by Niv Sultan
Each time President Donald Trump adds another Goldman Sachs alum to his administration, it’s tempting to bring up his campaign-trail rhetoric about the investment bank. After all, it seems as though Trump is trying to drain the swamp by forcing it to overflow; last week, he nominated Goldman managing director James Donovan to the post of deputy Treasury secretary, to serve alongside the department’s secretary, Steven Mnuchin — another former Goldman bigwig.
Trump has joined his predecessors of both parties in tapping into Goldman’s ranks. President Barack Obama‘s Goldman recruits included the firm’s lobbyist Mark A. Patterson, who served as chief of staff to Treasury Secretary Timothy Geithner; President George W. Bush brought in, among others, Henry Paulson, who left his role as CEO to serve as Treasury secretary; President Bill Clinton enlisted Goldman’s co-chairman, Robert Rubin, to head his National Economic Council and then become Treasury secretary.
No wonder some call it “Government Sachs.”
Along with Donovan and Mnuchin, who worked at Goldman for 17 years until 2002, other veterans of the firm now with Trump’s team include Gary Cohn, who left his position as COO to become Trump’s National Economic Council director; Deputy National Security Adviser Dina Powell, who was there for nine years and acted as president of the Goldman Sachs Foundation until she joined Trump; and Steve Bannon, now Trump’s chief White House strategist, who also was once an executive at the firm. And although he’s not quite a Goldman alum, attorney Jay Clayton, Trump’s nominee to chair the Securities and Exchange Commission, represented the firm during the 2008 financial crisis. (There’s more: His wife, Gretchen, works at Goldman, though his letter to the Office of Government Ethics stated that she plans on retiring upon his confirmation; his hearing was held today.)
These migrations to the public sector, it turns out, are a source of pride for Goldman. In his 2016 letter to shareholders, published last week, CEO Lloyd Blankfein wrote, “We are proud of our tradition of leadership and public service and believe it is a core part of our culture. That is why we will continue to encourage our people to contribute to government service if they are fortunate enough to be asked.”
Being “fortunate enough to be asked” is one way of putting it. Others see a bit more at play than luck.
According to Paul S. Ryan, vice president of policy and litigation at Common Cause, the reliable hiring of Goldman alums to government positions is “a direct result of the willingness and the ability of Goldman executives to raise money for candidates.”
“This is a complete, classic back-scratching deal, where Goldman Sachs executives help finance presidential and other campaigns, and are then rewarded with government jobs,” he said.
Between its PAC and individuals associated with the firm, Goldman Sachs made nearly $5.6 million in political contributions throughout the 2016 cycle, outspending its investment banking peers like Citigroup, Bank of America, JPMorgan Chase, Morgan Stanley and Wells Fargo. Less than $5,000 of that total went to Trump. But overall, Goldman’s giving sided with Republicans, as it has since 2010; 62 percent of its contributions went to Republican/conservative candidates, parties, outside groups and federal 527s last cycle.
Landing Goldman employees in government gigs has the potential to be a significant return on investment, Ryan added, as many who make the journey to the government eventually return to work at the Wall Street giant.
“This isn’t about making money,” he said. “[I]t’s about moving from Wall Street to a position of power to help set the course of financial policy for the United States. If you can go from your job at Goldman into the administration and be part of the organization that repeals or weakens Dodd-Frank, and then go back and reap the benefits of that repeal or weakening of Dodd-Frank, it’s pretty easy to connect the dots.” Ryan was speaking of the 2010 law, passed in response to the financial crisis of two years earlier, that tightened regulations on the financial services industry; many members of that industry want to see the measure loosened or repealed.
In his shareholder letter (the firm declined to answer more specific questions from OpenSecrets Blog), Blankfein denied that having Goldman’s former executives serve in high-ranking administration positions gives the firm an edge. “In fact, the opposite is true,” he wrote. “Those in government bend over backward to avoid any perception of favoritism.”
Goldman’s influence on the government isn’t limited to appointees and their staffs, however. The firm lobbies, too, and spent more than $3 million doing so in 2016. Not only that, but for its lobbying needs, Goldman hires an exceptionally high share of revolvers: Lobbyists who have served in the federal government. These individuals bring to their lobbying work valuable connections to lawmakers, which can get their clients priceless seats at the policymaking table.
Goldman led its peers in 2016, with nearly 88 percent of its lobbyists having worked for the federal government. And in many ways, hiring individuals with government experience is the lobbying ideal.
“That’s lobbying 101,” said Ryan. “You hire people with relationships. It’s about getting your phone calls returned, getting meetings when you want them. When you want a meeting in the White House with staff or even with the president himself, it helps to know people who are working in the White House.”
