Goldman Sachs' Revolving Door: Regulatory Capture

In July 2012, Andrew Williams, a former spokesman for U.S. Treasury Secretary Timothy Geithner, announced plans to head over to Goldman Sachs at the end of that month.[1] Williams was the second of the Secretary’s spokesmen to head to theWall Street bank. Such moves may reflect a standing policy at the bank to have a revolving door. The previous U.S. Treasury Secretary, Henry Paulson, had been the CEO at Goldman. This suggests that the revolving door was to include populating high offices in government, presumably not out of a sense of civic duty, but, rather, to see that Goldman's interests would be protected and even promoted through public policy. Hence President Obama was said to have had a Wall Street government with respect to positions bearing on Wall Street. I submit that deconstructing such a revolving door would be very difficult. 

The full essay is at "Goldman Sachs' Revolving Door."

1. Bonnie Kavoussi, “Andrew Williams, Ex-Treasury Spokesman,Headed to Goldman Sachs,” The Huffington Post, July 12, 2012. 

An Institutional Conflict of Interest at the New York Federal Reserve

According to The New York Times, even after taxpayers rescued Citigroup, regulators at the New York Federal Reserve failed to monitor the company adequately. The regulators, although adequately staffed and proficient in training, failed to move swiftly as the bank’s financial condition deteriorated from as early as 2005, and were overly optimistic about the bank’s prospects as late as December, 2009. From 2006 to 2007, decisions on poorly underwritten loans were changed from “turned down” to “approved.” As many as 80 percent of the loans that Citigroup sold to Fannie Mae, Ginnie Mae and other investors were defective. “Although the dedicated supervisory team is well-qualified and generally has sound knowledge of the organization, there have been significant weaknesses in the execution of the supervisory program,” according to one excerpt of the 2009 review. Tim Geithner, who as president of the New York Fed from 2003 to 2008 was in charge of overseeing Citigroup, went on to become the US Secretary of the Treasury.

The full essay is at Institutional Conflicts of Interest, available at Amazon.

Were Raises at Bailed-Out U.S. Companies Approved by Treasury?

In early 2013, the Special Inspector General for Troubled Asset Relief Program reported that the U.S. Treasury Department disregarded its own guidelines in order to allow large pay increases for executives at three major companies that had received bailouts during the financial crisis. In particular, eighteen raises for executives at American International Group (AIG), General Motors, and Ally Financial were approved. Fourteen were for $100,000 or more. A raise for the CEO of a division of AIG was $1 million. Treasury approved these raises even though they exceeded the pay limits set in Treasury’s own guidelines.

Was Treasury Secretary Tim Geithner smirking because his friends were happy?     NYT

The full essay is at "Raises at Bailed-Out Banks: Taxpayer-Funded?"

Jamie Dimon of JPMorganChase Exploits an Institutional Conflict of Interest

U.S. Treasury Secretary, Tim Geithner, said on July 18, 2011 that he was not concerned about dire warnings from Jamie Dimon, CEO of JP Morgan Chase, a bank that was too big to fail and thus evinced systemic risk. Jamie Dimon, CEO of JPMorgan Chase, said the government regulations may have been suffocating the economic recovery. While it was nice of Jamie Dimon to be so civic-minded as to want to protect the recovery, his real objective was likely to increase his bank’s profitability through relaxed financial regulations in the U.S. If so, his ulterior motive was not in line with the economy overall, much less with society and the common good.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.