Goldman declined to discuss its lobbying, but says: “As many of the regulators who implemented the [Volcker] rule have conceded, now is an appropriate time to review the rule.” The Financial Times has assembled a picture of its efforts from interviews with more than four dozen policymakers, bankers, lobbyists and lawyers. They describe an aggressive institution pushing to regain its trading edge by having Volcker watered down, if not abolished.
The bank is “all over it”, says a Treasury official. “Their single focus this year, more than any other bank, is the Volcker rule,” says the Washington chief of a rival institution. Dennis Kelleher of Better Markets, which advocates tougher regulation, says: “Goldman has always been the big swashbuckling trader that wants to take huge risks and huge leverage for the big score.”
Mr Blankfein says he is “barely” in touch with his former colleagues Mr Cohn and Mr Mnuchin, claiming in June to be “apprehensive” about how it might look. But Goldman has cause to hope Washington will come to its rescue.
When Mr Trump fired the gun on Wall Street deregulation this year Mr Cohn said “we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year”. In June, Mr Mnuchin’s Treasury department unveiled a regulatory review whose bank-friendly recommendations included “substantial amendment” to the Volcker rule. Randal Quarles, Mr Trump’s nominee to be the Fed’s regulatory chief, said last month that “the complexity of the rule makes it very difficult to apply and [we] should work to try to simplify [it]”.
But there are reasons to be cautious, too. So far not a single significant regulation has been changed. White House turmoil has slowed the confirmation of Trump appointees at the main US watchdogs. Goldman is straining relations with its rivals and its critics are ultra-vigilant for any sign of a “Government Sachs” plot.
Goldman Sachs and the Trump campaign were never natural bedfellows. Mr Trump’s final campaign video scorned the robber barons of the global elite as it displayed an image of Mr Blankfein. A tweet from the Goldman boss on Monday, interpreted by many as a comparison between the shadow cast by the solar eclipse and the Trump administration, hinted at the tensions. The head of its Washington office is a Democrat named Michael Paese, who leads a team of eight in-house lobbyists and oversaw lobbying spending of $1.4m in the first half of this year, compared with $3.2m for 2016, according to the Center for Responsive Politics. His boss is John Rogers, Goldman’s chief of staff, an earnest man from the Republican party establishment, which Mr Trump derides.
Where Goldman and the Trump team have found common cause is deregulation. The job of the Rogers-Paese axis is to turn Mr Trump’s anti-red tape rhetoric into blows against the Volcker rule. It is a clunky regulation disliked by almost all US banks. But its reform is crucial for Goldman because of the bank’s outsized dependence on trading. Citigroup has surpassed Goldman by spending $2.5m on lobbying in the first six months of 2017, while JPMorgan Chase is in line with it at $1.5m, but both are universal banks working on multiple fronts. Morgan Stanley, which doled out $1.2m, was the investment bank most similar to Goldman before the crisis, but it has shifted its focus to wealth management.
Goldman, however, does not want to look like it is on a lone crusade. As one person who works with the bank says, it would be the kiss of death for any proposal to be branded the “Goldman Sachs amendment”. So it has tried to forge a united front with the industry.
But there are cracks in the façade. “[Goldman] don’t play well with others. Unless there’s something they want and feel collectively they can do,” says the chief lobbyist of another bank. On Volcker, “whatever the industry view is, it has to be their view”, he adds. The corralling of its peers has happened via the Securities Industry and Financial Markets Association, or Sifma, a trade group. Sifma laid down a marker with comments it submitted in June to the Treasury’s regulatory review calling for Congress to erase the entire rule.
On conference calls where Sifma’s members thrashed out what they would say on Volcker, Goldman was “relentless” with Mr Paese at the helm, according to one person involved.
Another bank lobbyist says institutions that wanted refinements rather than the abolition of the Volcker rule pushed back against Goldman, worried that asking for too much would jeopardise the chance of any victories. But the lobbyist says that in the end: “What Sifma came out with on Volcker is what Goldman wanted. That’s where they did their fighting.” Ken Bentsen, Sifma president, however, denies that Goldman drove the process and says the trade group’s views have been consistent since 2010.
Putting himself in Goldman’s shoes, Peter J Solomon, founder and chairman of a boutique investment bank, says he would “absolutely” want to cast off Volcker and make big bets again. “I would want to do more. Where else are you going to make your money?” he says.