Nomi Prins On The Goldmanization Of President Trump

Tyler Durden's picture

Authored by Nomi Prins, originally posted at TomDispatch.com,

How A Bank Conquered Washington

Irony isn’t a concept with which President Donald J. Trump is familiar. In his Inaugural Address, having nominated the wealthiest cabinet in American history, he proclaimed, “For too long, a small group in our nation's capital has reaped the rewards of government while the people have borne the cost. Washington flourished -- but the people did not share in its wealth.”  Under Trump, an even smaller group will flourish -- in particular, a cadre of former Goldman Sachs executives. To put the matter bluntly, two of them (along with the Federal Reserve) are likely to control our economy and financial system in the years to come.

Infusing Washington with Goldman alums isn’t exactly an original idea. Three of the last four presidents, including The Donald, have handed the wheel of the U.S. economy to ex-Goldmanites. But in true Trumpian style, after attacking Hillary Clinton for her Goldman ties, he wasn’t satisfied to do just that.  He had to do it bigger and better.  Unlike Bill Clinton and George W. Bush, just a sole Goldman figure lording it over economic policy wasn’t enough for him. Only two would do.

The Great Vampire Squid Revisited

Whether you voted for or against Donald Trump, whether you’re gearing up for the revolution or waiting for his next tweet to drop, rest assured that, in the years to come, the ideology that matters most won’t be that of the “forgotten” Americans of his Inaugural Address. It will be that of Goldman Sachs and it will dominate the domestic economy and, by extension, the global one.

At the dawn of the twentieth century, when President Teddy Roosevelt governed the country on a platform of trust busting aimed at reducing corporate power, even he could not bring himself to bust up the banks.  That was a mistake born of his collaboration with the financier J.P. Morgan to mitigate the effects of the Bank Panic of 1907. Roosevelt feared that if he didn’t enlist the influence of the country’s major banker, the crisis would be even longer and more disastrous.  It’s an error he might not have made had he foreseen the effect that one particular investment bank would have on America’s economy and political system.

There have been hundreds of articles written about the “world’s most powerful investment bank,” or as journalist Matt Taibbi famously called it back in 2010, the “great vampire squid.” That squid is now about to wrap its tentacles around our world in a way previously not imagined by Bill Clinton or George W. Bush.

No less than six Trump administration appointments already hail from that single banking outfit. Of those, two will impact your life strikingly: former Goldman partner and soon-to-be Treasury Secretary Steven Mnuchin and incoming top economic adviser and National Economic Council Chair Gary Cohn, former president and “number two” at Goldman.  (The Council he will head has been responsible for “policy-making for domestic and international economic issues.”)

Now, let’s take a step into history to get the full Monty on why this matters more than you might imagine.  In New York, circa 1932, then-Governor Franklin Delano Roosevelt announced his bid for the presidency. At the time, our nation was in the throes of the Great Depression.  Goldman Sachs had, in fact, been one of the banks at the core of the infamous crash of 1929 that crippled the financial system and nearly destroyed the economy. It was then run by a dynamic figure, Sidney Weinberg, dubbed “the Politician” by Roosevelt because of his smooth tongue and “Mr. Wall Street” by the New York Times because of his range of connections there. Weinberg quickly grasped that, to have a chance of redeeming his firm’s reputation from the ashes of public opinion, he would need to aim high indeed. So he made himself indispensable to Roosevelt’s campaign for the presidency, soon embedding himself on the Democratic National Campaign Executive Committee.

After victory, he was not forgotten. FDR named him to the Business Advisory Council of the Department of Commerce, even as he continued to run Goldman Sachs. He would, in fact, go on to serve as an advisor to five more presidents, while Goldman would be transformed from a boutique banking operation into a global leviathan with a direct phone line to whichever president held office and a permanent seat at the table in political and financial Washington.

Now, let’s jump forward to the 1990s when Robert Rubin, co-chairman of Goldman Sachs, took a page from Weinberg’s playbook.  He recognized the potential in a young, charismatic governor from Arkansas with a favorable attitude toward banks. Since Bill Clinton was far less well known than FDR had been, Rubin didn’t actually cozy up to him from the get-go. It was another Goldman Sachs executive, Ken Brody, who introduced them, but Rubin would eventually help Clinton gain Wall Street cred and the kind of funding that would make his successful 1992 run for the presidency possible.  Those were favors that the new president wouldn’t forget. As a reward, and because he felt comfortable with Rubin’s economic philosophy, Clinton created a special post just for him: first chair of the new National Economic Council.

