How Wall Street, In Broad Daylight, Took Over The US Government

Tyler Durden's picture

By now it is common knowledge that the primary way by which Goldman has taken over the world of central banking is by seeding places such as the New York Fed (or the ECB or the BOE) with its "former" employees, in the process converting them to benign colonies of the vampire squid (as explained first in 2010) while making sure the "independent" financial media which is supposed to expose and reveal such travesties is anything but (see "On The New York Fed's Editorial Influence Over The WSJ"). For a quick refresher read "How Goldman Controls The New York Fed: 47.5 Hours Of "The Secret Goldman Sachs Tapes" Explain."

Of course, what Goldman has done is hardly groundbreaking: as the following chart from Bloomberg shows, Wall Street's "revolving door" tradition has been working in overdrive to make sure that all American regulators are staffed with former (and future) Wall Street employees.

This epic pile up of conflicts of interest assures that the great bezzle - the robbery of the middle class by the 0.1% - can continue without any interruption, a great case in point being today's latest HSBC Swiss bank account scandal.

But while Wall Street can play dumb and try to ascribe what is clearly a premeditated attempt of literal "regulatory capture" to chance, where things get scary is that Wall Street is now actively enforcing behavior that facilitates even further Wall Street incursion into government positions.

As New Republic reports, "Citigroup is one of three Wall Street banks attempting to keep hidden their practice of paying executives multimillion-dollar awards for entering government service. In letters delivered to the Securities and Exchange Commission (SEC) over the last month, Citi, Goldman Sachs and Morgan Stanley seek exemption from a shareholder proposal, filed by the AFL-CIO labor coalition, which would force them to identify all executives eligible for these financial rewards, and the specific dollar amounts at stake. Critics argue these “golden parachutes” ensure more financial insiders in policy positions and favorable treatment toward Wall Street."

This is what the labor coalition asked:

“As shareholders of these banks, we want to know how much money we have promised to give away to senior executives if they take government jobs,” said AFL-CIO President Richard Trumka in a statement. “It’s a simple question, but the banks don’t want to answer it. What are they trying to hide?”

What has since been revealed is nothing short of a management-funded (and for recently insolvent banks it really means taxpayer-funded) takeover of government. Enter Usual Suspect A - Goldman Sachs:

These payments are routine at major banks, several of which have explicit policies, found in filings with the SEC, outlining automatic awards for executives who rotate into government. Goldman Sachs offers “a lump sum cash payment” for government service, for example.

And of course let's not forget the epic tax breaks that former Goldmanites receive when joining government. Case in point: Hank Paulson, who avoivded tens if not hundreds of millions in capital gains taxes when he rushed to leave Goldman to become Treasury secretary in 2006, just before it all came crashing down, in the process benefiting from the biggest capital allocation loophole in US history:

The $183,500 salary for the Treasury Secretary post may not mean much to nominee Henry Paulson, Jr., who's used to earning closer to $40 million. But thanks to a provision in the tax code, the exiting Goldman Sachs CEO will get a financial break for moving to D.C. that could add up to millions.


Paulson, who is expected to get the nod from the Senate Finance Committee as early as Tuesday, owns about $480 million worth of Goldman Sachs stock, which the White House said he would sell to avoid conflicts of interest, according to published reports.

Yes, we laughed too.

When executive branch officials are forced to sell assets, they are allowed to defer paying the capital gains tax owed if they buy "permitted property" within 60 days of the sale.


Permitted property includes Treasury securities and a "diversified investment fund," such as a stock mutual fund if approved by the Office of Government Ethics.


Paulson will have to pay a tax on his gains eventually, but one advantage of the forced sale for any executive branch official - not just Paulson - is the same as it is with any tax-deferred vehicle, like 401(k)s: the longer you put off taxes, the larger the balance that remains invested and the faster your money can compound.


And for someone like Paulson, whose wealth is heavily tied to Goldman Sachs, it's a free way to diversify one's holdings.

In other words, on one hand Goldman pays its employees massive bonuses, then pays them more when they join the government, and then the government, pardon - the taxpayer - makes sure they are "avoid" paying taxes on their vast equity holdings when they become part of the same government... that will sooner or later demand a bailout for Goldman... and every other bank.

