Con Of The Century
Salena Zito has a moving NYPost piece about the day that began the destruction of Youngstown, Ohio, and “sowed the seeds of Trump.” Excerpts:
From then on, this date in 1977 would be known as Black Monday in the Steel Valley, which stretches from Mahoning and Trumbull counties in Ohio eastward toward Pittsburgh. It is the date when Youngstown Sheet and Tube abruptly furloughed 5,000 workers all in one day.
The bleeding never stopped.
Within the next 18 months, US Steel announced that the nation’s largest steel producer was also shutting down 16 plants across the nation including their Ohio Works in Youngstown, a move that eliminated an additional 4,000 workers here. That announcement came one day before Jones and Laughlin Steel Corp. said they were cutting thousands of jobs at their facilities in the Mahoning Valley, too.
Within a decade 40,000 jobs were gone. Within that same decade, 50,000 people had left the region, and by the next decade that number was up to 100,000. Today the 22 miles of booming steel mills and the support industries that once lined the Mahoning River have mostly disappeared — either blown up, dismantled or reclaimed by nature.
If a bomb had hit this region, the scar would be no less severe on its landscape.
The events of Black Monday forever changed not only the Steel Valley, but her people and eventually American culture and politics. Just last year the reverberations were felt in the presidential election when many hard-core Democrats from this area broke from their party to vote for Donald Trump, a Republican who promised to bring jobs back to the Heartland.
Even today, after the election, the Washington establishment still hasn’t processed or properly dissected its effects. Economic experts predicted that the service industry would be the employment of the future. Steel workers were retrained to fill jobs in that sector, which was expected to sustain the middle class in the same way that manufacturing did.
It did not. According to a study done by the Midwest Center for Research the average salary of a steel worker in the late 1970s was $24,772.80. Today, according to the most recent Bureau of Labor statistics, the medium household income in the Mahoning Valley is $24,133.
Now that they have the working man’s champion in the White House, what’s he doing for them? Here are Gary Rivlin and Michael Hudson, writing in The Intercept, about how Goldman Sachs more or less runs the Trump administration. Excerpts:
Trump raged against “offshoring” by American companies during the 2016 campaign. He even threatened “retribution,” a 35 percent tariff on any goods imported into the United States by a company that had moved jobs overseas. But [Gary] Cohn laid out Goldman’s very different view of offshoring at an investor conference in Naples, Florida, in November. There, Cohn explained unapologetically that Goldman had offshored its back-office staff, including payroll and IT, to Bangalore, India, now home to the firm’s largest office outside New York City: “We hire people there because they work for cents on the dollar versus what people work for in the United States.”
Candidate Trump promised to create millions of new jobs, vowing to be “the greatest jobs president that God ever created.” Cohn, as Goldman Sachs’s president and COO, oversaw the firm’s mergers and acquisitions business that had, over the previous three years, led to the loss of at least 22,000 U.S. jobs, according to a study by two advocacy groups. Early in his candidacy, Trump described as “disgusting” Pfizer’s decision to buy a smaller Irish competitor in order to execute a “corporate inversion,” a maneuver in which a U.S. company moves its headquarters overseas to reduce its tax burden. The Pfizer deal ultimately fell through. But in 2016, in the heat of the campaign, Goldman advised on a megadeal that saw Johnson Controls, a Fortune 500 company based in Milwaukee, buy the Ireland-based Tyco International with the same goal. A few months later, with Goldman’s help, Johnson Controls had executed its inversion.
With Cohn’s appointment [as his economic adviser], Trump now had three Goldman Sachs alums in top positions inside his administration: Steve Bannon, who was a vice president at Goldman when he left the firm in 1990, as chief strategist, and Steve Mnuchin, who had spent 17 years at Goldman, as Treasury secretary. And there were more to come. A few weeks later, another Goldman partner, Dina Powell, joined the White House as a senior counselor for economic initiatives. Goldman was a longtime client of Jay Clayton, Trump’s choice to chair the Securities and Exchange Commission; Clayton had represented Goldman after the 2008 financial crisis, and his wife Gretchen worked there as a wealth management adviser. And there was the brief, colorful tenure of Anthony Scaramucci as White House communications director: Scaramucci had been a vice president at Goldman Sachs before leaving to co-found his own investment company.
Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House.
“There was a devastating financial crisis just over eight years ago,” Warren said. “Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country’s economic policy to a senior Goldman executive turns my stomach.” Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six.
Ex-Goldmanista Steve Bannon’s White House agenda was not in Goldman’s interest, though. But now he’s gone. More:
The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich. If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts — he seeks to slash rates by 57 percent — that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon’s was.
The story tracks Gary Cohn’s impressive rise from an aluminum siding salesman to a Goldman Sachs top leader. In the mid-2000s, Goldman saw that the housing market was a bubble waiting to pop, and arranged its position to take advantage of the coming collapse. The Intercept continues:
Cohn was a member of Goldman’s board of directors during this critical time and second in command of the bank. At that point, Cohn and Blankfein, along with the board and other top executives, had several options. They might have shared their concerns about the mortgage market in a filing with the SEC, which requires publicly traded companies to reveal “triggering events that accelerate or increase a direct financial obligation” or might cause “impairments” to the bottom line. They might have warned clients who had invested in mortgage-backed securities to consider extracting themselves before they suffered too much financial damage. At the very least, Goldman could have stopped peddling mortgage-backed securities that its own mortgage trading desk suspected might soon collapse in value.
