospital.
As dusk fell, demonstrators began attempting to pull the monument down from its pedestal on the Albuquerque Museum grounds. At that point, members of the New Mexico Civil Guard militia group moved in, attack…

Αντίο δημόσια, δωρεάν παιδεία ...

globinfo freexchange
Μετά τα σχέδια για ιδιωτικοποίηση του νερού, το Μητσοτακικό καθεστώς ετοιμάζεται να ισοπεδώσει με το νεοφιλελεύθερο "οδοστρωτήρα" και τη δημόσια παιδεία.
Από τη χθεσινή ομιλία Κεραμέως στη βουλή, το μόνο που χρειάζεται να κρατήσετε είναι η εξής φράση:
                        Εμείς, λοιπόν, κάνουμε πράξη τη δέσμευσή μας, για πανεπιστήμια πιο ελεύθερα και αυτόνομα. Για πανεπιστήμια, τα οποία μπορούν να ρυθμίζουν τα του οίκου τους.

Όταν ακούτε έννοιες όπως "ελευθερία", "αυτονομία" και "αυτορρύθμιση", να βγαίνουν από στόματα φανατικών νεοφιλελεύθερων, όπως των στελεχών της κυβέρνησης Μητσοτάκη, να ετοιμάζεστε για ιδιωτικοποιήσεις, ξεπουλήματα και όλες τις επακόλουθες συμφορές. 
Πίσω από τα ωραία λόγια της Κεραμέως, κρύβονται οι αληθινές προθέσεις του καθεστώτος και για τον τομέα της παιδείας. Δηλαδή, σταδιακή ιδιωτικοποίηση των δημόσιων πανεπιστημίων και τελειωτικό χτύπημα στη δημόσια, δωρεάν παιδεία.
Απ'ότι φαίνεται και μ…

Meet the far-right oligarchs working to topple Mexico’s progressive President AMLO

A Trump-like Mexican oligarch, Gilberto Lozano, is leading a coalition of corporate leaders and far-right fanatics called FRENA to try to overthrow President Andrés Manuel López Obrador.
by José Guadalupe Argüello III and Ben Norton
Part 2 - The extremist National Anti-AMLO Front (FRENA) proposes a color revolution
On May 30 and throughout the weekend of June 13 and 14, traffic across Mexico was disrupted with motorcades of honking cars displaying signs of opposition to President López Obrador. In the days leading up to the event, opposition supporters in the country, and in parts of the United States, had been called to protest in vehicle caravans under the slogan “Andrés López, we don’t want you.”
The group that organized these protests calls itself the National Anti-AMLO Front (Frente Nacional Anti-AMLO in Spanish), and uses the acronym FRENAAA, typically simplified to FRENA. This far-right Mexican group modeled its demonstrations against AMLO after similar protests organized by the …

Leaked documents reveal right-wing oligarch plot to overthrow Mexico’s AMLO

Mexico’s oligarchs and establishment political parties have united in a secret alliance to try to remove left-wing President López Obrador from power, with help from the media, Washington, and Wall Street. Leaked documents lay out their devious strategy.
by Ben Norton 
Part 3 - Mexico’s establishment political parties and former presidents unite to oust AMLO
With backing from the US government and utter dominance of media narratives, the Broad Opposition Bloc plan is to unite all of Mexico’s establishment political parties.
Together, these parties could potentially run candidates under the BOA umbrella, according to the document. Their goal would be, in the 2021 legislative elections, to end the majority that AMLO’s left-wing party Morena won in Mexico’s Chamber of Deputies. 
After that, BOA states clearly that it plans to block reforms in the Mexican legislature, and ultimately impeach President López Obrador by 2022 — at least two years before his term ends.
Quite revealing is that th…

New court files expose Sheldon Adelson’s security team in US spy operation against Julian Assange

An exclusive investigation by The Grayzone reveals new details on the critical role Sheldon Adelson’s Las Vegas Sands played in an apparent CIA spying operation targeting Julian Assange, and exposes the Sands security staff who helped coordinate the malicious campaign.
by Max Blumenthal
I was the CIA director. We lied, we cheated, we stole.

–Mike Pompeo, College Station, TX, April 15, 2019
Part 9 - Spying, stealing diapers, and burglary plans
Stefania Maurizi, an Italian journalist who visited Assange regularly at the embassy in London, remembered relaxed encounters with minimal security and friendly interactions with embassy staff for the first five years of the Wikileaks founder’s stay. It was in December 2017 that everything changed.
During a visit to interview Assange that month, the Spanish security guards from UC Global demanded Maurizi hand over her backpack and all belongings inside for the first time. She protested the new and seemingly arbitrary procedure, but to no avail. 

The US imperialist machine calls for a G-7 expansion to tackle China's 5G penetration in its Western sphere of influence

globinfo freexchange

The US imperialist machine openly calls Western allies (and particularly the UK), to sabotage China's economic and technological penetration in its Western sphere of influence, through a Foreign Policyarticle.

Although the article adopts Trump-style anti-Chinese propaganda, it is clear that the US imperialists have difficulties to accept Trump's inconvenient proposal regarding the expansion of G-7, because it includes "hostile" Russia.

