Financial Crash Analysis: $22.6 Billion in Homeowner Relief; $7.8 Trillion to Four Wall Street Banks

gao-report-of-january-9-2017-on-emergency-lending-to-homeowners

By Pam Martens and Russ Martens: January 11, 2017 

As Goldman Sachs guys prepare to take the reins of power in Washington under the Trump administration, the Government Accountability Office (GAO) provided a tragic reminder on Monday regarding the power of the U.S. citizen versus their Wall Street overlords. The GAO released a study showing that as of October 31, 2016, the government “had disbursed $22.6 billion (60 percent) of the $37.51 billion Troubled Asset Relief Program (TARP) funds” that were directed at helping distressed homeowners as a result of the 2008 Wall Street financial crash and the resulting housing bust.

Those paltry billions stand in stark contrast to the $7.8 trillion in near-zero interest loans that the Federal Reserve secretly funneled to just four Wall Street banks from 2007 to 2010. The Fed funneled $2.5 trillion to Citigroup; $2 trillion to Morgan Stanley; $1.9 trillion to Merrill Lynch; and $1.3 trillion to Bank of America. The total amount that the Fed secretly loaned to both U.S. and foreign banks came to $16.1 trillion. (See the chart below from the 2011 GAO report for the full list of bailed out banks.)

The American people would still be in the dark about the Federal Reserve’s covert money spigot to the banks except for Senator Bernie Sanders. In 2010, as Congress was debating the Dodd-Frank financial reform legislation, Sanders introduced an amendment that would force the GAO to conduct a one-time audit of the Fed covering its emergency lending programs from December 1, 2007 through July 21, 2010, the date the legislation was signed into law by President Obama. (Because of this abbreviated period of time, the public may still lack full details about Wall Street’s bailout. Sanders got pushback from the White House that prevented him from pushing for a stronger amendment.)

When the one-time audit of the Fed was released by the GAO in 2011, Sanders said in a statement: “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Today, Goldman Sachs is the most politically-connected Wall Street bank in America thanks to appointments by Donald Trump. But back in 2008 when the Fed was pumping out trillions of dollars to banks like penny candy at a carnival, it was Citigroup that held the reins of power. (The full extent of that power was underscored last year when WikiLeaks released emails showing that one of Citigroup’s executives, Michael Froman, has played the key role in selecting cabinet officials for Obama’s administration.) The current U.S. Treasury Secretary, Jack Lew, is a former Citigroup executive as is Stanley Fischer, the Vice Chair of the Federal Reserve. Michael Froman is the current U.S. Trade Representative who’s responsible for the deeply flawed Trans-Pacific Partnership (TPP). Obama’s Secretary of State, Hillary Clinton, ranked Citigroup as one of her top lifetime political donors.

Back in 2014, when Citigroup pushed through a legislative amendment that effectively repealed the Dodd-Frank rule that derivatives had to be removed from the books of the deposit-taking banks, Senator Elizabeth Warren spoke from the Senate floor about the corrosive power of Citigroup in Washington. Warren stated:

“Mr. President, in recent years, many Wall Street institutions have exerted extraordinary influence in Washington’s corridors of power, but Citigroup has risen above the others. Its grip over economic policymaking in the executive branch is unprecedented. Consider a few examples:

“Three of the last four Treasury Secretaries under Democratic presidents have had close Citigroup ties. The fourth was offered the CEO position at Citigroup, but turned it down.

“The Vice Chair of the Federal Reserve system is a Citigroup alum.

“The Undersecretary for International Affairs at Treasury is a Citigroup alum.

“The U.S. Trade Representative and the person nominated to be his deputy – who is currently an assistant secretary at Treasury – are Citigroup alums.

“A recent chairman of the National Economic Council at the White House was a Citigroup alum.

“Another recent Chairman of the Office of Management and Budget went to Citigroup immediately after leaving the White House.

“Another recent Chairman of the Office of Management of Budget and Management is also a Citi alum — but I’m double counting here because now he’s the Secretary of the Treasury.”

