Unfortunately for America, the track record of government officials coming out of Goldman Sachs to run the Treasury Department and the National Economic Council – two favorite haunts of the bank's former bigwigs – mirrors the unsavory track record of the bank itself.
It's not that Goldman Sachs people don't know how to make money or run the most powerful bank or country in the world… it's the matter of how they do it that should frighten you.
There's a slippery track record of Goldman alums who snaked their way around when they held government positions – that's how the phrase Government Sachs was born.
It's in your best interest to understand this history that looks doomed to repeat itself.
How Big Banks Broke Into the White House
President Donald Trump just saddled us with former Goldman banker Steve Mnuchin as Secretary of the Treasury. He also chose Goldman's just-retired president and COO, Gary Cohn, for the Director of the President's National Economic Council.
I'll touch on them in a moment.
But first, let me remind you of what happened the last few times these positions were held by Goldman people.
The National Economic Council (NEC) – not to be confused with the Council of Economic Advisors (CEA) – was first formed in 1993 by President Bill Clinton. The NEC dispenses economic policy advice to the President, coordinates policy-making for domestic and international economic issues with the President's economic goals, and monitors implementation of the President's economic agenda.
The director of the NEC has extraordinary access to the President with an office in the West Wing of the White House.
Robert Rubin retired as Goldman Sachs' chief operating officer, co-chairman, and co-Senior Partner to become the first director of the NEC.
Two years later, Rubin became Clinton's Treasury Secretary. From 1995 through 1999, the free-market advocate (as in 'a free-for-all', especially his Goldman buddies and himself) worked behind the scenes to make sure there would be no regulation of exotic derivatives. These would later be the dynamite that blew up the mortgage market, imploded three investment banks, rendered all America's big banks insolvent, and ushered in the Great Recession.
Rubin left the Treasury in 1999 to join Citigroup, which had been birthed from a merger of Citicorp and Travelers Group in 1998. It didn't matter that the merger was illegal. The remaining remnants of the 1933 Glass-Steagall laws that prohibited the merger of a commercial bank (whose depositors were insured by the FDIC) and an investment bank (which Travelers owned in the form of Salomon Smith Barney) would be killed off by Treasury Secretary Rubin's coup de grâce. The enactment of the Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, was passed to legalize these types of mergers on a permanent basis.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.