It was then only a matter of time until he was elevated to Treasury Secretary. In that position, he would accomplish something Ronald Reagan -- the first president to appoint a Treasury Secretary directly from Wall Street (former CEO of Merrill Lynch Donald Regan) -- and George H.W. Bush failed to do.  He would get the Glass-Steagall Act of 1933 repealed by hustling President Clinton into backing such a move. FDR had signed the act in order to separate investment banks from commercial banks, ensuring that risky and speculative banking practices would not be funded with the deposits of hard-working Americans. The act did what it was intended to do.  It inoculated the nation against the previously reckless behavior of its biggest banks.

Rubin, who had left government service six months earlier, wasn’t even in Washington when, on November 12, 1999, Clinton signed the Gramm-Leach-Bliley Act that repealed Glass-Steagall. He had, however, become a board member of Citigroup, one of the key beneficiaries of that repeal, about two weeks earlier.

As Treasury Secretary, Rubin also helped craft the North American Free Trade Agreement (NAFTA). He subsequently convinced both President Clinton and Congress to raid U.S. taxpayer coffers to “help” Mexico when its banking system and peso crashed thanks to NAFTA.  In reality, of course, he was lending a hand to American banks with exposure in Mexico.  The subsequent $25 billion bailout would protect Goldman Sachs, as well as other big Wall Street banks, from losing boatloads of money. Think of it as a test run for the great bailout of 2008.

A World Made by and for Goldman Sachs

Moving on to more recent history, consider a moment when yet another Goldmanite was at the helm of the economy.  From 1970 to 1973, Henry (“Hank”) Paulson had worked in various positions in the Nixon administration. In 1974, he joined Goldman Sachs, becoming its chairman and CEO in 1999.  I was at Goldman at the time.  (I left in 2002.)  I remember the constant internal chatter about whether an investment bank like Goldman could continue to compete against the super banks that the Glass-Steagall repeal had created. The buzz was that if Goldman and similar investment banks were allowed to borrow more against their assets (“leverage themselves” in banking-speak), they wouldn’t need to use individual deposits as collateral for their riskier deals.

In 2004, Paulson helped convince the Securities and Exchange Commission (SEC) to change its regulations so that investment banks could operate as if they had the kind of collateral or backing for their trades that goliaths like Citigroup and JPMorgan Chase had. As a result, Goldman Sachs, Lehman Brothers, and Bear Stearns, to name three that would become notorious in the economic meltdown only four years later (and all ones for which I once worked) promptly leveraged themselves to the hilt. As they were doing so, George W. Bush made Paulson his third and final Treasury Secretary.  In that capacity, Paulson managed to completely ignore the crisis brewing as a direct result of the repeal of Glass-Steagall, the one I predicted was coming in Other People’s Money, the book I wrote when I left Goldman.

In 2006, Paulson was questioned on his obvious conflicts of interest and responded, “Conflicts are a fact of life in many, if not most, institutions, ranging from the political arena and government to media and industry. The key is how we manage them.” At the time, I wrote, “The question isn’t how it’s a conflict of interest for Paulson to preside over our country’s economy but how it’s not?” For men like Paulson, after all, such conflicts don’t just involve their business holdings.  They also involve the ideology associated with those holdings, which for him at that time came down to a deep belief in pursuing the full-scale deregulation of banking.

Paulson was, of course, Treasury Secretary for the period in which the 2008 financial crisis was brewing and then erupted. When it happened, he was the one who got to decide which banks survived and which died. Under his ministrations, Lehman Brothers died; Bear Stearns was given to JPMorgan Chase (along with plenty of government financial support); and you won’t be surprised to learn that Goldman Sachs thrived.  While designing that outcome under the pressure of the moment, Paulson pled with Nancy Pelosi to press the Democrats in the House of Representatives to support a staggering $700 billion bailout.  All those taxpayer dollars went with the 2008 Emergency Financial Stability Act that would save the banking system (under the auspices of saving the economy) and leave it resplendently triumphant, bonuses included), even as foreclosures rose by 21% the following year.