Commensurate with its power in Washington, the serially-charged, now felony-bank Citigroup, received by far the largest bank bailout during the crash and in U.S. history. The U.S. Treasury infused $45 billion in capital into Citigroup to prevent its total collapse; the government guaranteed over $300 billion of Citigroup’s assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; the Fed secretly sluiced $2.5 trillion in almost zero-interest loans to Citigroup. And, that’s just what the public is allowed to know about.

The meager amount that was directed to help struggling homeowners who were tricked into mortgages they couldn’t afford or who had lost their jobs because of the Wall Street bust, is, sadly, not the worst part of the story.

Neil Barofsky was the Special Inspector General of the Troubled Asset Relief Program during the financial crisis. His job was to monitor how the taxpayers’ dollars were spent. In 2012, Barofsky released his book on that period: Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street. 

One of the housing programs discussed in Monday’s report from the GAO is the Home Affordable Modification Program (HAMP). Barofsky also discussed HAMP in his book, revealing that its real goal, according to U.S. Treasury Secretary Tim Geithner, was to “foam the runway” for the banks.  Barofsky wrote:

“For a good chunk of our allotted meeting time, Elizabeth Warren grilled Geithner about HAMP, barraging him with questions about how the program was going to start helping home owners.  In defense of the program, Geithner finally blurted out, ‘We estimate that they can handle ten million foreclosures, over time,’ referring to the banks. ‘This program will help foam the runway for them.’

“A lightbulb went on for me.  Elizabeth had been challenging Geithner on how the program was going to help home owners, and he had responded by citing how it would help the banks. Geithner apparently looked at HAMP as an aid to the banks, keeping the full flush of foreclosures from hitting the financial system all at the same time.  Though they could handle up to ‘10 million foreclosures’ over time, any more than that, or if the foreclosures were too concentrated, and the losses that the banks might suffer on their first and second mortgages could push them into insolvency, requiring yet another round of TARP bailouts.  So HAMP would ‘foam the runway’ by stretching out the foreclosures, giving the banks more time to absorb losses while the other parts of the bailouts juiced bank profits that could then fill the capital holes created by housing losses.”

Today, the largest Wall Street banks hold more dangerous levels of derivatives than they did at the time of the crash in 2008. Two of the banks, Citigroup and JPMorgan Chase, are now admitted felons – something that has not previously occurred in their century old existence. The Dodd-Frank reform legislation has failed to rein in the serial frauds at the banks, which have now morphed into coordinated cartel activity. And, despite all of this, President-elect Donald Trump has placed the future of the nation in the hands of Goldman Sachs power players.

GAO Data on Secret Emergency Lending Programs During  Financial Crisis

GAO Data on Secret Emergency Lending Programs During Financial Crisis

Bernie Sanders Assumes Mantle as Progressive Leader in CNN Town Hall

By Pam Martens and Russ Martens: January 10, 2017

Senator Bernie Sanders Fields a Question from Sawyer Neale During January 9, 2017 CNN Town Hall

Senator Bernie Sanders Fields a Question from Sawyer Neale During January 9, 2017 CNN Town Hall

Just 11 days before Donald Trump is sworn into office as the 45th President of the United States, CNN hosted a Town Hall with Senator Bernie Sanders fielding a broad range of grave questions from people in all walks of life on where the country is heading. The event was held at George Washington University in Washington, D.C. and aired on CNN at 9 p.m. ET last evening. Chris Cuomo was the moderator.

Sanders’ no-holds-barred answers and the audience’s warm embrace of his message, provided the distinct feeling that Sanders may be positioning for another presidential run in 2020 to bring to fruition his promised political revolution in the United States.

Sawyer Neale, the youngest Bernie Sanders delegate from Pennsylvania at the Democratic Convention last year, was in the audience and asked the question that was on everyone’s mind: would Sanders run again in 2020.

Neale said: “You motivated a generation of voters by talking about issues like health care, criminal justice, income inequality. I’m afraid with Trump in the White House, with Republicans occupying the majority [of statehouses] all around the country, that this is on the line.” He then directly asked if Sanders would consider a 2020 run.