It's all downhill from there. Back to New Republic.

Other banks’ policies are subtler. Banks often defer certain types of compensation in order to retain talent. When an executive terminates employment, unvested stock options and other forms of deferred compensation are usually forfeited. But several companies let executives’ equity options continue to vest if they leave for a government position, or allow them to keep retention bonuses that would otherwise be returned to the firm. A 2004 tax law banned accelerated payments but made an exemption for employees who leave for government service. Critics wonder whether the gifts are intended to fill the government with friendly faces who will act in their former employer’s interests. 


“It fuels the revolving door between banks and the government,” said Michael Smallberg, an investigator for the Project On Government Oversight (POGO), whose 2013 report detailed these types of compensation agreements. The average executive branch salary is substantially less than these millions in awards, so the bonuses effectively supplement the lower pay, raising questions about who the government officials actually work for.

The answer, by now, should be clear to absolutely everyone. Sadly, nobody cares, because that great distraction - the stock market - is at all time manipulated highs, central banks are on pace to buy more government bonds in 2015 than will be issued, the music is playing, everyone is dancing, and even the confidence of Joe Sixpack has rarely been higher.

And then one day the rug is pulled from under the house of cards, households lose trillions, crushing yet another generation of Americans even deeper into indentured servitude, and destroying what little is left of the middle class. But not the banks. Because at first opportunity, the "government's" workers will do what they have to, to make sure that the banks - their true employers - are taken care off: after all it is the banks that control government, not some quaint, anachronistic concept that it is a government "by the people, for the people."

Which means another round of bank bailouts. And then the Wall Street take over of its regulators, and of government in general can resume, until the two are indistinguishable.

And all of this takes place in broad daylight, in front of the entire American population, which is too bored, too lazy, and far too distracted by collecting the government handout equivalent of plastic beads, spending on 99 cent apps and watching the Grammys to care.

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CH1's picture

Guv, corp, what's the difference?

These are sociopaths, ensconced in hierarchies... And the suckers obey them.

Usurious's picture
Usurious (not verified) CH1 Feb 9, 2015 6:32 PM

tribe bankers sure know how to STEAL

cossack55's picture

ZH is freakin' on it today.  Numerous 5 ratings. Keep on kickin', Tylers.

F-Tipp's picture

Cheese Truck article made my day. Coworkers couldn't understand what I was laughing about.

Cognitive Dissonance's picture

Looks like a sense of urgency in 2008 kicked the revolving door up to warp factor 8. The percentage rate double in 6 short years.

It's almost like they knew 08-09 was going to be bad....but the next one was gonna be horrific. So they better have things already in place before it happens.

Anusocracy's picture


What special interest group WOULDN'T take over the government?

Most people are stupid evil control freaks.

stocktivity's picture

Amazing how many times it all comes back to Goldman.

Pinto Currency's picture


Where's the graph showing the takeover of the government starting in 1913 with creation of the Federal Reserve.

MarketAnarchist's picture

One must distinguish a corporation (a legal title granted by a government, and socialistic in nature) and a free-market company.   The free market only breaks when government is introduced.

NotApplicable's picture

Formation of a government is the worst thing that can happen to a society.

TuPhat's picture

Without government there is no society.  Some groups of people can govern themselves without outside force but they are still governed.  Most are not capable of governing themselves. 

Renfield's picture

<<Most are not capable of governing themselves.>>

Then those people are the responsibility of their own families or churches, or voluntary societies. Part of the reason big, powerful government exists is this stupid and futile mentality of nannying everyone else everywhere.

Anusocracy's picture

Exactly! + 1 for all the sanity in the World in your post.

It's the act of dumbing society down to the level of the least capable by introducing rule by the least human.

Anusocracy's picture

"Most are not capable of governing themselves."

There are 7+ billion people on Earth. If those people can't be civilized, drop them in the jungle and let Nature recycle her own.

lunaticfringe's picture

Society existed long before government. I am confident that our culture will continue even though one day, we will stretch some bankers necks on the branches of the tree of liberty.

lakecity55's picture

"A dangerous Servant and a Fearful Master."
-G. Washington, President

doctor10's picture

funny how they never even mention that LITTLE part about the NSA-keeping track of all the congressional boyfirends and girlfriends-and making sure the data gets strategically dropped at the right time and place

Kaiser Sousa's picture

how many times have i said here in this fucking place THAT THE MONEYCHANGERS R UR REAL GOVERNMENT!!!

until theY r destroyed nothing will fucking change.