Once again, it was a world made by and for Goldman Sachs.

Goldman Back in the (White) House

Running for office as an outsider is one thing. Instantly inviting Wall Street into that office once you arrive is another. Now, it seems that Donald Trump is bringing us the newest chapter in the long-running White House-Goldman Sachs saga. And count on Steven Mnuchin and Gary Cohn to offer a few fresh wrinkles on that old alliance.

Cohn was one of the partners who ran the Fixed Income, Currency and Commodity (FICC) division of Goldman. It was the one that benefited the most from leverage, trading, and the complexity of Wall Street’s financial concoctions like collateralized debt obligations (CDOs) stuffed with derivatives attached to subprime mortgages. You could say, it was leverage that helped propel Cohn up the Goldman food chain.

Steven Mnuchin has proven particularly adept at understanding such concoctions. He left Goldman in 2002.  In 2004, with two other ex-Goldman partners, he formed the hedge fund Dune Capital Management.  In the wake of the 2008 financial crisis, Dune went shopping, as Wall Street likes to do, for cheap buys it could convert into big profits. Mnuchin and his pals found the perfect prey in a Pasadena-based bank, IndyMac, that had failed in July 2008 before the financial crisis kicked into high gear, and had been seized by the Federal Deposit Insurance Corporation (FDIC).  They would pick up its assets on the cheap.

At his confirmation hearings, Mnuchin downplayed his role in throwing homeowners (including members of the military) out of their heavily mortgaged homes as a result of that purchase. He cast himself instead as a genuine hero, the guy who convened a cadre of financial sharks to help, not harm, the bank’s customers who, without their benevolence, would have fared so much worse. He looked deeply earnest as he spoke of his role as the savior of the common -- or perhaps in the age of Trump “forgotten” -- man and woman. Maybe he even believed it.

But the philosophy of swooping in, attacking an IndyMac-like target of opportunity and converting it into a fortune for himself (and problems for everyone else), has been a hallmark of his career. To transfer this version of over-amped 1% opportunism to the halls of political power is certainly a new definition of, in Trumpian terms, giving the government back to “the people.” Perhaps what our new president meant was “the people at Goldman Sachs.” Think of it, in any case, as the supercharging of a vulture mentality in a designer suit, the very attitude that once fueled the rise to power of Goldman Sachs.

Mnuchin repeatedly blamed the FDIC and other government agencies for not helping him help homeowners. “In the press it has been said that I ran a ‘foreclosure machine,’” he said, “On the contrary, I was committed to loan modifications intended to stop foreclosures. I ran a ‘Loan Modification Machine.’ Whenever we could do loan modifications we did them, but many times, the FDIC, FNMA, FHLMC, and bank trustees imposed strict rules governing the processing of these loans.” Nothing, that is, was or ever is his fault -- reflecting his inability to take the slightest responsibility for his undeniable role in kicking people out of their homes when they could have remained.  It’s undoubtedly the perfect trait for a Treasury secretary in a government of the 1% of the 1%.

Mnuchin also blamed the Federal Reserve for suggesting that the Volcker Rule -- part of the Dodd-Frank Act of 2010 designed to limit risky trading activities -- was harming bank liquidity and could be a problem. The way he did that was typically slick. He claimed to support the Volcker Rule, even as he underscored the Fed’s concern with it. In this way, he managed both to make himself look squeaky clean and very publicly open the door to a possible Trumpian “revision” of that rule that would be aimed at weakening its intent and once again deregulating bank trading activities.

Similarly, at those confirmation hearings he said (as Trump had previously) that we needed to help community banks compete against the bigger ones through less onerous regulations. Even though this may indeed be true, it is also guaranteed to be another bait-and-switch move likely to lead to the deregulation of the big banks, too, ultimately rendering them even bigger and more dangerous not just to those community banks but to all of us.

Indeed, any proposition to reduce the size of big banks was sidestepped. Although Mnuchin did say that four monster banks shouldn't run the country, he didn’t say that they should be broken up. He won’t. Nor will Cohn. In response to a question from Democratic Senator Maria Cantwell, he added, “No, I don’t support going back to Glass-Steagall as is. What we’ve talked about with the president-elect is that perhaps we need a twenty-first-century Glass-Steagall. But, no I don’t support taking a very old law and saying we should adhere to it as is.”