Sanders responded that it’s too early to be talking about the next presidential race. What is important, said Sanders, is for everyone to engage and protect critical programs like Social Security and Medicare from being gutted in order to give billions of dollars in tax breaks to the rich.

A young teacher asked Sanders what he and other members of Congress are going to do about Trump’s deportation plans. She said she had numerous undocumented students in her classes and they are frightened about being deported. She asked: “Where can they find hope?” Sanders said this topic was “emotional” to him. His father, he said, came to this country at age 17 with “no money, no education, dropped out of school when he was 16.” Sanders said he is hearing from Muslims and Latinos all over the country “that they are frightened” because Trump has promised that his administration will be picking people up and “throwing millions of people out of this country.” Sanders said Trump’s campaign had spread bigotry and xenophobia and ignored the fact that “we are a great and unique country because of our diversity.”

Curiously, CNN seemed to be giving Sanders a broad stage to deliver his message. On the same day as the Town Hall, CNN published an opinion piece by Sanders in which he pounded away on the same themes that had turned out tens of thousands of supporters to his rallies during the primaries.

Sanders wrote:

“How do we stop the movement toward oligarchy in our country in which the economic and political life of the United States is increasingly controlled by a handful of billionaires?

“Are we content with the grotesque level of income and wealth inequality that we are experiencing? Should the top one-tenth of 1 percent own almost as much wealth as the bottom 90 percent? Should one family in this country, the Waltons of the Walmart retail chain, own as much as the bottom 40 percent of our people? Should 52 percent of all new income be going into the pockets of the top 1 percent?

“While the very rich become much richer, are we satisfied with having the highest rate of childhood poverty of almost any major country on earth? Can a worker really survive on the current federal minimum wage of $7.25 an hour? How can a working-class family afford $15,000 a year for childcare? How can a senior citizen or a disabled veteran get by on $13,000 a year from Social Security?

“What can be done about a political system in which the very rich are able to spend unlimited sums of money to elect candidates who represent their interests? Is that really what democracy is about?…

“Why is the richest country in the history of the world the only major country not to provide health care to all as a right, despite spending much more per capita? Why are we one of the very few countries on earth not to provide paid family and medical leave? With the five major drug companies making over $50 billion in profits last year, why do we end up paying, by far, the highest prices in the world for prescription drugs?

“How do we succeed in a competitive global economy if we do not have the best educated workforce in the world? And how can we have that quality workforce if so many of our young people are unable to afford higher education or leave school deeply in debt? Not so many years ago, we had the highest percentage of college graduates in the world. Now we don’t even rank in the top ten. What can we do to make sure that every American, regardless of income, gets all of the education he or she needs?”

On the last point, Sanders said during the Town Hall that he had met a young woman in Iowa who wanted to be a Dentist. She now has $400,000 in student loans as a result of that quest.

As another sign that Sanders plans to lead an assault on any Trump plans to gut Social Security, Medicare or Medicaid, an email went out this morning from Our Revolution with the subject line: “Bernie needs you to call your senator.” The email said:

“During his campaign, Trump promised he would make no cuts to Social Security, Medicare and Medicaid. He said it would be unfair to the people who have been paying into those programs for years.

“Now Republicans have proposed a budget that would throw 30 million Americans off their health insurance. They want to privatize Medicare, raise prescription costs, and reduce Social Security benefits, which serves as the primary source of income for the majority of seniors.”

The email indicated that Senator Sanders is introducing a budget amendment tomorrow “that would prevent Senate Republicans from breaking Donald Trump’s campaign promise to make no cuts to Medicare, Medicaid, and Social Security.”

The following phone number was provided for citizens to call their own Senator and demand that the Senate holds Trump to his promise to make no cuts to these essential programs: 877-826-4344.

As a growing roster of billionaires are set to take their cabinet seats in the Trump administration, it’s becoming increasingly clear just whom the real populist candidate was in the 2016 race.

