President Obama was in the Big Apple on Thursday, for another lecture on big, bad Wall Street. The dutiful, third-row appearance by Lloyd Blankfein, Goldman Sachs’s CEO, said it all: More than any other firm, Goldman is confident in its ability to cozy up to the Democrats that regulate it, and to favorably shape the current congressional negotiations on financial reform.
“They’ve been wired through the Clinton years, the Bush years, and before that, they have a lot of heavy hitters,” Rep. Peter DeFazio (D., Ore.) tells us. “They’re well connected. . . . They’re aggressive.” DeFazio, along with Rep. Elijah Cummings (D., Md.), urged the Securities and Exchange Commission this week to widen its current investigation of the firm to include securities underwritten by Goldman and backed by American International Group, the bailed-out insurer, to probe for “fraudulent conduct” and “ill-gotten gains.”
“From the beginning, I’ve thought that the deal Goldman Sachs got via Treasury Secretary Tim Geithner on their bad bets through AIG kind of stunk,” DeFazio says. “They got $13 billion from AIG last year. I’m looking for any legal way to recoup that money for the people of the United States.”
With former senior aides to Obama, Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, and other Democrats on its payroll, Goldman isn’t fretting about DeFazio and company. As Timothy Carney of the Washington Examiner reports, four of the five in-house lobbyists at Goldman were Democratic staffers on Capitol Hill, with the remaining one a contributor to Hillary Clinton’s presidential campaign. Directing Goldman’s Washington shop is Michael Paese, Frank’s former go-to committee staffer, who had responsibility for committee policy related to the banking, securities, and insurance industries. One of Paese’s deputies is Ken Connolly, a veteran of the Senate Environment and Public Works Committee. And this week, Paese’s bosses enlisted Greg Craig, Obama’s former White House counsel, through the law firm Skadden Arps, just days after Goldman was charged with fraud by the SEC.
The relationship between the government and Goldman is fluid and open. Frank’s staff, for one, is a training ground for big-banking lobbyists, and Goldman remains a soft landing spot for supportive ex-officials and former policymakers. Peter Roberson, who worked on the Boston congressman’s capital-markets team, recently left the House Finance Committee’s staff to join the world’s top clearinghouse for over-the-counter derivatives. Frank himself admits that the revolving door is unseemly. After Roberson quit, Frank publicly criticized him, a little tantrum to hide bigger problems.
Over on Pennsylvania Avenue, the White House has friendships with many senior Goldman lobbyists outside of the bank’s immediate team of Washington operatives: former House minority leader Dick Gephardt; Janice O’Connell, a former adviser to Chris Dodd (D., Conn.), the chairman of the Senate Banking Committee; and former Tennessee congressman Harold Ford Sr., to name a few. Another Goldman-enlisted Washington warrior is Steve Elmendorf, John Kerry’s deputy campaign manager in 2004. Prominent Republicans, of course, are also part of the operation, with Ken Duberstein, a Reagan White House chief of staff, and Eric Ueland, former chief of staff to Bill Frist, the former Senate majority leader, on board. Altogether, the bank employs 41 lobbyists and 13 outside firms.
According to the Hill, Goldman has devoted $18 million over the last decade to lobbying members of Congress and “millions more to contributing to lawmakers’ campaigns.” It’s an immense, sprawling operation, buoyed by countless buddies inside the Obama administration, as detailed by Michelle Malkin earlier this week. Senior officials such as Mark Patterson, Tim Geithner’s chief of staff, are former Goldman lobbyists. Patterson, in fact, had Paese’s position before Paese.
Analysis by the Christian Science Monitor shows that Goldman increased its lobbying by more than 70 percent over the past year, spending $2.8 million in the process, and it doesn’t end with Goldman. According to Public Citizen, a Washington, D.C., watchdog group, 940 former public officials are now registered lobbyists on behalf of banks and investment houses. The Center for Responsive Politics counts 56 former congressional aides on the Senate and House Banking Committees who went on to lobby for the financial sector. For Goldman, the intermingling is policy. A company insider tells Politico that the firm’s Washington operation is “a very conscious, long-term effort that is very deliberate and is intended to address this two-pronged need of understanding the political process and understanding our business.”
For all of his talk about reforming Wall Street, President Obama has been powerless to stop the influence of lobbyists on his financial agenda, preferring to put his hand out, rather than up — his presidential campaign collected more than $1 million from Goldman employees, a wad of dough the president refuses to return. Obama’s hesitancy to return his bundle of Goldman cash is shared by Senate majority leader Harry Reid (D., Nev.), who was recently hosted by Goldman’s president at a fundraiser in New York. Other tentacles slither throughout the Democratic caucus. Since 1990, according to OpenSecrets.org, Goldman has donated over $31 million to political-action committees and candidates, with 64 percent of those donations going to Democrats.
Despite’s Obama’s tough words at the Cooper Union, the symbiosis between Goldman’s lobbyists and the Democrats that regulate it has long been a work of political impressionism. Close up, it looks disconnected and blurred, but if you step back, the shape of it all falls into focus: Democrats hoard Goldman cash, Goldman hoards Democrats, and the American people lose.
– Robert Costa is the William F. Buckley Fellow at the National Review Institute.