Just days before the president is expected to announce his choice for the Supreme Court, the perceived front-runner for that post is being plagued by a story that actually broke in March 2009.
On Friday, a slew of inquiries was made to the White House and Justice Department about a minor post Solicitor General Elena Kagan once held at Goldman Sachs, the investment bank under fire over controversial mortgage securities transactions. Kagan served on a Goldman advisory council between 2005 and 2008, with the task of providing expert "analysis and advice to Goldman Sachs and its clients." For her work she earned a $10,000 stipend.
This was actually old news. Kagan disclosed this information during her first confirmation hearings for the post of Solicitor General. On March 24, 2009, the New York Times mentioned the position and payment in an article on whether White House employees should be allowed to keep the bonuses they earned from their time in private industry.
In mid-April 2010, Goldman was charged by the SEC with fraud in its dealing with the subprime mortgage market and immediately became a toxic name within the political world. With Kagan ascending to the short list of potential Supreme Court nominees shortly thereafter, USA Today revisited the matter on April 27 -- albeit in a much different context than the Times.
Since then, however, the issue has remained largely on the back burner. That is until Friday, when White House spokesman Robert Gibbs was asked about the Goldman connection during a briefing with reporters. Gibbs stressed that the panel "had absolutely nothing to do with decisions Goldman is being investigated for" and stressed that her position with the bank would have "no" impact on her potential nomination.
The Justice Department, likewise, downplayed the findings in statements issued to inquiring reporters. "This advisory group was comprised of leaders from various sectors including academia, the media, business, and other industry," said spokeswoman Tracy Schmaler. "They met once a year for a daylong conference organized around public policy matters. The group was not involved in making any investment decisions for the company."
But concern nevertheless mounted in the progressive community (already skittish on Kagan's credentials) that the connection could be used to harm her during confirmation hearings -- should she be nominated.
While the work Kagan did for Goldman remains largely brief or unknown, the Huffington Post was passed along two reports that the advisory council completed in 2005 and 2008 (posted below). The findings touch on the broad risks that the world economy faced and contain the type of insight expected from a largely formal panel. In terms of content, they came up a bit short, failing to mention credit bubbles in major economies (such as the U.S. housing market) as a looming problem.
Considering how many actual economists missed the housing bubble in real time, it would be difficult to hold Kagan to a higher standard -- though Goldman was already betting against the housing market by the time the latter report was published. The issue for progressives, however, isn't her lack of long-term market salience. But rather the ties -- however small -- to a firm that is now a black mark on Wall Street and a pariah in Congress. Already, a variety of right-wing blogs have picked up on the findings. And the concern is that Goldman represents the type of superficial connection that could cause political damage.
"I just don't understand why the Administration would want to makes themselves and their nominee vulnerable to the opposition at a time when American skepticism of Wall Street is at an all time high," said a prominent progressive strategist speaking on the condition of anonymity. "This is like handing the Republicans the mantle of populism just for trying to oppose Kagen's confirmation."
HERE ARE THE TWO GOLDMAN DOCUMENTS
June 2008
September 2005