Here’s How Goldman Sachs Became the Overlord of the Trump Administration

By Pam Martens and Russ Martens: January 9, 2017

Occupy Wall Street Protesters Outside 15 Central Park West, the Residence of Lloyd Blankfein, CEO of Goldman Sachs

Occupy Wall Street Protesters Outside 15 Central Park West, the Residence of Lloyd Blankfein, CEO of Goldman Sachs

During his political campaign, Donald Trump repeatedly railed against Wall Street with a specific focus on Goldman Sachs. In the final days of his campaign, Trump released an advertisement (see video below) that featured his opponent, Hillary Clinton, shaking hands with Goldman Sachs CEO Lloyd Blankfein. As the image flickers on the screen, Trump does a voice over, stating: “”It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of a handful of large corporations and political entities.” As the ad ends, Trump bares his soul: “I’m doing this for the people and for the movement and we will take back this country for you and we will make America great again.”

How did a candidate who repeatedly demonized Goldman Sachs as the poster child for a corrupt establishment that owned Washington end up with Goldman Sachs’ progeny filling every post that even tangentially has the odor of money or global finance? One answer is family ties; another may be something darker.

Trump’s non-stop nominations and appointments of Goldman Sachs alumni have left his supporters stunned. Trump nominated Steven Mnuchin, a 17-year veteran of Goldman Sachs to be his Treasury Secretary. Stephen Bannon, another former Goldman Sachs banker, was named by Trump as his Chief Strategist in the White House. The sitting President of Goldman Sachs, Gary Cohn, has been named by Trump as Director of the National Economic Council, which, according to its website, coordinates “policy-making for domestic and international economic issues.”  Last week, in a move that stunned even Wall Street, Trump nominated a Goldman Sachs outside lawyer, Jay Clayton of Sullivan & Cromwell, to serve as Wall Street’s top cop as Chairman of the Securities and Exchange Commission. Adding to the slap in the face to Trump’s working class supporters, Clayton’s wife currently works as a Vice President at Goldman Sachs.

But the Goldman Sachs’ ties don’t stop there. 

When Alexander Blankfein, the oldest son of Goldman Sachs’ CEO Lloyd Blankfein was married in 2013, Joshua Kushner attended the wedding. Joshua had been Alexander’s roommate at Harvard according to the New York Times. Joshua is the brother-in-law to a woman who will play a major role in the Trump administration – Ivanka Trump, daughter of the President-elect and wife of Joshua’s brother, Jared.

According to Politico, Goldman Sachs partner, Dina Powell, President of the Goldman Sachs Foundation, is Ivanka’s “top adviser on policy and staffing.”

Then there is Erin Walsh who had worked at Goldman Sachs since 2010 as an Executive Director and head of its Office of Corporate Engagement for Asia Pacific. Walsh also previously worked in the Bureau of Near Eastern Affairs at the U.S. Department of State. Walsh is now part of Trump’s transition landing team for the State Department and is engaged in prepping the just retired CEO of ExxonMobil, Rex Tillerson, for his Senate confirmation hearing this week to become the Secretary of the Department of State, according to Politico.

A recent Executive Director of Goldman Sachs preparing the recent titular head of Big Oil to pass muster to run the State Department is the Orwellian version of draining the swamp — and Trump’s pre-election campaign language is proving to have been very Orwellian, as in reverse-speak.

And there is yet another former Goldman Sachs banker, Anthony Scaramucci, who sits on Trump’s transition team.

Since 2010, according to Federal Election Commission records, Gary Cohn, the President of Goldman Sachs and Trump’s designee as Director of the National Economic Council, has given $148,800 to political candidates running for Federal office. No contributions were made to Donald Trump. Despite that, Cohn will sit atop a powerful body and have the President’s ear on both domestic and international economic issues. According to multiple media reports, Jared Kushner, Trump’s son-in-law, is a close friend of Cohn’s and set up the first meeting with Trump.

During the primary campaign, when it emerged that Trump’s opponent Ted Cruz had received a loan from Goldman Sachs, Trump said that Cruz was “owned” by Goldman Sachs. Now the Dow Jones company, MarketWatch, has reported that Trump’s debt is held by more than 150 Wall Street firms. The New York Times has reported that Goldman Sachs Mortgage Company holds a loan on an office tower at 1290 Avenue of the Americas, a building that is 30 percent owned by Donald Trump.

