Goldman Sachs: Investing In Political Influence

Goldman Sachs was a major contributor to (and beneficiary of) the 2007 subprime mortgage crisis that helped initiate the current depression. The bank then proceeded to heavily avail itself of bailout payments and other monetary assistance from the federal government.

In 2010, the Securities and Exchange Commission (SEC) filed a lawsuit against the company, alleging that it had deceived investors about the nature of one of its products, costing them a total of $1 billion.

Goldman Sachs was defended in the lawsuit by its longtime legal firm, Skadden, Arps, Slate, Meagher & Flom, LLP. One of its advisors on defense strategy was a partner in the firm by the name of Gregory Craig, who had left his job as White House Counsel only months before. When observers raised ethical concerns, some of them pointing out that the Obama Administration prohibits its former members from lobbying it for at least two years, Craig responded by saying, "I am a lawyer, not a lobbyist."

Craig is a classic example of the "revolving door" in this country between industry and government. He has moved back and forth over the years between government positions — he served as foreign policy advisor to both Senator Edward Kennedy and to Secretary of State Madeleine Albright — and legal work, often taking on major corporate clients like Goldman Sachs.

Another striking example is Robert Rubin, who spent 26 years at Goldman Sachs, eventually becoming Co-Chief Operating Officer (COO), Co-Chairman, and a member of the Board. Months after leaving Goldman Sachs, he took a position as President Clinton's Assistant for Economic Policy and head of the National Economic Council. Two years later, Clinton appointed him Secretary of the Treasury, a position he filled for another four and a half years. After leaving the Treasury Department, Rubin immediately returned to the financial sector and took a position with the megabank Citigroup.

Is it any surprise that U.S. economic policy continues to benefit big banks to the detriment of everyday people?

Representing the Corporations

The case of Gary Gensler is instructive in understanding the constant conflict-of-interest produced when people move continually between industry and government. Gensler worked at Goldman Sachs for 18 years, achieved partner by the age of 30, and was eventually appointed co-head of finance for the entire company. He served first as Assistant Secretary of Financial Markets and later as Undersecretary of the Treasury for the Clinton Administration. In 2009, President Obama nominated him as chairman of the Commodity Futures Trading Commission.

Senator Bernie Sanders of Vermont opposed Gensler's appointment, noting that Gensler had collaborated "with Senator Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, [leading] to the collapse of AIG and … the largest taxpayer bailout in U.S. history." Sanders also said that Gensler had been partially responsible for the Enron collapse and had supported the Gramm-Leach-Bliley Act, which led to U.S. banks becoming "too big to fail."

In spite of Sanders' objections, Gensler was appointed to the post, and already his Goldman Sachs conflicts-of-interest have become too obvious to gloss over. In November 2011, he was forced to recuse himself from an investigation of brokerage firm MF Global because the company's CEO, Jon Corzine, had been a co-worker of his at Goldman Sachs.

Jon Corzine is also a former senator and governor of New Jersey.