RENEE MONTAGNE, Host:
Now in a new, critical history of the bank, financial writer William Cohan examines Goldman's influence over government and the financial system. The book is called "Money and Power," and William Cohan joined us from our New York bureau to talk about it. Good morning.
MONTAGNE: Good morning, Renee.
MONTAGNE: Give us a reminder of what happened, during or just after the financial crisis, to damage Goldman Sachs' name.
MONTAGNE: A few days prior to that, the government had also rescued AIG, the big insurance company, to the tune of something like $180 billion. And over time, people were wondering, where did all that money go? Finally, the New York Federal Reserve Bank revealed that Goldman Sachs, among others, got something like $13 billion from the bailout of AIG - directly into their pockets. And that created a huge controversy.
MONTAGNE: So what was Goldman Sachs' image up until the financial crisis?
MONTAGNE: In the 1970s, the firm was involved in a very serious matter involving the Penn Central Corporation, which was a large railroad that went bankrupt in 1970. So the firm has been in and out of trouble for a very long time, which people forget. I would say its reputation for pristine excellence - the envy of Wall Street, if you will - has really sort of been in and around since the 1980s.
MONTAGNE: In becoming what one might call the gold standard on Wall Street over the last - say, 30 years, how did that image come about? Was it cultivated? Was it thought out?
MONTAGNE: Well, I think it was cultivated in as much as Goldman set about assembling the best people it could possibly find, at every turn of the road. Its success, its - the reason other firms envied Goldman Sachs for so long, and probably still do, is because they continue to be the leading firm on Wall Street in terms of underwriting the most, advising the most, trading the most, having huge amounts of capital. And that gives them huge cache, huge prestige, and huge power.
MONTAGNE: Goldman Sachs has sent many of its bankers into the government - I mean, so many that the company has been called, jokingly, Government Sachs. How much influence has Goldman Sachs had on the government? In your book, you describe Henry Goldman's role during the creation of the Federal Reserve System. I mean, that was nearly a hundred years ago.
MONTAGNE: And so this had been going on for a very, very long time, and just continued through every senior partner of Goldman Sachs up until Hank Paulson - as we know - when he was named Treasury secretary.
MONTAGNE: Now, is Goldman Sachs unique in its influence over government? In a world where money means power, and bankers often do have sway over what the government does, has Goldman had that much more influence than other banks?
MONTAGNE: I think Wall Street has always had a tremendous influence - and it's not just Goldman Sachs - but Wall Street generally has had a tremendous influence over Washington. They helped write the regulations; they're help - writing the regulations now. They know what they can and can't do, and they - and Goldman Sachs, especially, has been very, very good at getting right up against the line of wrongdoing. They know exactly where that line is, and they're very careful of - most of the time - to stay just on this side. And they help influence the way the regulations are enforced.
MONTAGNE: Are you asserting, in your book, that Goldman Sachs is sending its graduates, if you will, into the government - that this is deliberate policy on Goldman's part?
MONTAGNE: And one of the ways to do that is, of course, through government service. And that is very different than other firms. And you know, by the way, it's not just government service. They're leaders in philanthropy; they're leaders in education, at this point. You know, their tentacles are everywhere, and they're very powerful.
MONTAGNE: Thanks very much for talking with us.
MONTAGNE: Thank you, Renee.
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