Some of the Trump debt held by Wall Street firms, according to media reports, includes Donald Trump’s personal guarantee in the event of a default. The true owners of other Trump debt are shielded behind secretive Limited Liability Corporations. These serious conflicts of interests together with the unprecedented infusion of Goldman Sachs honchos into his administration, have the potential to set a new low in Washington politics – an outcome that America can ill afford as it struggles to rise above the greatest economic collapse since the Great Depression just eight years ago.

The Senate is set to hold confirmation hearings on nine of Trump’s nominees this week. Call your Senator today and demand that he or she asks the questions that will get to the bottom of these Byzantine conflicts.

Related Articles:

Senate Specifics on Why Goldman Sachs’ Gary Cohn Should Not Have a Role in the U.S. Government

Mnuchin Nomination for Treasury Shines Harsh Light on U.S. Politics

Law Partners of Trump’s SEC Nominee Gave Huge Sums to Elect Hillary – Not Trump

Bernie Sanders Supporters Launch Glass-Steagall Drive

By Pam Martens and Russ Martens: January 6, 2017

"Make America Honest Again" Poster Appears at the New York City March for Bernie Sanders for President, April 16, 2016

“Make America Honest Again” Poster Appears at the New York City March for Bernie Sanders for President, April 16, 2016

Northwest Ohio supporters of Senator Bernie Sanders in his run for President have launched a nationwide push to enlist other organizations to send it letters and take to social media to endorse a demand that President-elect Donald Trump fulfill a campaign pledge. Trump made the pledge on October 26 of this year in a speech he delivered in Charlotte, North Carolina, promising to enact a 21st Century Glass-Steagall Act to reform Wall Street. Such legislation has been sitting dormant in both the House and Senate for years. If enacted, it would separate the deposit-taking, taxpayer-insured commercial banks from the globe-trotting, high-risk trading casinos known as investment banks on Wall Street.

The 1933 Glass-Steagall Act kept the financial system of the United States safe for 66 years until its repeal in 1999 during the Bill Clinton presidency. It took only nine years after its repeal for Wall Street to blow up the financial system in a replay of 1929. All that prevented another Great Depression was a massive, secret money drop by the Federal Reserve.

Following the financial crash in 2008, the Federal Reserve fought for years in court to avoid providing details of the money it funneled to the Wall Street banks during the years of the crisis. When the Fed finally lost the legal fight, the Government Accountability Office (GAO) tallied up the secret Fed loans, all of which had been made at super low, below-market interest rates with no public or Congressional disclosure. The final tally came to $16.1 trillion in cumulative loans. (See the GAO report for a bank-by-bank breakdown of the loans.)

While Wall Street banks received trillions of dollars in almost interest-free loans, many of the same banks were charging the customers they had rendered homeless through foreclosures, double-digit interest rates on their credit cards.

During Trump’s speech in Charlotte on October 26, he delivered the following remarks: (See video clip below.)

“I will also pursue financial reforms to make it easier for young African-Americans to get credit to pursue their dreams in business and create jobs in their communities…Dodd-Frank has been a disaster, making it harder for small businesses to get the credit they need. You folks know that. The policies of the Clintons brought us the financial recession – through lifting Glass-Steagall, pushing subprime lending, and blocking reforms to Fannie and Freddie. Two friendly names but they’re not so friendly. It’s time for a 21st century Glass Steagall and, as part of that, a priority on helping African-American businesses get the credit they need.”

Sanders’ supporters have good reason to be holding Trump’s feet to the fire on his pledge to restore Glass-Steagall. Instead of making good on his pledge to drain the Washington swamp, Trump has stacked his administration with men tied to Goldman Sachs. Trump has nominated Steven Mnuchin, a 17-year veteran of Goldman Sachs to be his Treasury Secretary; named Stephen Bannon, another former Goldman Sachs banker, as his Chief Strategist in the White House; and nominated Gary Cohn, the current President of Goldman Sachs, to head the National Economic Council. Just this week, Trump nominated a Goldman Sachs outside lawyer, Jay Clayton of Sullivan & Cromwell, to serve as Wall Street’s top cop as Chairman of the Securities and Exchange Commission. In an added insult to the public’s sensibilities, Clayton’s wife currently works as a Vice President at Goldman Sachs.

