The puppet master of The West: Goldman Sachs

Goldman Sachs. The undisputed King of Wall Street, a financial factory whose name reverberates across the globe for it’s ruthless efficiency in making money. The name itself is synonymous with the rise of financial capitalism, shifting it’s image away from the ‘moral investment bank’ in the 1980’s as the rise of proprietary trading encouraged them to delve into the secret world of risky derivatives, culminating in the Financial collapse of 2008. And yet, Government Sachs has persisted. In addition to the millions spent on lobbying Congress, executives of this financial powerhouse have long been steadfast members of the upper echelons of the White House contingency.

The trend started with Chief Executive Sidney J. Weinberg under the Presidency of Franklin D Roosevelt – appointed as Director of the War Production Board, ‘Mr Wall Street’ began the march of the Goldman diaspora into the political sphere. The bank’s presence has crossed party lines, with senior executives wielding their economic influence as advisers and Treasury Directors under both parties.

Yet Government Sachs is not limited to the US; its political influence is global. Following 15 years at the bank, Gavyn Davies served as Chair of the BBC in addition to being an informal adviser to Prime Minister Gordon Brown, whilst Malcolm Turnbull, former head of Goldman Australia, assumed the most powerful post in the country when he was elected Prime Minister in 2015. Western politics appears to have been consumed by the shady, speculative world of international finance, for whom Goldman Sachs is their emblem – and the trend that Weinberg began seems unlikely to reverse.

Yet whether this is merely a Goldman coup to influence policy or a mutually beneficial exchange between the bank and political institutions is more difficult to discern. As the 2008 Crisis proves, the fate of America, and to an extent the fate of the world economy, hinges on the fortunes of one road in Lower Manhattan: Wall Street. American Business Writer William Cohan exclaimed that “there’s no better way to calm people in the financial markets” than appointing a Goldman employee to the White House. As the political representative of finance, Goldman’s influence is a reassurance to the financial world that the interests of financial stability will always prevail, enabling a relatively smooth functioning of capital markets.

Additionally, Goldman is infamous for its ruthless selection process. The bank is seen as the holy grail for budding bankers, and as such it attracts only the brightest talent from around the world. Since such brains are demanded in political circles, the presence of Goldman employees should not be viewed with surprise; it is not Goldman’s tactic to influence policy that has driven its march to the White House, but instead the government’s desire for its staff.

Yet in addition to maintaining stability, Goldman’s presence has also enabled the maintenance of greed. The wave of financial deregulation in the 1980’s was overseen by the bank’s alumni, enabling ever greater profits at the expense of ever greater risk – culminating in a bubble and inevitable financial collapse. The Bush Administration – under whom the term ‘Government Sachs’ was first coined – presided over the early signs of Financial catastrophe without oversight of the risky derivatives that lay beneath the profit explosion, epitomising the preference of the Goldman diaspora for profit over effective policy to benefit the nation. With great power comes great responsibility, and Goldman’s abuse of it in the interests of financial profits adds weight to the faction of Democrats led by Bernie Sanders, who call for the severing of the bank’s political ties. It is not difficult to see why. The company were accused of fraud following the subprime lending scandal in 2007. They were never found guilty, like the majority of the bankers involved in the crisis. Many would look at the lack of prosecutions and note the financial contributions towards major parties and perhaps see a link.

Alas, despite the public hatred of investment banking following the 2008 collapse, the Goldman march continues. Trump’s campaign team was a star-studded lineup of Goldman heavyweights; with Gary Cohn, Steven Mnuchin and Steve Bannon all prominent figures in the early Trump administration. Yet in this Presidency, something is different. As opposed to rallying cries for help from the Presidents, from Roosevelt in WW2 to Bush’s dependence on Hank Paulson in managing the early crisis, Trump acts alone. On the belief of his omnipotence, Trump relies on nobody – causing potential disagreement with the economic specialists from the Goldman contingency if Trump opposes their suggested policies. The wisdom of Goldman executives is no match for Trump’s masquerading belief in his own self-importance – and as such the Goldman ranks are dwindling, with Bannon and Scaramucci already axed and Cohn seemingly next out of the White House doors.

Government Sachs has long been the norm in American politics, and it has spread its wings across much of the globe. However the relationship has its foundations in the expertise of Goldman staff and the financial wisdom they impart on the White House – advice which President Trump may never seek. Yet whilst the political rumblings in the White House continue, Government Sachs remains intact at all levels of government, and its grip seems unlikely to break any time soon.

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Craig Stock

Second Year Economics Undergraduate at Warwick University.

Craig Stock has 14 posts and counting. See all posts by Craig Stock

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