So, although the reinstatement of Glass-Steagall was part of the 2016 Republican election platform, it’s likely to prove just another of Trump’s many tactics to gain votes -- in this case, from Bernie Sanders supporters and libertarians who see too-big-to-fail institutions and a big-bank bailout policy as wrong and dangerous. Rest assured, though, Mnuchin and his Goldman Sachs pals will allow the largest Wall Street players to remain as virulent and parasitic as they are now, if not more so.

Goldman itself just announced that it was the world’s top merger and acquisitions adviser for the sixth consecutive year. In other words, the real deal-maker isn’t the former ruler of The Celebrity Apprentice, but Goldman Sachs. The government might change, but Goldman stays the same. And the traffic pile up of Goldman personalities in Trump’s corner made their fortunes doing deals -- and not the kind that benefited the public either.

A former Goldman colleague recently asked me whether it was just possible that Mnuchin was a good person. I can’t answer that. It’s something only he knows for sure. But no matter how earnest or sympathetic to the little guy he tried to be before that Senate confirmation committee, I do know one thing: he’s also a shark. And sharks do what they’re best at and what’s best for them. They smell blood in the water and go in for the kill. Think of it as the Goldman Sachs effect.  In the waters of the Trump-Goldman era, don’t doubt for a second that the blood will be our own.

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TeethVillage88s's picture

BUT... you know at least it won't be G.W.B or B. Obama.

So we got that going for us!

Lynx Dogood's picture

People can be Hung!!!   Or worse spiked!!!!!!!

TeethVillage88s's picture

Well we used to put them in cages hung in the town center. Pretty gruesome. We also chained them over kind of cones or pyramids that slowly slip them from the ass up.

- But why not just strip them Citizenship and of earning a living/doing business the USA... take their ill-gotten gains, seize their accounts or whatever ... and Exile them to maybe an islands or whatever.

old naughty's picture

Meet the new king with new "clothes",

same as the old king with old rags...

for christ sake, look at how we fight each other...

and not "them" ?

Freedom of choices, ours !!!

BabaLooey's picture

WHEN WAS THIS WRITTEN?

199......................?

BECAUSE THE BANKS TOOK OVER THE WHITE HOUSE YEARS AGO....

where's this fuck been? Church?

zippedydoodah's picture

I read it as 29th January 2017 when I click on the link. Do you think the author was clairvoyant and knew all about the future government in 199 ...........?

I think you've been on the dope. Dope.

donomiller's picture

These Goldman guys are pawns. Nomi is smart but doesn't see the script Trump is playing with.

AnonG-Man's picture

That reasoning sounds suspiciously like scorned Obama supporters that quickly learned the hard lesson when he filled financial advisory positions with bankers.  If you wish to be willingly fooled, you're more than welcome to it.  "Hope and Change" with a different branding.

Giant Meteor's picture

Indeed correct.

Actually I call this phenomenon, the reverse obama. Some will say, well of course, the don is reversing obama's policies. No, that is not what I mean with the term. What I mean is exactly what you have stated. Shortly after obama's first election, when picking his own cabinet, Mr. Hope and change went to the old Clinton retreads, even the old hag herself. Rewarded their own wall street / special interest, and big bank booster crony's. FIRE sector baby, big pharma!

It was immediate hands off Bush / Cheney for their own war crimes. Let's dress up this ole war pig with a NEW color lipstick! Blame, blame blame, pretend that this was statemen like. Me, me, me. Republican't's bad. Bad, bad, bad, me, me, me .. The one note opera.

0 and company created their own brand of global adminstered war, by remote control, won a peace prize, ramped up the national security state, sanctioned state murder, and increased the war on whistle blowers. His Just Us dept - held no major prosecutions for known financial crimes, (because according to the 0, no crimes were committed) no Rico enforcement, nothing, nada, zilch. And many of the sheeple still cheered the great man, as he waved, smiled, and made funnies, went golfing, jet setting, island hopping. Look at the job's created!

My God it's a miracle! He has saved the world! And look at that market go up will ya ! Oh, boy ..

His hard core fanclub, never waivered. Never lost faith. In spite of all evidence in front of them, or perhaps BECAUSE of it. One big three demensional chess game they said. He was an expert statemen, orator, a brilliant man!. He was pragmatic, scholarly, wise and exercised steady, even handed stewardship over all that was good and holy! He was second to none, the best! Better still, the evil right wing was destroyed forever, shattered into a thousand pieces for their seemingly mindless resistance.

