Reuters reports today that "The incoming Treasury secretary, Henry M. Paulson Jr., was awarded an $18.7 million cash bonus for half a year of work as the chief executive of the Goldman Sachs Group." The massive bonus was, not surprisingly, approved by Goldman Sachs at the very same time Paulson was both CEO and Treasury Secretary designate. This raises a very simple question: What is Goldman Sachs buying with this brazen payoff to someone they knew was headed to one of the most powerful government posts in America?
In my book Hostile Takeover, I note that these sorts of payoffs happen all the time -- and they are made with public policy favors in mind. The most high profile before Paulson's was the payoff Halliburton gave to Dick Cheney in the form of a truckload of "deferred compensation" valued in the tens of millions. At the time, those who raised questions about what such a payoff would buy were dismissed by the Washington Establishment as conspiracy theorists . The insiders who populate this Establishment, of course, are addicted to the revolving door, and they didn't want anyone questioning it. Now, just a few years later, we found out that, indeed, Halliburton's generosity to Cheney was a payoff, as the Vice President used his office to help the oil company secure huge government contracts in the aftermath of the Iraq War.
So again, a simple question: With Goldman Sachs handing incoming Treasury Secretary Henry Paulson an $18.7 million bonus for six months of service, what is the company looking for in return? After all, Goldman Sachs has had a lot of business before the government that Paulson's Treasury Department has been involved in and can influence. Here are just a few factoids about the Goldman Sachs-Government connections that raise questions about the Paulson payoff:
- The nonpartisan Project on Government Oversight (POGO) noted in a major 2002 study that Goldman Sachs is one of the largest beneficiaries of government contracts in America. It is also one of the contractors that POGO noted "have been found to have repeatedly broken the law or engaged in misconduct," yet still receives government contracts.
- MSN Money notes that Goldman Sachs main profit-makers is its offering of "investment banking services to corporate and government clients."
- The Associated Press reported in 2004 that "Goldman Sachs is being sued by investors who say the firm cost them money by trading on advance knowledge of the Treasury Department's announcement in October 2001 that the government was ending sales of new 30-year bonds." Goldman Sachs "previously settled government charges that one of its economists used an illegal tip to make millions for the firm in advance of the announcement."
Obviously, these factoids raise questions. Just off the top of my head, I'm wondering whether the Paulson payoff will mean he directs more government contracts to Goldman Sachs? I'm also curious whether the Paulson payoff mean Goldman Sachs analysts will have more insider information from the Treasury Department which they can bilk investors with?
Sadly, these kinds of conflict-of-interest questions -- obvious, even before the public found out about the $18.7 million payoff -- were never even asked of Paulson by either party when he was brought before the U.S. Senate for confirmation. In fact, he was roundly sucked up to by Senators at his confirmation hearing a few weeks ago. Then, in the ultimate act of complicity, Senators confirmed him on a unanimous voice vote in the Senate Finance Committee, and again by voice vote on the Senate floor, meaning not one U.S. Senator was even willing to call for a recorded vote -- true proof of Big Money's hostile takeover of our government.
Nonetheless, despite our lawmakers playing dead in the face of the hostile takeover, these new questions about the Paulson payoff must be asked -- and Senators and House Members have a responsibility to ask them. Will our representatives have the guts to ask the tough questions? Will our representatives have the courage to ask why Paulson was given such a disgustingly large bonus right before heading into government service, and what that payoff is buying? Stay tuned.