One pricey Goldman lobbyist: Justin Daly, who had served stints with the Securities and Exchange Commission, the Senate Banking, Housing and Urban Affairs Committee and the House Financial Services Committee. That background warranted payments of $240,000 from Goldman to the Daly Consulting Group in 2016.
There and back again
Hiring staffers and aides as lobbyists is nice, but the real jackpot consists of former lawmakers — and Goldman had three on the payroll last year. Two of them, former Sens. John Breaux (D-La.) and Trent Lott (R-Miss.), are former members of the Senate Finance Committee. The pair works at Squire Patton Boggs, which, in 2016, received $80,000 for its work with Goldman. The third lawmaker-revolver, former Rep. Tom Reynolds (R-N.Y.), was a member of the House Ways and Means Committee, which handles budgets and taxes — the latter of which is a timeless concern of bankers and financiers.
Breaux, Lott and Reynolds are just three of nine former lawmakers who have lobbied on behalf of Goldman since 1998. The others include former Sen. Dan Coats (R-Ind.) — who lobbied for the bank between his House and Senate tenures, was on the Senate Finance panel and is now Trump’s director of national intelligence — and former Sen. Lloyd Bentsen (D-Texas), who chaired the Finance Committee and was Treasury secretary under Clinton.
There have also been three lawmakers who worked at Goldman — rather than merely lobbying for the firm — either before or after their congressional service. Two of them, former Sens. Jon Corzine (D-N.J.) and Judd Gregg (R-N.H.), were on the Senate Budget Committee; Gregg was its chairman, then its ranking member. Corzine was Goldman’s CEO before winning a Senate seat, and Gregg was an adviser to the firm after leaving the Senate. Currently in Congress is Rep. Jim Himes (D-Conn.), who spent 12 years with Goldman.
For many, the far-reaching ties between Goldman and the government is worrisome.
“The concern is that we’re going to have public policy driven by the concerns of and for the benefit of the wealthiest people in the U.S., including Goldman Sachs and other Wall Street financial firms,” said Ryan.
But Paul Miller, president of the National Institute for Lobbying and Ethics, is willing to wait and see how Trump’s appointees pan out. He emphasized that the Trump administration “is new for us,” and said, about Trump’s seeming attraction to Goldman alumni, “I don’t necessarily think it means they’re going to be corrupt. I think it means that this president is coming from a business background, and is hiring people with that background.”
“But I understand that concern,” he added. “Washington hasn’t functioned as best as it could in the last 15 years. But let’s not rush to judgment.”
There’s also the added layer of what Trump’s ex-Goldman hires could so easily do after leaving the administration: Leverage their shiny governmental relationships to continue exerting influence on policy.
A Trump executive order mandated that all full-time political appointees to his administration sign an ethics pledge, a key provision of which bars signers from lobbying their former agencies for five years after they leave the government.
But some of Goldman’s many critics say they don’t believe that the pledge will actually keep the Goldman embeds from carrying on business as usual — and amid reports that former National Security Adviser Michael Flynn didn’t even sign the pledge, doubts about how it will be enforced are gaining traction.
“For a president who campaigned for common people and against Wall Street to stack his administration with Goldman officials who will likely take advantage of the massive loopholes in both his campaign pledges and [his executive order] to become serial revolvers is disturbing,” wrote Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, in an email.
One possible loophole is the fact that the lobbying ban only applies to interactions with the agency for which officials worked, rather than to all lobbying activities. (Although, according to international law firm K&L Gates, the pledge uses a definition of “lobbying activities” that is broad enough to include unregistered, “‘behind the scenes'” activity, and is in that way stricter than Obama’s ethics pledge.)
Lobbying bans aside, Mierzwinski later added that what officials do during their time in the government is just as important as what they’ll do upon passing through the revolving door, back into the private sector. For “creative Goldman types,” as he referred to them, “there is a lot more influence peddling that can be done.”
“Goldman’s time horizon can be a be a lot longer than the next quarter, the next year, or the next election cycle,” he wrote. “They can have an immense pro-Goldman impact on our political, financial and economic systems.”
At the end of the day, Goldman Sachs is striving to do what corporations, more or less, always strive to do: Increase the profit margin. And ultimately, on a fundamental level, it shouldn’t be too surprising that Goldman Sachs meshes so well with government and lobbying work, which thrives on forging and cashing in on connections. In their 2015 letter to shareholders, CEO Blankfein and president and COO Cohn summed it up:
“Ours is a business of relationships,” they wrote.
Researchers Dan Auble and Doug Weber contributed to this post.