No more war protests. No protests at all, with the exception of the misguided Alinsky commie playbook / Soros effort -"Occupy Wallstreet," snuffed out by obama himself, and his very own "just us" department. The right wing cheered as they cleared the riff raff, city by city, state by state. Damn right, they said, Fuck those shit in the park, deadbeat commies!! Get a fucking job!

What you are witnessing sports fans, is not much more than Punch and Judy show, albeit on a much grander, or dare I say, a Yuuuuuger scale.

Gold man Sacks is still in, and still in charge. No prosecutions for crimes, (Clinton) treason, corruption. Still a devotion to Israel (policy) and beat those war drums some more, gotta defeat the evil doers and placate the bankers and take credit for the Yuuuuuge gains in the once fraudelent market (formerly an evil bubble) now apparently a good development, throw some red meat, firings and bones to the plebes, rail against "the establishment." And for God's sake make a plan to ramp up the National Security State, strive for further militarization of law enforcement, and threaten to crack down on dissent ...

So, as someone else here had mentioned. DJT IS the Giant Meteor. He is certainly speeding things up, as opposed to what was likely to be a slower, more painful death .. So Punch and Judy it is, and the NEW Giant Meteor, DJT .. for better or worse, by hook or by crook is ripping this shit up .. Buckle up ..

 

SgtShaftoe's picture

Goldman people do not work for other non goldman people or themselves.  Have you ever spent time on Wall st? 

Wahooo's picture

Drumpf gets rich, we get screwed. Soetero, Jr.

Mammon's picture

Shhhh, don't mention that to the idiots on ZH who worship at his feet.

King Tut's picture

I'm hoping this is some kind of Machiavellian ploy by Orange Jesus to hang these GS bastards out to dry when the inevitable financial breakdown occurs but I'm not holding my breath

Miss Informed's picture

If that's our last hope then we need to send a droid out with a message for Obi Wan Kenobe.

Paul Kersey's picture

ALL of Trump's grandchildren, from all three of his married children, have the strong potential to become future Goldmanites. Was Trump a Trojan Horse?

BigFatUglyBubble's picture

Yup.  He did a great job, didn't he?

Anarchyteez's picture

Holy shit.

What the hell? All those words and I'm dumber than when I began reading.

King Tut's picture

About the only thing I gleaned is that GS has always been run by jews

Paul Kersey's picture

Hank Paulson and Jon Corzine were Goldman CEOs, but they are not (((Paulson))) and (((Corzine))). Men whose lives are all about money and greed can be found in any race, creed or color. Al Sharpton was never Al Sharpowitz,and Bill Clinton was never Shlomo Clintstein.

Mustafa Kemal's picture

Words are hard, sentences even harder. Well exposited and informative articles even more difficult.

roadhazard's picture

I am entertained.

Giant Meteor's picture

Indeed, me too. Here is to hoping we survive the entertainment !

Popcorn overdose ..

LetThemEatRand's picture

"After victory, he was not forgotten. FDR named him to the Business Advisory Council of the Department of Commerce, even as he continued to run Goldman Sachs."

And let's not forget that FDR signed an executive order confiscating gold.  I wonder where that idea came from?

I hope long-time ZH'rs who have been rightly calling out the squid for years will not be apologists for Trump putting the squid in key roles in the government.  It doesn't mean that we need to oppose Trump completely, or disagree with everything he's doing, but it's a huge red flag to say the least.

venturen's picture

FDR was a Democrats....so there is hope for Trump....but the backlash if these guys continue what they are doing is going to be UGLY!

opport.knocks's picture

That and the Israel first policies. 

JailBanksters's picture

The wealthy always do the right thing for the poorer people of society.

You can always trust the rich to be honourable.

 

Able Ape's picture

What is there to worry about?  All the looting and stealing HAS already been done!  There's nothing left, there's NO meat on the bones!  How many times can we be taken to the cleaners?