Instead, Cohn and his colleagues decided to take care of Goldman Sachs.
Goldman would not have suffered the reputational damage that it did — or paid multiple billions in federal fines — if the firm, anticipating the impending crisis, had merely shorted the housing market in the hopes of making billions. That is what investment banks do: spot ways to make money that others don’t see. The money managers and traders featured in the film “The Big Short” did the same — and they were cast as brave contrarians. Yet unlike the investors featured in the film, Goldman had itself helped inflate the housing bubble — buying tens of billions of dollars in subprime mortgages over the previous several years for bundling into bonds they sold to investors. And unlike these investors, Goldman’s people were not warning anyone who would listen about the disaster about to hit. As federal investigations found, the firm, which still claims “our clients’ interests always come first” as a core principle, failed to disclose that its top people saw disaster in the very products its salespeople were continuing to hawk.
What follows is an amazing, very detailed story about how Goldman maneuvered successfully through the rubble of the economic collapse, and came out on top. And then, get this:
Politically, 2016 would prove a strange year for Goldman. Bernie Sanders clobbered Hillary Clinton for pocketing hundreds of thousands of dollars in speaking fees from Goldman, while Trump attacked Ted Cruz for being “in bed with” Goldman Sachs. (Cruz’s wife Heidi was a managing director in Goldman’s Houston office until she took leave to work on her husband’s presidential campaign.) Goldman would have “total control” over Clinton, Trump said at a February 2016 rally, a point his campaign reinforced in a two-minute ad that ran the weekend before Election Day. An image of Blankfein flashed across the screen as Trump warned about the global forces that “robbed our working class.”
So Trump won — and staffed up with Goldman machers — Gary Cohn most important of all:
There’s ultimately no great mystery why Donald Trump selected Gary Cohn for a top post in his administration, despite his angry rhetoric about Goldman Sachs. There’s the high regard the president holds for anyone who is rich — and the instant legitimacy Cohn conferred upon the administration within business circles. Cohn’s appointment reassured bond markets about the unpredictable new president and lent his administration credibility it lacked among Fortune 100 CEOs, none of whom had donated to his campaign. Ego may also have played a role. Goldman Sachs would never do business with Trump, the developer who resorted to foreign banks and second-tier lenders to bankroll his projects. Now Goldman’s president would be among those serving in his royal court.
It’s Cohn’s influence over the country’s regulators that worries Dennis Kelleher, the financial reform lobbyist. “To him, what’s good for Wall Street is good for the economy,” Kelleher said of Cohn. “Maybe that makes sense when a guy has spent 26 years at Goldman, a company who has repaid his loyalties and sweat with a net worth in the hundreds of millions.” Kelleher recalls those who lost a home or a chunk of their retirement savings during a financial crisis that Cohn helped precipitate. “They’re still suffering,” he said. “Yet now Cohn’s in charge of the economy and talking about eliminating financial reform and basically putting the country back to where it was in 2005, as if 2008 didn’t happen. I’ve started the countdown clock to the next financial crash, which will make the last one look mild.”
Read the whole thing. Please, do. It is staggering to think that here we are, a decade after the crash, and … here we are.
Tonight (Sunday), PBS begins airing Ken Burns’ and Lynn Novick’s long Vietnam War documentary. I’ll write more about it this week. I’ve watched it, and to call it landmark television is to vastly undersell it. It comes to mind reading the Goldman-Trump piece because it revealed, however inadvertently, how little we Americans learned from the Vietnam experience when it came time to invade Iraq.
Twenty, thirty years from now, don’t be surprised if some American president proposes a “this time, it’s different” invasion of another foreign country. And don’t be surprised if we the people cheer for him. We’re suckers for this kind of thing. Here’s Kevin Williamson, on Trump’s epic flip-flop on immigration and DACA:
What did they expect? Trump is a serial bankrupt who has betrayed at least two-thirds of the wives he’s had and who lies compulsively — who invented an imaginary friend to lie to the press on his behalf. He has screwed over practically everyone who has ever trusted him or done business with him, and his voters were just another in a long series of marks. They gave him that 280ZX with no down payment — and no prospect of repossessing it until 2020 at the earliest. Poor Ann Coulter is somewhere weeping into her gin: “I bet on a loser,” she explains.
It was a dumb bet.
With no market-oriented health-care reform and no hawkish immigration reform and the prospects of far-reaching tax reform looking shaky — even though Republicans exist for no obvious purpose other than cutting taxes — Trump is still looking for his big win. Even those who were willing to suspend the fully formed adult parts of their brains and give him the benefit of the doubt are coming around to the realization that he has no beliefs and no principles, and that he will sell out any ally, cause, or national interest if doing so suits his one and only true master in this life: his vanity. He didn’t get rolled by Pelosi and Schumer: His voters got rolled by him. That’s the real deal.
Cheers to you, Youngstown!
When Youngstown (so to speak) figures out what’s been done to it, politics in this country is going to get very, very interesting. In the meantime:
Some of Trump's base is happy to let him cut deals with Pelosi and Schumer so long as he tweets gifs of Hillary and CNN logos. WWE BS.
— Ben Shapiro (@benshapiro) September 17, 2017