The 849-page Dodd-Frank financial reform legislation, enacted over six years ago in 2010, has indeed been a failure as Trump correctly notes. Dodd-Frank mandated 398 new rules, none of which have been successful in curtailing fraud by Wall Street banks. What has happened instead is that the biggest banks on Wall Street are signing deferred prosecution agreements with the Justice Department for prior felonies as they invent ingenious new ways to loot the investing public. Instead of these so-called “universal” banks functioning as one-stop financial supermarkets as they promised Congress prior to the repeal of Glass-Steagall, they have become sprawling criminal enterprises, frequently operating as cartels to rig various markets or engaging in ever more brazen frauds, as we saw in the recent two million fake accounts at Wells Fargo or the London Whale scandal at JPMorgan Chase where it gambled with hundreds of billions of dollars of its depositors’ money, not its own capital, and lost over $6.2 billion in high-risk derivatives trading in London.

The organization pressing Trump to keep his campaign promise and asking others to make this a national campaign is Our Revolution in Northwest Ohio. The letter it is circulating has been endorsed by the Cuyahoga County Progressive Caucus and by Ohio Revolution.  Sanders had promised his supporters a “political revolution.” Despite his loss in the presidential primary, his supporters are keeping that promise alive through this kind of grassroots activism.

Law Partners of Trump’s SEC Nominee Gave Huge Sums to Elect Hillary – Not Trump

By Pam Martens and Russ Martens: January 5, 2017

Jay Clayton, Law Partner at Sullivan & Cromwell, Has Been Nominated to Chair the SEC by Donald Trump.jpg

Jay Clayton, Law Partner at Sullivan & Cromwell, Has Been Nominated to Chair the SEC by Donald Trump

The rationale for Donald Trump’s selection of Jay Clayton, a law partner at Sullivan & Cromwell which has represented Goldman Sachs since the late 1800s, to be the next SEC Chairman grew exponentially fuzzier after Wall Street On Parade reviewed political donation records at the Federal Election Commission. FEC records show that 59 of Clayton’s fellow lawyers at the firm made over $900,000 in donations to the Hillary Victory Fund while one lone lawyer, Donald Korb, made two $2700 donations to Trump’s primary and general election campaign. Donations from three other lawyers at the firm, Justin Decamp ($2700), Robert Giuffra ($25,000), and Diane McGimsey ($5,000) to the Trump Victory committee came after Trump was already elected President, according to images of receipts filed with the FEC.

In addition to the more than $900,000 that went to the Hillary Victory Fund, tens of thousands of dollars more were donated by Sullivan & Cromwell lawyers to Hillary Clinton’s main campaign committee, Hillary for America.

Donors to the Hillary Victory Fund included Sullivan & Cromwell Senior Chairman, H. Rodgin (Rodge) Cohen, who donated $250,000 on May 12, 2016 and another $35,000 the following month. During the Wall Street panic and crash in 2008 and 2009, Cohen darted from representation of one failing institution to another. The Wall Street Journal dryly noted in the midst of the crisis that Cohen was “in demand because he helped mold the financial system that is now under assault. He helped draft the rules that led to the emergence of powerful national banks, waged the first hostile bank takeover in the U.S. and lobbied, in the early 1990s, to expand the Federal Reserve’s power to provide the emergency loans now being employed by the government.”

