"But Summers, a leading architect of the administration's economic policies and response to the global recession, appears to have collected the most income. Financial institutions including JP Morgan, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for an April 16 visit to Goldman Sachs, according to his disclosure form." -- Washingtonpost.com
So I guess that $45,000 speaking fee from Merrill Lynch wasn't technically a bribe because Summers wasn't named to Obama's economic transition team until Nov. 24 — a full 12 days later. I'm sure Larry Summers had absolutely no inkling whatsoever that he was going to be one of the key advisers to the new administration on Nov. 12.
It likewise makes perfect sense that Merrill Lynch, a company just months removed from having to be rescued from bankruptcy by an 11th-hour, pseudo-state-subsidized buyout by Bank of America, would decide to spend $45,000 on a speaking appearance by Summers because, well, they really valued his economic expertise and his proven ability to rally the troops with his stirring rhetoric.
It certainly had nothing to do with the fact that a) it was eight days after a Democrat was elected to the presidency; b) Summers had a long history of being one of the key policymakers in Democratic Party politics; and c) Merrill was absolutely not going to survive more than a few more months unless taxpayers forked over another 20 billion or so to cover the giant hole in Merrill's balance sheet that was, at that time, still being hidden from Bank of America and its shareholders.
And how about that $135,000 appearance for Goldman Sachs in April, when Summers was already involved with Democratic Party politics again? That wasn't a surreptitious campaign contribution at all!
But you have to give Goldman credit: it sure is thorough. It literally leaves no stone unturned.
One has to love the sequence of events here. Back in 2004, Goldman chief Hank Paulson goes to SEC chief William Donaldson and petitions to have lending restrictions relaxed for the top five investment banks. Donaldson rolls over, the restrictions are relaxed, and it's a disaster, as the top five banks immediately overleverage themselves — two of the five, Bear Stearns and Lehman, would actually collapse, at least partially as a result of being insanely overleveraged.
In the midst of this disaster, Paulson is named Treasury secretary. He does nothing about the worsening financial crisis until it is far too late, then allows one of Goldman's biggest competitors, Lehman, to fail while at the same time intervening on a huge scale to save AIG, which just happens to owe Goldman a ton of money.
When AIG is bailed out, its government regulator is not in the room, but the new chief of Goldman, Lloyd Blankfein, is. In fact, Goldman Sachs ultimately receives about $13 billion of the money paid to AIG by the government in the bailout, reportedly getting paid 100 cents on the dollar for its AIG exposure, despite the fact that the bank claimed it wasn't going to suffer severe losses if AIG collapsed.
Later, another former Goldman executive, Ed Liddy, is installed as head of AIG -- which just happens to get bailed out twice more, the last time to the tune of $30 billion.
The last two bailouts of AIG take place after a former Goldman chief, Robert Rubin (who, incidentally, helped start this mess by ramming through a series of i-banker wet-dream deregulatory moves as Treasury secretary for Clinton in the 1990s), is named to the Obama transition team, joining Summers (who had already taken $135,000 from Goldman that year) and Timothy Geithner (a protege of another Goldman alum, John Thain, former president and chief operating officer and notorious scumbag).
When it comes time for new Treasury Secretary Geithner to name a chief of staff, he chooses Mark Patterson, who is less than a year removed from working as a lobbyist for … Goldman Sachs. Patterson's great contribution to society as a Goldman lobbyist was opposing a 2007 measure introduced in the Senate by presidential candidate Barack Obama to rein in executive compensation.
I remember watching Obama the presidential candidate give a speech in Mason City, Iowa, in 2007. Obama had made a big show of not having registered lobbyists working for his campaign, and he promised that lobbyists "won't work in my White House." The line was a hit and became part of Obama's stump speech. I must have heard it two dozen times.
A little over a year later, he put a registered lobbyist of a bailed-out investment bank into a job whose primary responsibility is administering bailout money.
