The contest for the Democratic Party nomination for President is now a two-horse race between the establishment favourite, Hillary Clinton and the elderly, radical (in American terms) outsider, Bernie Sanders.
Hillary is the feminist candidate and the choice of the party’s centrist elite, while Sanders, who is not even a member of the Democratic party, is a dissenting voice, albeit one who could have found a comfortable place in, say, Tony Blair’s Labour Party, who calls himself a ‘Democratic Socialist’.
But as I say, this is America and the fact that a candidate who even uses the adjective/noun ‘Socialist’ to describe his politics can come within a few votes of defeating the anointed choice of the Democratic establishment in Iowa and has her on the back foot in New Hampshire, is an upset beyond words and a reflection of how changed American politics are as a result of the still reverberating financial crisis of 2008.
And so Hillary’s links to Wall Street – and beyond that her husband’s thralldom to the big banks during his presidency – have become the issue that may decide the outcome of the primary contest (although the Black vote, dazzled by the Clintons and happy to ignore the role both husband and wife played in facilitating the mass incarceration of working class, young Blacks, could yet come to her rescue).
Anyhow, this post is devoted to reproducing an authoritative examination of Hillary & Bill Clinton’s indebtedness to Wall Street that was published on Politico.com in 2014.
Although written some time before Hillary declared herself a candidate, the article is still a timely classic and serves as a warning of what we could expect if a second member of that family occupies the White House. (And that’s before we get to her foreign policy!)
By William D. Cohan, the author of Money and Power: How Goldman Sachs Came to Rule the World (2011).
An odd thing happened last month when, stumping just before the midterms, Hillary Clinton came in close proximity to the woman who has sometimes been described as the conscience of the Democratic Party. Speaking at the Park Plaza Hotel in Boston as she did her part to try to rescue the failing gubernatorial campaign of Martha Coakley in Massachusetts, Clinton paid deference to Senator Elizabeth Warren, the anti-Wall Street firebrand who has accused Clinton of pandering to the big banks, and who was sitting right there listening. “I love watching Elizabeth give it to those who deserve it,” Clinton said to cheers. But then, awkwardly, she appeared to try to out-Warren Warren—and perhaps build a bridge too far to the left—by uttering words she clearly did not believe: “Don’t let anyone tell you that it’s corporations and businesses that create jobs,” Clinton said, erroneously echoing a meme Warren made famous during an August 2011 speech at a home in Andover, Massachusetts. “You know that old theory, trickle-down economics? That has been tried, that has failed. It has failed rather spectacularly.”
The right went wild. See? Hillary Clinton has finally shown her hand. After having sat out the financial crisis and all the economic turmoil that has followed in the past six years—and with good reason, since for most of that time she was tending to the nation’s diplomacy as secretary of state—she is proving to be an anti-Wall Street populist too, and as much a socialist as her former boss, President Obama.
But here’s the strange thing: Down on Wall Street they don’t believe it for a minute. While the finance industry does genuinely hate Warren, the big bankers love Clinton, and by and large they badly want her to be president. Many of the rich and powerful in the financial industry—among them, Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO James Gorman, Tom Nides, a powerful vice chairman at Morgan Stanley, and the heads of JPMorganChase and Bank of America—consider Clinton a pragmatic problem-solver not prone to populist rhetoric. To them, she’s someone who gets the idea that we all benefit if Wall Street and American business thrive. What about her forays into fiery rhetoric? They dismiss it quickly as political maneuvers. None of them think she really means her populism.
Although Hillary Clinton has made no formal announcement of her candidacy, the consensus on Wall Street is that she is running—and running hard—and that her national organization is quickly falling into place behind the scenes. That all makes her attractive. Wall Street, above all, loves a winner, especially one who is not likely to tamper too radically with its vast money pot.
According to a wide assortment of bankers and hedge-fund managers I spoke to for this article, Clinton’s rock-solid support on Wall Street is not anything that can be dislodged based on a few seemingly off-the-cuff comments in Boston calculated to protect her left flank. (For the record, she quickly walked them back, saying she had “short-handed” her comments about the failures of trickle-down economics by suggesting, absurdly, that corporations don’t create jobs.) “I think people are very excited about Hillary,” says one Wall Street investment professional with close ties to Washington. “Most people in New York on the finance side view her as being very pragmatic. I think they have confidence that she understands how things work and that she’s not a populist.”
