Goldman and Its Lobbyists Spurned in Finance Fight
Last week, White House officials quietly approached leading financial firms seeking formal letters of support for a Congressional overhaul of financial regulations. One Wall Street powerhouse was left off the list: Goldman Sachs.
Given the government’s lawsuit against Goldman, “the message,” said a financial industry executive involved in the discussions about the White House solicitation, “was that Goldman’s opinion doesn’t matter and that it would be negative if Goldman was supportive of what we were doing.”
Goldman Sachs employs perhaps the country’s most well-connected stable of Washington lobbyists, and it spent $2.8 million last year to bend the ear of federal officials and lawmakers. But the pounding the investment firm has taken in recent days has left it sidelined — at least in public — as Congress moves toward a decision that could reshape the very industry it rules.
With Goldman the target of a Securities and Exchange Commission fraud lawsuit filed two weeks ago and nearly 11 hours of questioning in a Senate committee hearing on Tuesday, the company has been portrayed by many as a symbol of Wall Street excess and abuse.
“All of the Wall Street banks today are politically toxic,” said Jaret Seiberg, a financial policy analyst for Concept Capital, a financial policy research group. “Goldman is in that bucket. The hearing makes it harder to get their message out in Washington, but that was true before the hearing and that is true today. To be a Wall Street bank today means there are already two strikes against you.”
Still, the company is trying to find a way to influence the debate, even if it cannot play as visible a role.
Goldman Sachs declined to comment on Wednesday on the impact that its legal and public relations troubles have had on its Washington lobbying operations. But one person briefed on its plans, but who spoke on condition of anonymity because of the firm’s continuing legal and political troubles, said it was still trying to push its agenda.
In seeking to make its case to lawmakers and their aides, the bank has been largely relying on trade groups, like the Securities Industry and Financial Markets Association, the American Banking Association, or the Financial Services Forum, to plead its case about concerns in the financial legislation, industry officials said.
In contrast to JPMorgan Chase and other rivals, Goldman has not tried grass-roots outreach efforts, like setting up hot lines to have employees call their Congressional leaders. But on occasion, Goldman and its lobbyists have approached Senate Democrats directly on areas of particular concern, like the so-called Volcker Rule, which would bar institutions like Goldman from buying and selling for their own profit, rather than as a service to its clients, according to a Democratic aide. Another provision that the firm would like to see changed is a ban on banks’ trading in the derivatives market.
More often, the firm — whose lobbyists and outside lawyers include Washington luminaries like Richard A. Gephardt, the former House majority leader, and Ken Duberstein, the former Reagan administration official — has relied largely on intermediaries because politicians are worried about being associated with it, government and industry officials said.
“They know they’re not going to have that much of an impact,” said one lobbyist who works with Goldman but did not want to be named for fear of jeopardizing his relationship with the firm.
In addition to the political concerns, there were also pragmatic ones: many of the Goldman’s highest-ranking executives, including Lloyd C. Blankfein, the chief executive, had been preoccupied for the last week in preparing for the Senate hearing.
At the hearing, senators pressed Goldman executives on the allegations by the S.E.C. that the firm had misled investors by selling them a complex mortgage investment that was secretly devised to fail. Senate investigators also made public internal documents that shed light on the large profits the company made, and the satisfaction some of its executives derived, as the housing market began collapsing.
And the events of recent weeks are clearly hurting the access of a company once renowned in Washington for sending its executives to senior posts at the Treasury Department. For instance, Senator Blanche Lincoln, the Arkansas Democrat who wrote the provision that would ban banks like Goldman Sachs from trading in derivatives, had discussed having a fund-raiser at the firm’s New York offices this month, but she scuttled the possible event after the S.E.C. filed its lawsuit.
Ms. Lincoln said she would no longer take political contributions from the firm, which has been one of the most prolific contributors to campaigns. Goldman executives and its political action committee have given more than $24 million to federal candidates in the last decade, including nearly $1 million to Mr. Obama’s 2008 presidential campaign.