In earlier columns, I have warned about the potential threat to freedom and wealth in any nation that drifts away from laissez-faire capitalism under the rule of law towards state capitalism under rule by men. The European Union succumbed to such drift several decades ago, with predictable consequences. Since 2001, the United States has followed suit, with the September 2008 financial crisis an entirely predictable consequence. Lessons have not been learned since then. Currently, the United States is on track to drift beyond the limits of state capitalism to progressive socialism or liberal fascism - two closely- related, ultimately autocratic movements.
Goldman Sachs, is no exception to, but rather is the epitome of the corporate form best adapted to conditions of state capitalism, progressive socialism, and liberal fascism. Goldman Sachs, indeed, is the harbinger of America’s corporate future in the absence of some unlikely reversal of political economic direction. Goldman Sachs is the perfectly designed two-way sewer, pumping excrement in and out of privately-networked political markets and in and out of politically-networked private markets. Goldman Sachs, to put it more bluntly, is designed to work the sewer system, extracting all valued protein for itself, while discharging the residuals into any waste dump corrupt enough, or foolish enough to provide access to its pipes.
Let us briefly outline the complex nature of Goldman Sachs’ linkages between political and private markets within the United States (without forgetting that the corporation is multi-national and that what we see in the United States is at least equally apparent in other countries).
Brody Mullins and Jean Spencer ( ‘Goldman Links Cut Both Ways’, The Wall Street Journal, April 20, 2010) trace the pattern of Goldman Sach’s direct infiltration into the US political system. This infiltration started under the administration of FDR when Sidney J. Weinberg, a Senior Partner of GS, 1930-1969, became Vice Chairman of the War Production Board , remaining there through the ensuing two Truman administrations. It has manifested itself with increasing force since 1995. Robert Rubin, Co-Chairman and Co-Senior Partner of GS, 1990-1992, served as Treasury Secretary under President Clinton, 1995-1999. Joshua Bolten, Executive Director for Legal and Government Affairs in London for GS, 1994-1999, served as Chief of Staff to President George W. Bush 2006-2009. Henry Paulson, Chairman and CEO of GS 1999-2006, served as Treasury Secretary under President George W. Bush, 2006-2009.
The GS sewer pipes extend more deeply into the regulatory process. Reuben Jeffery III, Managing Partner of the GS Paris office, 1997-2001, served as Chairman of the Commodity Futures Trading Commission, 2005-2007. Stephen Friedman, Co-Chairman of GS, 1990-1994, served as Chairman of the Federal Reserve Bank of New York in 2008 and 2009. Neel Kashkari, Head of IT Security Investment Banking Practice at GS, 2002-2006, ran the $700 billion Troubled Asset Relief Program until May 2009. Gary Gensler, Co-Head of Finance at GS, 1995-1997, has served as Chairman of the Commodity Futures Trading Commission since May 2009. Bill Dudley, Partner and Managing Director at GS until 2007, has served as President of the Federal Reserve Bank of New York since January 2009.
Money, of course, is the mother’s milk of politics, and politicians, Republican and Democrat alike, drink deeply from the GS pales. According to the nonpartisan Center for Responsive Politics, the GS political action committee and its employees, since 1989, has ranked second among corporate donors (to AT&T Corporation) in total campaign donations – $31.6 million. Almost two-thirds of the money has gone to Democrats, making GS their largest single donor. GS is the fourth largest corporate donor to Republicans. Barack Obama scooped up nearly $1 million from GS employees during his 2008 presidential campaign. The next largest recipient of GS-related contributions was Hillary Clinton, at $500,000.
Undoubtedly, the infiltration of GS personnel and GS monies into US politics has provided opportunity and cover for their dirty dealings in private markets. As I have outlined in earlier columns, GS is currently under investigation by financial regulators around the world, in addition to the US Securities and Exchange Commission’s fraud charges over tts mis-selling of derivatives. GS has now been named in a court filing seeking information about short-selling Lehman shares in September 2008. In a further potential legal case, AIG is considering suing Goldman over $2 billion of losses it incurred when it was forced to pay protection to buyers of credit-default swaps when collateralised debt obligations (CDOs) in GS’s Abacus program lost their value.
It is sometimes claimed that when thieves fall out, honest men come into their own. Unfortunately, in the world inhabited by Goldman Sachs, the number of honest men appears to be vanishingly small. I am sure that anyone who lived under Benito Mussolini’s Fascist Italy, or Adolf Hitler’s National Socialist Germany would immediately identify with this depressing and truly dangerous phenomenon.