The bottom line for Wall Street, says this executive—echoing many others—is that Clinton understands that America’s much-maligned financial industry wants to be part of the solution to the country’s problems. “Everybody who makes money feels a shared responsibility,” he continues. “Everybody sort of looks at her with a lot of optimism because they feel she doesn’t mind making hard decisions. She’ll do what she needs to do, but it’s not a ‘Let me blame you.’ It’s, ‘Hey, here’s what you’ve got to do.’ And I think that’s very different.” During a speech last December at the Conrad Hotel, in New York, her message could not have been more different from Obama’s hot, anti-Wall Street rhetoric: “We all got into this mess together, and we’re all going to have to work together to get out of it.”
During the 2012 presidential election, Wall Street felt burned by Obama’s rhetoric and regulatory positions and overwhelmingly supported with their money Republican candidate Mitt Romney, co-founder of private-equity firm Bain Capital. Now, though, there’s a significant momentum back behind the Democratic contest. “The money is already behind her,” the Wall Street money manager says. “I don’t think it’s starting to line up behind her: It’s there for her if she wants it.”
The informal head of her informal Wall Street outreach effort for her informal campaign is a finance executive she knows well—and recruited to work for her at the State Department. Tom Nides, 53, the Morgan Stanley executive, knows both New York and Washington intimately. Today he speaks with Clinton regularly and has begun to play the role of gatekeeper on Wall Street to her embryonic campaign. He also has been known to run interference between the Obama administration and the leaders of the Israeli government, in order to try to patch up their dysfunctional relationship. “Tom at the end of the day is the guy—she trusts him, she knows him,” says the Wall Street investment manager.
Nides returned to Morgan Stanley in 2013 after two years working for Clinton at the State Department as deputy secretary of state for management and resources. Nides (with whom I once shared a one-week summer rental on Nantucket) epitomizes the revolving door that has long existed between Washington and Wall Street. Born in Duluth, Minnesota, he served in a senior leadership role for a diverse group of Washington politicians, from Representatives Tony Coehlo and Tom Foley to, as chief of staff, Mickey Kantor, Bill Clinton’s U.S. trade representative. He worked at Fannie Mae for six years, ran Joe Lieberman’s 2000 vice-presidential campaign and served a brief stint as CEO of Burson Marsteller, the public relations firm.
In 2001, Morgan Stanley CEO John Mack took Nides under his wing. When Mack was named CEO of Credit Suisse, Nides went along with him as chief administrative officer. When Mack returned to Morgan Stanley as CEO in 2005, Nides accompanied him again as chief operating officer and then stayed another year serving in the same role for James Gorman. Then Nides returned to Washington to work for then-Secretary Clinton at the State Department, replacing Jack Lew, who became head of the Office of Management and Budget. Many thought Nides’ time at Morgan Stanley was over, especially with Mack’s retirement at the end of 2011. But Gorman—also a Hillary supporter—surprised people by bringing Nides back to the firm as a vice-chairman.
Now Nides is the first stop in New York for many a visiting dignitary and for those ambitious Wall Street types hoping to get access to Clinton. Nides declined to comment on the record, as did other Wall Street executives with whom Clinton is said to confer, among them Blair Effron, one of the three founders of Centerview Partners, an investment banking boutique, and Marc Lasry, the founder of Avenue Capital, a New York hedge fund, who was almost named Obama’s ambassador to France.
But Greg Fleming, Nides’ partner at Morgan Stanley and the president of Morgan Stanley Wealth and Investment Management, was pleased to discuss his enthusiastic support for Clinton. He says that the “broad perception” across Wall Street, among both Democrats and Republicans, is that she, “like her husband, will govern from the center, and work to get things done, and be capable of garnering support across different groups, including working with Republicans.” He agreed that, as a former senator from New York, Clinton is trusted by Wall Street and will tackle issues, such as fiscal and tax reform, that have been long neglected thanks to the intractable polarization that rules Washington these days. “She will be trying to govern from the center with a problem-solving bent like her husband,” Fleming says.
