The continuity of Wall Street’s dominant role in American politics — regardless of what party sits in power or how reviled the financial industry finds itself across the country — was perhaps never more evident than when Jake Siewert, now a Goldman Sachs spokesperson, on Tuesday praised the selection of Jim Donovan, a Goldman Sachs managing director, for the No. 2 position in the Treasury Department under Steve Mnuchin, himself a former Goldman Sachs partner.
“Jim is smart, extraordinarily versatile, and as hard-working as they come,” Siewert gushed. “He’ll be an invaluable addition to the economic team.”
The punch line? Siewert was counselor at the Treasury Department to Timothy Geithner, as well as a White House press secretary under Bill Clinton.
The ubiquity of Goldman Sachs veterans across numerous presidencies throughout history, both Republican and Democratic, has been well documented. But Donald Trump sold himself as something different, an economic nationalist determined to rankle Wall Street. He even ran campaign ads savaging bankers like Goldman CEO Lloyd Blankfein for their role in a “global power structure.”
That populist smokescreen is long gone now.
Mnuchin and Donovan are just two of five Goldman expats in high-level positions on Trump’s team. Steve Bannon spent a limited time at Goldman Sachs, but White House assistant Dina Powell, who headed the bank’s philanthropic efforts, and National Economic Council director Gary Cohn, Goldman’s former president, had higher-ranking positions for a longer period. Jay Clayton, Trump’s nominee for the Securities and Exchange Commission, was a partner for Goldman’s main law firm, Sullivan and Cromwell.
Other big banks are represented inside team Trump as well. Several expats of Mnuchin’s OneWest Bank, which repeatedly brutalized homeowners during the foreclosure crisis, have been rumored for key spots at the banking regulators.
The same day as Donovan, Trump announced the nomination of David Malpass as treasury undersecretary for international affairs. Malpass was the chief economist for Bear Stearns right before the investment bank imploded. He literally wrote an opinion piece called “Don’t Panic About Credit Markets” for the Wall Street Journal in August 2007, noting, “Housing and debt markets are not that big a part of the U.S. economy.”
But it’s not just the presence of ex-bank executives that matters; it’s the policy menu oriented to Wall Street’s wishes.
After dalliances with unorthodox proposals for a Republican, Trump has settled into an agenda of tax cuts and deregulation — particularly for the financial industry. Cohn laid out the new paradigm in an interview with the Wall Street Journal last month, promising lighter supervision and even lower capital requirements for the financial sector. J. Christopher Giancarlo, Trump’s choice to run the Commodity Futures Trading Commission, which handles derivatives regulations, hijacked a federal advisory panel to recommend abandoning limits on commodity speculation, of the kind pursued by big banks like Goldman Sachs.
Donovan is expected to play a major role in tax policy, which will be overwhelmingly tilted to benefiting the wealthy, despite claims from Mnuchin that the rich will see “no absolute tax cut.” Even Trump’s flailing health care proposal is really little more than a large tax cut for the wealthiest Americans, financed by cuts to the low-income Medicaid program.
Even in areas where populist sentiment was seen as pre-eminent, Trump has reportedly succumbed to the Wall Street advance. A dramatic piece in the Financial Times described a “civil war” within the White House over trade, pitting Trump’s hard-liners like Bannon and trade policy adviser Peter Navarro against the likes of Cohn. It stated that Navarro was being sidelined, with Cohn taking a larger role in the negotiations over NAFTA, and with foreign leaders working through the National Economic Council rather than Navarro in trade talks. AFL-CIO official Thea Lee said in the story, “It appears the Wall Street wing … is winning this battle.”
At the NEC, Cohn hired Andrew Quinn, a chief negotiator for the Trans-Pacific Partnership, to coordinate international trade and development. A stewing Breitbart News called Quinn “the enemy within.”
Not enough has happened on trade to declare the winner of this internecine battle; indeed, the Financial Times reported that Trump took Navarro’s side in a recent Oval Office meeting. But in confirmation hearings Tuesday, Robert Lighthizer, Trump’s pick for U.S. trade representative, praised his predecessor Michael Froman, architect of the TPP (and himself a former Citigroup executive), arguing that some of that work could be used in constructing a successor to NAFTA. Lighthizer also vowed tough enforcement of trade rules but said little about tariffs or the kinds of disruptive policies Trump touted in the campaign, which Wall Street disfavors.
Banks have celebrated since Trump’s election, composing the lion’s share of the “Trump bump” in stock prices. Goldman Sachs shares have risen from $181.92 on Election Day to around $250 today, an increase that accounts for as much as one-fifth of the total rise in the Dow Jones Industrial Average over that period.
Not only do Goldman executives benefit, but so do their alumni: Cohn received nearly $300 million in severance from Goldman after moving into government. He’s vowed to recuse himself from anything “directly” affecting his former company, but that doesn’t necessarily apply to tax and regulatory policies affecting the entire financial sector.