Instead, they think that London's proposal regarding the expansion of G-7 (into D-10), is the most appropriate.

Although according to the article, "The D-10 is not an anti-China alliance.", its hawkish style is more than evident, as can be depicted with that "United Kingdom's D-10 is the right size and shape ... covering only the Cold War West.", for a start.

Furthermore, according to the article, the UK appears to be the most suitable, among the US allies, to lead the race against China…

Hong Kong’s ‘pro-democracy’ movement allies with far-right US politicians that seek to crush Black Lives Matter

As a Hong Kong protest leader promotes far-right condemnations of US anti-racism demonstrations and activists shut down a Black Lives Matter rally in the city, Hong Kong organizers forge close ties with hardline Republicans in Washington.
by Ajit Singh
Part 4 - Hong Kong’s opposition aligned with same far-right US politicians repressing Black Lives Matter
There are some within Hong Kong’s “pro-democracy” movement who have issued statements expressing support for the protests taking place in the US and the Black Lives Matter movement, arguing that both movements are engaged in a shared struggle against oppression and police brutality. 
Joshua Wong, a poster-boy for the Hong Kong protests, along with Nathan Law and other leading members of his political party, Demosistō, have stated that they stand with Black Lives Matter. “Many of you have asked me about the ongoing U.S. protests” wrote Wong in a June 2 tweet. “As a human-rights activist, I stand firmly on the side of the #BlackLivesMat…

Here we go again: neoliberal machine prepares ground to blame the Greens for a potential Biden defeat in November

globinfo freexchange

It seems that the neoliberal machine creates the suitable climate in order to put the blame on the usual scapegoats in case Joe Biden loses November's election.

Politico's recent article leaves little doubt. Check out the title:
Jill Stein cost Hillary dearly in 2016. Democrats are still writing off her successor.

And the first paragraphs confirm the case:

                         Jill Stein still haunts Hillary Clinton’s campaign team. “Oh woof. I can’t bear to talk about that,” said former communications director Jennifer Palmieri. For good reason: Had voters in Pennsylvania, Michigan and Wisconsin cast their ballots for Clinton rather than the Green Party’s Stein, Clinton would be president. 

                         Now, with the Green Party set to elevate its presumptive nominee — Howie Hawkins, a longtime labor activist keen on attracting disillusioned Bernie Sanders voters and calling for a “#DemExit” — many Democrats are unfazed. Not to worry, they sa…

Βούρκος, παρακράτος και... σκάνδαλα

Kαθώς τα εσωτερικά προβλήματα, οι αποτυχίες, το φιάσκο της διασπάθισης των 20 εκατ. ευρώ αλλά και η τρέχουσα και επερχόμενη κατάρρευση της οικονομίας απειλούν την επίπλαστη εικόνα της κυβέρνησης και ναρκοθετούν το ρίσκο των διπλών εκλογών του Φθινοπώρου, η ΝΔ φαίνεται ότι επιλέγει να κυλήσει την πολιτική ζωή στο βούρκο και να μεταχειριστεί πρακτικές παρακράτους.  
Ελλείψει πολιτικού αφηγήματος, ο Υπουργός Άδωνις Γεωργιάδης όταν δεν εγκαινιάζει ανύπαρκτες επενδύσεις στο Ελληνικό, απειλεί δημοσιογράφους, πολιτικούς αντιπάλους ακόμη και εισαγγελείς που τον ελέγχουν για μίζες, στους οποίου υπόσχεται φυλακή και δίνει τον τόνο της θεσμικής αμετροέπειας.
Η ακροδεξιά κυβερνητική πτέρυγα, που έχει κουρελιάσει κάθε έννοια νομιμότητας στην Προανακριτική Επιτροπή, επιστρατεύει παράνομες υποκλοπές και γυρνά τη χώρα στις εποχές του «Μαυρίκη», προσπαθώντας απεγνωσμένα να αντιπαρέλθει τις αποκαλύψεις για τα εμβάσματα της Novartis και τις μίζες των 2,5 εκατ. ευρώ από τον Παναμά. Αλλά και το ίδιο το π…

Pentagon war game includes scenario for military response to domestic Gen Z rebellion

by Nick Turse
In the face of protests composed largely of young people, the presence of America’s military on the streets of major cities has been a controversial development. But this isn’t the first time that Generation Z — those born after 1996 — has popped up on the Pentagon’s radar.
Documents obtained by The Intercept via the Freedom of Information Act reveal that a Pentagon war game, called the 2018 Joint Land, Air and Sea Strategic Special Program, or JLASS, offered a scenario in which members of Generation Z, driven by malaise and discontent, launch a “Zbellion” in America in the mid-2020s.
The Zbellion plot was a small part of JLASS 2018, which also featured scenarios involving Islamist militants in Africa, anti-capitalist extremists, and ISIS successors. The war game was conducted by students and faculty from the U.S. military’s war colleges, the training grounds for prospective generals and admirals. While it is explicitly not a national intelligence estimate, the war game, …