Beyond that, Hillary Clinton—and the Clintons generally—have always courted Wall Street assiduously and without apology. In June, the biggest donors to the Bill, Hillary & Chelsea Clinton Foundation met with the Clintons at Goldman Sachs’ headquarters in lower Manhattan for a day-long discussion about the foundation’s goals. Goldman has donated hundreds of thousands of dollars to the Clintons’ foundation, and in October 2013, Hillary Clinton gave two speeches at Goldman. Her usual speaking fee is $200,000, and Goldman is known to be a full payer on the speaking circuit. Goldman is hardly alone—Clinton is popular in the financial industry: In 2013, she also gave speeches to KKR and the Carlyle Group, two private-equity behemoths.
Wall Street does not seem to be the slightest bit shy about coming out for Hillary—and are now contributing their money to prove it. While Priorities USA Action, a super PAC dedicated to getting Clinton elected in 2016, does not have any Wall Street banks among its top 50 donors to date, there have been large contributions from wealthy hedge funds, such as Renaissance Technologies, which has donated $4 million (the largest single contribution); D.E. Shaw, whose employees have donated $1.375 million; Khosla Ventures and Soros Fund Management, which have each donated $1 million; and Ripplewood Holdings, a private equity firm, which contributed $400,000. There are many Wall Street financiers who have donated $25,000—by design, the maximum contribution—to the Ready for Hillary superPAC.
Goldman is an interesting case study. As in nearly every other way, it has always been careful to hedge its bets where electoral politics is concerned. Historically, although trending Democratic, Goldman employees have managed to give nearly equally to both parties in presidential elections. And a lot of it: Since 1990, Goldman’s employees have given $47 million to political candidates and various political action committees—more than any other single group of company employees. But that calculus changed dramatically in 2008 when Goldman employees gave about $1 million to Barack Obama’s presidential campaign, according to the Center for Responsive Politics, second only to that given to Obama by the employees of the University of California, who donated nearly $1.8 million. By contrast, Goldman employees gave only $235,000 to Senator John McCain, the Republican Party nominee.
By 2009 the bloom was off the rose. In an interview with 60 Minutes, Obama not only referred to Wall Street as the “fat cat bankers” but also blamed Wall Street for causing the financial crisis. “People on Wall Street still don’t get it,” he said. In July 2010, just weeks after a much-vilified Goldman agreed to pay a $550 million fine to the Securities and Exchange Commission—then the largest fine ever—to settle charges stemming from Goldman’s underwriting and selling of a synthetic collateralized debt obligation, the details about which the SEC believed Goldman had failed to properly disclose to investors, Obama joked at the White House Correspondents Dinner: “All of the jokes here tonight are brought to you by our friends at Goldman Sachs. So you don’t have to worry—they make money whether you laugh or not.”
By 2012, in an historic turnaround, Goldman went full force for Romney. According to the Center for Responsive Politics, Goldman employees gave $1.2 million to the Republican National Committee and another $1 million or so to Romney directly. By contrast, Obama received a mere $210,000 from Goldman employees (who also gave $493,000 to the Democratic National Committee). “In the four decades since Congress created the campaign-finance system, no company’s employees have switched sides so abruptly, moving from top supporters of one camp to the top of its rival,” the Wall Street Journal observed. So far this year, Goldman remains a Republican shop. Some 63 percent of the firm’s political contributions, or $1.75 million, has gone to support Republican candidates.
That will change if Clinton decides to run. For starters, as the former U.S. senator from New York, she is well known to many of Goldman’s leaders. They have seen her at numerous Goldman events over the years or at fundraisers in the Hamptons. Blankfein ran into the Clintons in August at a party in the Hamptons at Hollywood mogul Harvey Weinstein’s house, and there are the many pictures of Blankfein smiling broadly at her side during September’s Clinton Global Initiative in New York. A few weeks later, they spent time together at a dinner celebrating the Goldman Sachs “10,000 Women Initiative,” a Goldman-funded training and education program for female entrepreneurs.
Many Goldman employees, especially women, are also excited about the historic potential of the 2016 presidential election since Clinton could become the first female president. “They’re not going to reflexively support any woman, but she’s a woman that seems more or less in sync with the way they think about the world,” says another former Clinton administration official who now works on Wall Street. “And she’s successful, and they just like her.”