When the Senior Chairman of a powerful law firm gives over a quarter of a million dollars to boost a presidential candidate’s chances, it tends to send a message to his fellow lawyers in the firm. Other Sullivan & Cromwell lawyers giving generously to the Hillary Victory Fund included: Scott D. Miller ($50,000);  Frank Aquila ($33,400); Alexandra Korry ($33,400); Alison Ressler ($33,400); Sharon Nelles ($25,000); Yvonne Quinn ($25,000); George White ($25,000); David Hariton ($20,000); Richard Pepperman ($20,000); Karen Seymour ($16,700); and Sam Seymour ($16,700). Another 21 lawyers at the firm gave $10,000 each while 11 lawyers gave $5,000 or more to the Hillary Victory Fund.

Why would President-elect Donald Trump discredit himself further by nominating a Goldman Sachs outside counsel to run the already discredited SEC when the law firm’s partners were funneling serious money into his opponent’s campaign to make sure he didn’t win. Trump has already earned the wrath of the public by stocking his administration with Goldman Sachs alumni. Steven Mnuchin, a 17-year veteran of Goldman Sachs and operator of a foreclosure mill bank has been nominated by Trump to be Treasury Secretary; Stephen Bannon, another former Goldman Sachs banker, will be Trump’s Chief Strategist in the White House; and Gary Cohn, sitting President of Goldman Sachs, has been tapped to head the National Economic Council.

In response to the so-called “populist” president placing the vampire squid and its tentacles securely around anything that smells like money in the U.S. government, protesters from New York Communities for Change stormed the lobby of Goldman Sachs’ headquarters in Manhattan yesterday and unfurled a banner reading “Government Sachs.”

Jay Clayton’s nomination for SEC Chair also raises the question of what kind of vetting is being done by Trump’s transition team – or is it simply taking its marching orders from power brokers on Wall Street, which has now become the norm regardless of which political party is in power. Not only has Clayton been Goldman Sachs’ outside counsel for years but Clayton’s wife, Gretchen, has worked at Goldman for the past 17 years, currently holding the title Vice President, according to her LinkedIn profile.

Under 18 U.S.C. § 208, the basic criminal conflict of interest statute, an executive branch employee is prohibited from participating personally and substantially in a government matter that will affect his own financial interests, as well as the financial interests of his spouse. This effectively means that the SEC Chair will have to recuse himself permanently from any matter involving Goldman Sachs, one of the largest investment banks and holders of derivatives in the world.

Martindale, the legal research firm, lists 5,517 lawyers in the U.S. that specialize in securities law. Clearly, Trump did not have to tap another lawyer with deep ties to Goldman Sachs for another powerful job in his administration.

In 2015, James Kidney, a former SEC trial attorney for a quarter of a century, penned an OpEd at Wall Street On Parade. Kidney raised concerns over the sagging reputation of the SEC and the Washington-New York nexus that has captured it. Kidney wrote:

“The SEC also has work to do to restore its reputation as an effective agency which is not captive to those it is supposed to regulate.  Along with the Department of Justice, there is reasonable skepticism that the agency was sufficiently tough on individuals who approved suspect practices on Wall Street that contributed to the 2008 financial crash.  Appointing more lawyers with a history of defending financial wrongdoers and their employers will not relieve this concern…

“The Northeast has dominated commission appointments for years – perhaps forever.  Of 19 commissioners and Commission chairmen appointed by Presidents Bush and Obama since 2000, only four were outside New York, Washington and, one, Philadelphia…The concern here is not for a sterile geographical balance.  Rather, it is that the SEC is consistently dominated by those who are fully embedded in the New York-Washington axis.  If not actively sympathetic to the needs of those the SEC is principally charged with regulating, they are cozy with these institutions.  In my 25 years with the SEC, I have no doubt that in nearly all instances these connections not only are unbroken during tenure on the Commission, but almost always lead to a very sympathetic hearing denied to the average Joe or Joanne and to lesser institutions.”

Trump is rapidly losing the confidence of even his most ardent supporters. He needs to remember that this is not about him – it’s about confidence in the decency and honesty of America and the integrity of the nation’s financial markets.

Protesters Take Over Lobby of Goldman Sachs on January 4, 2017 in Protest of Its Dominant Role in the Trump Administration

Protesters Take Over Lobby of Goldman Sachs on January 4, 2017 in Protest of Its Dominant Role in the Trump Administration