Giant Meteor's picture

Well the ultimate would be a smoldering hole in the ground where life once existed. I agree regarding the looting and stealing. Corruption is the name of the game, on a scale never before seen. Civil unrest. war. rumors of war. The beating's will continue, and morale will definitely not be improving.

cowdiddly's picture

HA, She's bitching about Goldmanites and she is one herself. LOL

Squid calling the Squids INKY

 Maybe She's just jealous she didnt get a cabinet pick and got passed over. But she talks a good game how she's seen the light and all.

Once a squid always a squid.

HRH Feant's picture

Prins gives me the creeps. I have seen / heard her interviews a number of times but rarely in the MSM. She creeps around in the shadows and says what exactly? There's the rub for me about Prins. Just pushing her latest book. Isn't one out or ready to be published about now? Again?

Oliver Klozoff's picture

"Similarly, at those confirmation hearings he said (as Trump had previously) that we needed to help community banks compete against the bigger ones through less onerous regulations. Even though this may indeed be true, it is also guaranteed to be another bait-and-switch move likely to lead to the deregulation of the big banks, too, ultimately rendering them even bigger and more dangerous not just to those community banks but to all of us."

 

So she is offering a guarantee, Trump is actually moving forward with his campaign platform, which is what he also guaranteed.

Sorry Nomi, Trump deserves the benefit of the doubt.

Giant Meteor's picture

Indeed, and that pisses people off .. so there's that .

LetThemEatRand's picture

Prins calls out the squid and the Fed.  Munchkin testified to Congress that the Fed is plenty transparent and should not be audited.  I would give any former GS manager the benefit of the doubt especially if they haven't worked there in many years like Munch, but he came right out just days ago in front on Congress and defended the very system (the Fed) that is at the heart of what is wrong with America.

King Tut's picture

It takes a thief to recognize another one

Miss Informed's picture

And then to complain about them vociferously.....

logicalman's picture

Often the victim does, but when it comes tobanksters and Joe Public, not so much.

 

HRH Feant's picture

She worked for GS. So, yes, she does have inside Intel.

She still give me the fucking creeps.

TeethVillage88s's picture

So ... she is saying that Goldman Sach has not been ruling the USA, Federal Govt, Wall Street since Bill Clinton Got Elected?

- I'm confused, I thought she was a good-girl, reform school girl, and yet she is saying she is innocent and GS are only now under President Donald J. Trump getting into the White House??!!! And controlling the Fraud, Deregulation, Financial Legislation, FIREs Industry... and Fraudulent Asset Backed Derivatives??!!

WTF?

"It will be that of Goldman Sachs and it will dominate the domestic economy and, by extension, the global one."

Nomi, you got a lot spainin' to do!!

Giant Meteor's picture

She's got a pretty interesting history .. worth reading.

blindman's picture

the law is an adversarial based
and oriented "system" which declares
itself as sovereign.
.
you all must be even more advertorial
adversarial, that required just to
be recognized. you might think that
this is not humane or sane?
.
bingo.
.
Trump Muslim Ban Made Possible By Obama Admin & Media Won't Tell You
https://www.youtube.com/watch?v=4FTFB9GDfls

logicalman's picture

I think you are referring to the 'legal system'

Law is a differnent thing altogether.

 

blindman's picture

they may be different but they
both have a way of making nearly
identical demands
that, ultimately, cannot be denied.
they are nearly identically impressive
when you parse out the oppressive function
termed "legal system". man on man.
.
the law is supposed to inspire the
demands and threaten the punishments
that comprise the codes of the legal system.
the law is flawless, the system is perpetually
a work in progress.
.
is there no hope of progress?
maybe, but i seriously doubt it.
anyway poem

logicalman's picture

Natural law is understandble by almost anyone.

The legal system isn't even understandable by those who study and practice it full time.

That's the important difference.

 

RumbleGuts's picture

Remember the club George Carlin talked about?

We ain't in it, but Trump is.

"Fill the swamp!"

Yen Cross's picture

 WeHEll, this is certainly a lot to digest!?  NOT!

 We voted for the Man and he's keeping his promise.  Bitchez

MASTER OF UNIVERSE's picture

One only bleeds if the have skin in the game. Goldman Sachs-of-SHIT have more skin in the game than I do, thank God.

 

tick, tick, tick, tick, tick,...

 

 

 

tick,...

 

 

 

It going to happen, Blankfein, and you can't hide, eh, because we will find you, and the loot.

 

just saying!