More significant, the 10,000 Women Initiative was designed by Clinton operatives and is being implemented at Goldman by people who still have close ties to her. For instance, Goldman paid Gene Sperling, a longtime Washington insider who was director of the National Economic Council under both Bill Clinton and Barack Obama, nearly $900,000 in 2008 for his help in creating the 10,000 Women Initiative. Noa Meyer, who runs the program at Goldman, once wrote speeches for Hillary Clinton when she was First Lady. “The whole idea to spend money on women and women’s education in developing countries came straight out of her playbook,” says someone familiar with the origins of the 10,000 Women Initiative. “The same people who got her interested in that issue are the people who …design[ed] the program.”
Of course, the ties between Goldman Sachs and Washington run deep, very deep, and many analysts have argued that the broad deregulatory moves pushed by former Goldman senior partner Robert Rubin—who later became Bill Clinton’s National Economic Council director and then Treasury secretary—were a major part of the process that led to the subprime mortgage disaster. But Rubin was only among the latest in a long line of Goldman executives who went to Washington and helped create the talent-and-ideas nexus that later became derisively known as “Government Sachs.” Sidney Weinberg, the longtime senior partner at Goldman Sachs in the 20th century, was a confidante of Franklin D. Roosevelt’s who enticed him to Washington on several occasions before, during and after World War II. In 1938, Roosevelt offered Weinberg the position of ambassador to the Soviet Union, but Weinberg thought better of it because he did not speak Russian, was a Jew from Brooklyn and didn’t want to leave Goldman. In November 1943, FDR did succeed in enlisting Weinberg to go to the Soviet Union “openly” as a representative of the Office of Strategic Services—the predecessor of the CIA—although what he did there and for how long has been lost to history.
In 1968, Henry Fowler joined Goldman Sachs as a partner, and thus became the first former Treasury secretary to spin the revolving door and land a Wall Street job. John Whitehead, who was the co-senior partner of Goldman Sachs in the 1970s and the early 1980s, became deputy secretary of state in the second Reagan Administration, after he retired from the firm. John F. W. Rogers, a former close Reagan advisor, has been the longtime consigliore at Goldman and oversees both the global communications and government relations departments. Rubin, who had befriended Fowler during his time at Goldman and who went on to run Goldman Sachs in the 1980s, along with Steve Friedman, left Goldman in January 1991 to join the Clinton administration. In 1995, he succeeded Lloyd Bentsen as Treasury secretary. Friedman, meanwhile, became chairman of the National Economic Council under George W. Bush, and, of course, Hank Paulson, the former CEO of Goldman, was Bush’s Treasury secretary during the financial crisis of 2007 and 2008.
Rubin, apparently, is not content to go gracefully into the good night when it comes to wielding power, and lingering questions about his continued influence inside the Clinton camp are at the center of an issue that is likely to dog Hillary through 2016. From his perches as co-chairman of the Council on Foreign Relations and as a founder of the Hamilton Project at the Brookings Institution, Rubin—long considered a Washington kingmaker—continues to cast his spell on the Obama administration, which has been, and continues to be, chock full of appointees with close ties to him, including Tim Geithner, Larry Summers, Peter Orszag, Gene Sperling, Jason Furman, Jack Lew, Michael Froman and Sylvia Matthews Burwell. While Rubin’s reach is both unprecedented and stunning, it remains to be seen whether he is able to work his magic and position Blankfein into an important role in a Hillary Clinton administration, should there be one and if he aspires to such a thing.
All of which raise the most pertinent question of all: rhetoric and fundraising aside, where does Clinton really stand on Wall Street? If she becomes president, is she going to side with the Rubinites—or has she come to realize, as even her husband apparently has, having conceded in remarks that he naively supported too much deregulation, that Wall Street must be carefully watched and kept at arm’s length?
She’s been fairly cagey about this issue, eager to assuage both sides. Where Obama blamed Wall Street—not inaccurately—for behavior that caused the 2008 financial crisis and championed new Wall Street regulations like the Volcker Rule and the 2010 Dodd-Frank law that really stick in the craw of money men—all while presiding over a veritable profit boon for the financial industry—Clinton said hardly a word on the topic of Wall Street shenanigans.