NotApplicable's picture

As I ask clueless statists all of the time, "Exactly how do you go about voting Goldman Sachs out of office?"

kowalli's picture

voting out by nail gun and garbage shredder

Sambo's picture

NYPD may not allow that.

davidalan1's picture

Baltic, velocity, employment lies....all good!  what does 18trillion and Eastern Airlines have in common?

Dungholio's picture

I want my mommy....

fascismlover's picture

It's like taking candy from a very fat baby in a sugar coma

Bill of Rights's picture

Don't forget drugged up as well..

Goldilocks's picture

The Archies - Sugar, Sugar (Original 1969 Music Video) (3:02)

buzzsaw99's picture

i seriously doubt the existence of god but am fairly damned certain that there is a powerful evil muther fucking devil

chinoslims's picture

Thats why Goldman got bailed out and Lehman and Bears Stearn were left to die.  /sarc off

disabledvet's picture

My personal view for what its worth is that "sometimes failure is better."

What Goldman had to do to "stay Goldman" I think destroyed not only the reputation of the business but the entire reputation of Wall Street.

"If you didn't need the money why did you take it?"

So now imagine being Greece....right now..."and Goldman Sachs rings you up and says we're here to help!"

Now its all HSBC's fault.

Bwhahahahahaha. Give it up already.


Now we have the Fed itself..."job numbers are great...we need another trillion!"

Wow...great! "So good we need another bailout.". There is no logic to it.

If you're just a thief of course...

Psquared's picture

Ehh ... our government has always been run by the elite. The first 10 Presidents, and most of the founding fathers were wealthy landowners and businessmen.

RaceToTheBottom's picture

Entry level class in VENN diagrams.

Elite does not always mean criminal.

WS always means criminal.

gdpetti's picture

Yes, as Niccolo Machiavellia wrote in The Prince, it's always a case of the oligarchs vs the people in every civilization... anyone with any knowledge of history knows this... check the Roman example, as it is about the most data we have, as these oligarchs have a tendency to burn books and the libraries that contain them... or the real hidden threat of cosmic catastrophe that comes around every 3-4 centuries and worse every 36 centuries, not to mention the outliers, but then only punctuates the situation, right?

Karl von Bahnhof's picture

I still think that bankers are subject of premature ejaculation in their "rule of world" dreams.

eddiebe's picture

When I talk about this kind of stuff to my own children, the get angry at me and tell me I'm always so negative. 

kowalli's picture

Americans are cowards because they can't face their problems..

Aleedsfella's picture

The western public are cowards, not just Americans. I am English NOT EUROPEAN! for most of my life I stood by in ignorance of all thing political, during this time the scum that we think runs our country's rose to power. We are to blame for all this shit, we went along with it all while we were money whoring and thinking we were special. Now its time for our children to pay the Piper!

GCT's picture

Spot on Eddie. +100 if I could.

Not only is the GS bunch and other banks revolving thru the doors into our financial areas, most, not all high level government employees break hte rule all the time.  They get relatives, cousins, spouse and sibling employed in some area of the government.  Many think they can do whateve they wish.  How many do you see being prosecuted for stealing money from the taxpayer coffers or have big time conflicts of interest themselves.  Yet if a lower government employee should violate this they get canned without alot of recourse.

The AFL-CIO speaking about corruption makes me just want to laugh as they are nothing mroe then the mafia telling the pleebs they must give 10% of their salary because they are helping them.  That same union leader violate his or her own oath of office daily.  The whole fucking system is corrupt.  If your skilled and experienced and could do the job better then anyone else it would not matter.  It is not what you know but WHO you know to gt a better paying job.

A true story .  Back in the 90's an Inspector General was appoint to investigate fraud and abuse of welfare people and the agencies that provided assistance.  Hie results were great, until he started investigating Executive Directors (ED) and their staffs.  Well he was getting more EDs then the welfare fraudsters.  Imainge that.  To make a long story short the power were brought to bear on this individual and his staff and the state government disbanded the office.  I used to laugh at listening to the whiney EDs because they too knkew they were breaking the laws. 