It gets worse. According to a Glenn Greenwald piece I just read, even Gary Gensler is a former Goldman employee. That absolutely blows my mind. Genlser is Obama's choice to head the Commodities Futures Trading Commission, whose purview is the derivatives market. The CFTC was the battleground where ages ago Rubin, Summers, and then-Rubin aide Gensler teamed up to whack CFTC chief Brooksley Born, who had serious concerns about the burgeoning derivatives market, in particular the credit-default swap market. Rubin overturned Born's recommendations, and derivatives were freed from most regulation. That economic Alamo led almost directly to the AIG disaster.
Think about this for a moment. A former Goldman chief, Rubin, presses the CFTC to deregulate a type of derivative contract whose chief benefit to an investment bank like Goldman is that it allows it to lend more -- the CDS being most useful as a tool to move investment risk off a bank's balance sheet.
Then another Goldman chief, Paulson, pushes for further relaxation of lending limits. Then Goldman jumps head first into the housing bubble, buying tens of billions in CDS protection to hedge its crazy investments. This massive explosion in lending by banks like Goldman, fueled in part by the use of derivatives like CDS and fueled still more by the 2004 change in rules, puts an enormous strain on the economy, leading to giant holes blown in its hull by the end of 2007 and on through 2008.
It follows that when Goldman's chief partner in those CDS deals, AIG, collapses as part of this wave of crashes, Paulson — now Treasury secretary — rushes to the rescue, pumping billions in taxpayer money into AIG that is quickly funneled to Goldman. Then a Goldman alum is put in charge of AIG, while another bunch of Goldman alums funnels still more bailout money to AIG, and yet another Goldman alum is put in charge of regulating the derivatives market that is the focus of most of the bailout efforts.
In the midst of all of this, something amazing happens. Goldman Sachs, along with Bank of America, Morgan Stanley and a host of other "troubled" banks, reports a profit for its first quarter in 2009! How and why that happened is another fascinating story, for another time. For now, the only thing to remember is that all the ones who got us into this mess — Rubin, Summers, Goldman in general — are now being put in charge of the cleanup by a president who spent most of 18 months on the campaign trail pledging to end the influence of money in politics.
Add this to the obscene giveaway that is the toxic assets program Geithner has just devised (Goldman Sachs "expressed interest in participating in the plan as an investor," according to the Wall Street Journal), and you have an amazing situation. Between the Bush and Obama administrations, you have a bailout program that has now figured three ways to funnel money to Goldman Sachs: via AIG, via TARP and now via this trillion-dollar "public-private investment program," which basically lends huge amounts of money to investors and provides guarantees against heavy losses. It's free money, state-subsidized profiteering at its most naked.
I hear all the time from people who complain that it's naive to wonder why we put Wall Street executives in charge of policing Wall Street -- that this is actually quite a sensible policy, because we need people with experience in that world making these decisions.
The reason people say this has nothing to do with reality and everything to do with the fact that the financial markets are intimidatingly complex. When Enron buys a seat at the table to conduct energy policy under the Bush administration, everyone knows what that is. When Reagan hires notorious union busters to run the National Labor Relations Board, everyone knows what that is. And when we hire investment bankers to run banking policy, and put investment bankers in charge of handing out bailout money to investment banks, we ought to know what that is. But for some reason we don't seem to see it the same way, not as clearly.
In my mind this officially ends the Obama honeymoon. I can maybe see one or two of these creeps in key positions. But this many -- it's an undeniable pattern. He put William Lynn, a former Raytheon lobbyist, in the Pentagon as deputy defense secretary. A lot of people squawked about Obama's early lean toward John Brennan as CIA director because of his role in establishing the "enhanced interrogation" policies, but to me more significant was the fact that Brennan was the former chairman of the Intelligence and National Security Alliance, which is sort of like the chamber of commerce of intelligence contractors.
Most importantly, I'm sensing in these economic appointments a kind of drearily cynical parsing of the approval-ratings situation -- Obama knows he's still flying high with the "Yes We Can!" T-shirt crowd and knows that most people simply are not going to give a shit if he packs his Treasury Department with Goldman alums and lobbyists, despite the fact that he explicitly promised to do otherwise.