I have commented before on how top executives of the big banks (Citigroup, JP Morgan Chase, Goldman Sachs) take on top economic jobs in both Democratic and Republican administration (usually as Treasury Secretary or White House economic advisor) and then push through changes that hugely benefit the banking sector they used to work for and then leave and return to the grateful embrace of those banks.
Gary Cohn is the latest to do so. He has just resigned his post as White House economic advisor. The media is spinning this as part of the ‘administration in chaos’ storyline, with him leaving due to dissatisfaction with Donald Trump’s decision to impose tariffs on steel and aluminum imports. But I tend to agree with Gary Rivlin’s take, that Cohn left because he had done what he came to do and that was give a huge gift the Wall Street in the form of the tax cut package.
GARY COHN, TRUMP’S top economic adviser, is leaving the White House after just 14 months — but not before delivering a number of gifts to Wall Street and his old firm, Goldman Sachs.
That list starts with a 40 percent cut in corporate income tax that Cohn, along with Treasury Secretary Steven Mnuchin (another former Goldman Sachs exec), championed.
The sweeping tax overhaul finalized by Congress late last year cuts the corporate tax rate from 35 percent to 21 percent. For Goldman, that translates into a tax savings of around $1 billion a year.
JPMorgan Chase, which paid more than $11 billion in income tax last year, could save closer to $4 billion a year. Wells Fargo will save roughly $2 billion a year, based on its 2017 earnings.
Cohn, who served as president of Goldman Sachs for 10 years before leaving to work in the Trump White House, delivered other generous tax gifts to corporate America during his brief tenure, including a tax break for the U.S. companies that have parked nearly $3 trillion in profits in Grand Cayman, Bermuda, or other tax havens.
Cohn delivered bigly for Goldman Sachs in other ways. Under Cohn, the administration eased the rules on initial public offerings — a step Goldman has long sought, as a firm that handles major public offerings, and one that is potentially worth hundreds of millions in additional fees to the firm each year. There could be more good tidings for Goldman and the other big banks in the $1.5 trillion infrastructure plan Trump unveiled at the start of the year. It places Wall Street firms at the center of partnerships between governments and private industry — welcome news for Goldman’s Public Sector and Infrastructure group, which arranges financing on large-scale public-sector deals. Goldman and other big investment banks are also in the business of debt-financing: a booming business as the federal government goes deeper into debt in the wake of Trump’s tax bill.
There’s one major piece of business that Cohn’s departure leaves unfinished: financial deregulation. Yet even on this front, Cohn made great progress for Wall Street in his months inside the White House. The Consumer Financial Protection Bureau is now in the hands of an acting director intent on destroying it. And the Senate is poised to pass the Economic Growth, Regulatory Relief, and Consumer Protection Act, a deregulatory bill that rolls back significant parts of the Dodd-Frank financial reform legislation — clearing the way for the risky behavior that tanked the economy in 2008.
“Next to Donald Trump,” said Dennis Kelleher, president of Better Markets, which advocates for tighter financial regulations, “the country’s biggest banks have had no better friend in Washington than Gary Cohn.”
Like many politicians, Barack Obama and Hillary Clinton included, Trump campaigned against the big banks while actually serving their interests. Last year Rivlin and Michael Hudson had laid bare Cohn’s history as a rapacious banker and his many conflicts of interest.
With Cohn’s appointment, Trump now had three Goldman Sachs alums in top positions inside his administration: Steve Bannon, who was a vice president at Goldman when he left the firm in 1990, as chief strategist, and Steve Mnuchin, who had spent 17 years at Goldman, as Treasury secretary. And there were more to come. A few weeks later, another Goldman partner, Dina Powell, joined the White House as a senior counselor for economic initiatives. Goldman was a longtime client of Jay Clayton, Trump’s choice to chair the Securities and Exchange Commission; Clayton had represented Goldman after the 2008 financial crisis, and his wife Gretchen worked there as a wealth management adviser. And there was the brief, colorful tenure of Anthony Scaramucci as White House communications director: Scaramucci had been a vice president at Goldman Sachs before leaving to co-found his own investment company.
Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House.
The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich. If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts — he seeks to slash rates by 57 percent — that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon’s was.
Cohn helped wreck the economy while working at Goldman Sachs. Then he helped his wealthy friends and hurt the poor while at the White House. Cohn can now go back to help thee banks wreck the economy once more while earning his multi-millions in salary and bonuses and perks from the grateful sector whose interests he so ably advanced. His brief tenure so ably illustrates that what we have in the US is a government of the banks, by the banks, and for the banks.