Nothing is going to change until people have had enough and that will not happen for a long, long time.  With more people on the government dole then people working in the private sector not one person here can do a dam thing.  Why?  Because as soon as you start checking and making complaints to superiors your labeled as a trouble maker and TPTB will do their damndest to make you out to be a criminal including doctoring up charges and planting evidence in your area.  Most govenment employees ae actually good honest people but those in charge of them usually suck big time.  The education system is the same dam way the scool superintendent will hire his wife for his personal assistant, the broter is the operatins manager, his cousin is the coach and her daddy runs the physical plant.  Nepotism is rampant in government work and they are usually related to the person in charge.

Those that enforce the rules sit in there offices because they do not have any money to travel and sit and watch porn!!!!! 

Bemused Observer's picture

Thank you for mentioning the welfare fraud investigation...So many people are outraged at the fraud and waste, but they focus their attacks on the individual recipients, who actually account for very little of the total fraud. It almost always originates higher up the food chain...
administratively, within the agencies, or from local businessmen who own chains of bodegas in poor neighborhoods and 'buy' people's benefits for a fraction of the face value, then cash in for the full amount. Many poor people DO have needs other than food, and sometimes they are desperate for some cash and will agree.
But too many people still want to take out their anger at the recipients, not understanding that if you eliminated ALL fraud among recipients, you'd barely make a dent in the fraud.

GCT's picture

Bemused if you come back to this which I hope you do fraud is rampant big time.  The reason we have a section * program is because a person trying to make it, working thier asses off cannot afford to rent period in most areas.  So the govenment subsidizes these outrageous prices.  You can bet rent would drop without this program.  True price discovery would happen if alot of these HUD programs went away as most multifamily housing would stand empty without them.  Landlords would actually have to charge a fair rent on property.

Welfare comes in many forms but the biggest chunks end up in the owners hands and not the poor peoples hands. 

Bemused Observer's picture

Absolutely...without all the subsidies on everything, we'd all be better off, including the poor. Prices would decline to the level the economy could support, and in fact many people who are now considered 'the poor' would suddenly find they COULD make ends meet without welfare. Right now, many ARE working, but simply can't make enough no matter how they try...I can't think of any better way to kill off the work ethic than to make work valueless and pointless for so many.

I wish folks could understand that their battle is not with "Takwana" and her EBT card or her 6 kinds by different fathers...but on the ones who have constructed and are protecting a system that gives her no choice, and no better options anyway.

Some say the recipients aren't even grateful for what they get, and that might actually be true...think about it. If you force someone into a corner, where they have no choice but to appeal to you for basic survival, and you reluctantly help, do you really expect gratitude?
What you'll GET is resentment, and a lot OF it.

Does the caged tiger feel warm fuzzy gratitude when his captor arrives with food? Or does that tiger fantasize about ripping his fucking head off every time he comes around? And that captor can feed him for 10 years, and the first time he turns his back that ungrateful tiger will go all Ferguson on his ass.

Bemused Observer's picture

My own son deleted a facebook comment I made on one of his posts because it "had such a downer tone"...

Questan1913's picture

Not quite the generation that will restore the country. But not the generation that sat back and let "them" destroy it either. 


lunaticfringe's picture

Negative? Since when did the fucking truth beg for a label? You sir, must have spared the rod. 

Renfield's picture

"Negative," like "positive," is subjective and relative, a slightly more grown-up way of saying "happy" or "sad". Such language indicates a garbage opinion. It's a mark of people who tend to believe in fairy tales with "happy" endings.

The first measure we should use for any statement is: "Is it true?" That's often the only standard necessary for clear thinking, and the only one worthy of debate.

lunaticfringe's picture

Is it true, is of course, correct. If they don't show a little more respect may I suggest that... You look those little brats in the fucking eye and tell them I brought you here and I might just revoke your day pass. I might be negative but at least I'm not stupid. I got that going for me and surely I wish that I had passed that DNA strand along. Capiche?

MrSteve's picture

It's true! It's true!  .... the first words of the theme from Camelot which didn't have a happy ending.

I like the Rotary's 4 Way Test, well worth passing on to anyone who needs to improve their world and thinking..