Her nascent populism has only appeared in the last year or so, as the Elizabeth Warren movement took off. For instance, in a speech at the progressive New America Foundation, she spoke about the dangers of the growing inequality in the country. “Americans are working harder, contributing more than ever to their companies’ bottom lines and to our country’s total economic output, and yet many are still barely getting by, barely holding on, not seeing the rewards that they believe their hard work should have merited,” she said. “And where’s it all going? Well, economists have documented how the share of income and wealth going to those at the very top—not just the top one percent, but the top one-tenth percent or the top-hundredth percent of the population—has risen sharply over the last generation. Some are calling it a throwback to the Gilded Age of the Robber Barons.”
She also lamented how government regulators had “neglected their oversight” of Wall Street and “allowed the evolution of an entire shadow banking system that operated without accountability.”
Asked about these issues, Clinton’s spokesman Nick Merrill is quick to point out times she has called for more regulation—an eagerness that underscores how the Clinton operation wants to appear populist even as it collects the Wall Street money. Merrill noted that back in March 2008, as a presidential candidate, she called for “much more vigorous government oversight and enforcement of the subprime mortgage market.” He also said that she staked out positions, in the year or so before the financial crisis hit, on reducing or eliminating the carried interest of private equity partners being taxed at capital gains rates; on a financial transaction tax; and on repatriating overseas income by U.S. corporations. In a 2007 press release from her campaign, for example, Clinton declared: “Our tax code should be valuing hard work and helping middle class and working families get ahead. It offends our values as a nation when an investment manager making $50 million can pay a lower tax rate on her earned income than a teacher making $50,000 pays on her income. As president I will reform our tax code to ensure that the carried interest earned by some multi-millionaire Wall Street managers is recognized for what it is: ordinary income that should be taxed at ordinary income tax rates.” Clinton said she would use the funds generated by the tax change—which some have estimated at $4 to $6 billion per year—to invest in middle-class and working families.
There’s no question, when and if she decides to run, that she’s going to have an incredible support foundation from Wall Street.”
Yet all of these efforts seem at best a combination of campaign trail rhetoric or minor tweaks around the edges—rather than the wholesale change that an Elizabeth Warren-type populist would want to impose on the financial industry.
Probably the best answer to the question of what Clinton will do to Wall Street comes from Wall Street’s own support of her. Wall Street executives, bankers and traders have already shown their hand in support of the two Clintons individually as well as of the causes they care about most deeply—money they wouldn’t contribute if they thought her political future would be detrimental to their economic future. And, in return, one thing we know about the Clintons: They value loyalty profoundly. They are unlikely to turn their backs on the banks, especially since it seems highly unlikely that Warren will mount the kind of outsider challenge to Hillary in 2016 that Barack Obama did in 2008. Instead, Clinton will find ways to work with Wall Street on issues it cares about, rather than vilifying it for political gain.
Democratic pollster Douglas Schoen says that Hillary’s hope is that she can use supposed slips like the one in Boston to appeal just enough to the liberal wing of the Democratic party to ward off Warren, who offers a “far more resonant message with the Democratic base than Hillary’s.” Without a strong national ground organization and a strong financial network, Warren’s message alone won’t get her very far, but the Clintons want to avoid repeating the mistakes of 2008, when an idealism-based campaign derailed her inevitability campaign.
She will also have much of her former opponent’s network behind her again in 2016. Robert Wolf, the former president of UBS’ investment bank who now has his own advisory boutique, 32 Advisors, has long been described as Obama’s BFF (Best Friend in Finance), and although he has little direct involvement with Clinton or her campaign team, he plans to support her fully when the time comes. He is one of the hosts of a December 16 gala in New York City where she will be honored. By his rough calculus, six in 10 Wall Street types are Democrats, three are Republicans and just one is independent. He predicts that the independents, who voted for Obama in 2008 and then defected to Romney in 2012, will return to Clinton in 2016. As he says, “There’s no question, when and if she decides to run, that she’s going to have an incredible support foundation from Wall Street.”
As we have all seen repeatedly, Wall Street often gets what Wall Street wants. Will it get a President Hillary Clinton, and will she be the president Wall Street expects?
William D. Cohan is the author of Money and Power: How Goldman Sachs Came to Rule the World (2011).