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Goldman Sachs’ network extends around the world

By Carol Eisenberg

October 10, 2008 at 3:06pm

After U.S. Treasury Secretary Henry Paulson named protege Neel Kashkari to head the $700-billion bailout, some grumbled that the entire U.S. financial system seemed to be under the stewardship of Goldman Sachs alumni.

In fact, Goldman’s reach through a network of former officials extends worldwide - a fact that could help foster global cooperation as Paulson and other U.S. officials reach out to foreign powers to calm financial markets, but which could also promote conflicts of interest.

Former Goldman Sachs execs now in top positions in key world institutions include:

  • Mark J. Carney, former managing director in Goldman’s Toronto office, who is governor of the Bank of Canada after having served as a senior official in Canada’s Finance Ministry.
  • Michael Cohrs, former head of Goldman’s equity capital markets, now the head of global banking for Deutche Bank.
  • Former Managing Director Mario Draghi, governor of the Bank of Italy.
  • Former vice chairman Robert B. Zoellick, now the head of the World Bank.

Executives at Goldman Sachs say it has so many alumni in government posts and central banks around the world because the firm tends to push partners out after they’ve made a lot of money but while they’re still young. The average tenure for a partner is only eight to 10 years, which means high-powered people are leaving while still in their 40s and looking for second careers.

“Goldman Sachs cares passionately about the intersection of Wall Street and public policy,” a former Treasury Department official told Politico. “They place a huge premium on engagement in both domestic and international policy circles.”

Others, however, are less sanguine about the implications of a globe-girdling Goldman network.

As far back as two years ago, Bloomberg News columnist Matthew Lynn argued the concentration of so much power in a group of people who shared similar backgrounds and training was unhealthy:

A clan of former senior Goldman staffers is now in a position to help steer the dollar, the euro and the pound. There needn’t be anything sinister about that - though financial conspiracy theorists could have a field day with some of the connections. The issue is that they are likely to have a uniform set of preconceptions and prejudices. In any area of endeavor, it is healthy to have a wide diversity of views. Global monetary policy is no exception.

All that clout does breed discomfort and jealousy - especially when Goldman is one of the only major Wall Street investment firms left standing in this country, besides Morgan Stanley.

“Even before Mr. Kashkari’s appointment, there were a lot of Goldman people involved,” complained the editorial board of the New York Times:

Mr. Paulson, after all, was urged to join the Bush administration by Joshua Bolten, President Bush’s chief of staff and a former Goldman executive director of legal and government affairs.

In October of 2006, Mr. Paulson recruited Robert Steel, a former vice chairman at Goldman to be his right hand man as Under Secretary of the Treasury for domestic finance. Mr. Steel left the Treasury in July to become the boss at Wachovia, then one of the nation’s biggest banks.

Earlier this year, Fortune magazine aired a complaint from an anonymous Wall Street money manager who complained that Goldman’s connections enabled it to weather the economic storm by getting information that others didn’t have.

Other questions are bound to surface when so many of the banks who stand to benefit from infusions of government cash are headed by Goldman alumni, among them Citigroup, where former co-chairman Robert E. Rubin is a director; Bank of America, where former Goldman president John Thain will head global banking, securities, and wealth management after the acquisition of Merrill Lynch; and of course Goldman itself, headed by Paulson’s successor, Lloyd Blankfein.

See Muckety’s earlier post on the Goldman Sachs network.

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1 Comments

  • #1.   David Greenblat 05.11.2009

    Carol,

    WOW, incredible! Thank’s for the unbelievable amount of work you did to put this together. Everyone in this country should see this.

    DaveG.

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