Democrats have co-opted a fiery resignation letter from a Goldman Sachs employee to argue for rigid rules on the financial sector.
Lawmakers say the letter from Greg Smith, published in The New York Times, is evidence that the reforms Congress passed in the wake of the financial crisis should be strictly implemented.
“This is ammunition for our argument,” said Rep. Barney Frank (D-Mass.), who co-authored the Dodd-Frank financial reform law.
Senate Majority Whip Dick DurbinDick DurbinSchumer sets Monday showdown on debt ceiling-government funding bill Democrats surprised, caught off guard by 'framework' deal Senate panel advances antitrust bill that eyes Google, Facebook MORE (D-Ill.) entered the piece into the congressional record, calling it “an indication of why we need to continue our vigilance over this industry to make certain that the right market forces prevail.”
Goldman executives have pushed back against the widely read letter and defended the firm’s behavior and corporate culture.
Goldman heads Lloyd Blankfein and Gary Cohn said the piece was written by a “disgruntled” individual and does not “reflect our values, our culture and how the vast majority of our people at Goldman Sachs think about the firm and the work it does on behalf of our clients.”
Lawmakers have cast Goldman as the poster child for Wall Street excess, repeatedly forcing the bank to account for its behavior in the run-up to 2008’s financial meltdown.
Sen. Carl LevinCarl Milton LevinOvernight Defense: First group of Afghan evacuees arrives in Virginia | Biden signs Capitol security funding bill, reimbursing Guard | Pentagon raises health protection level weeks after lowering it Biden pays tribute to late Sen. Levin: 'Embodied the best of who we are' Former Colorado Gov. Richard Lamm dead at 85 MORE (D-Mich.) famously aired his frustration with Goldman during a hearing in 2010, repeatedly uttering expletives as he pressed the firm’s executives about the “s----y deal” they discussed selling to clients in emails.
As chairman of the Senate Permanent Subcommittee on Investigations, Levin was a driving force behind the more than 600-page report on misbehavior leading up to the financial crisis. That report, released in April, heaped scorn on Goldman and other firms for marketing products to clients, betting against them privately, and then misleading Congress about it.
“In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin said at the time.
Smith’s resignation tirade hit many of the same notes. He said he was leaving Goldman because the firm had become consumed with its profit margin, to the detriment of clients.
“It makes me ill how callously people talk about ripping their clients off,” Smith wrote in the piece, published Wednesday.
Levin said he did not think the letter would lead to further investigations by Congress, but rather “is an embodiment of the spirit of our report, which showed the ethical depths to which Goldman had fallen.”
Lawmakers critical of Goldman said the letter did not surprise them.
“What this does is reinforce my conviction that what we did was essentially right,” Frank told The Hill Friday. “I’m surprised at the vehemence of it … but the fundamental issue? No, I’m not surprised.”
Frank said Smith’s piece undercuts the financial sector’s argument against strong Dodd-Frank regulations — namely, that their work is fundamentally for the good of the overall economy.
Industry representatives have repeatedly cautioned regulators to take a light touch in implementing Dodd-Frank, warning that onerous regulations could dry up lending and harm Main Street as well as Wall Street.
But Smith’s public accusation that Goldman is primarily concerned about its own bottom line deflates that rationale, according to Frank.
“What Smith does is to reinforce our answer to [industry concerns], which is that some of this liquidity is to the benefit of the broader economy, but a lot of this is for you,” he said.
Levin hoped regulators would take Smith’s message to heart as they figure out how to enforce Dodd-Frank.
“It was modest enough to begin with,” he said of the law.
It doesn’t appear that lawmakers will use the Goldman piece as a rallying cry for further legislation, which would be a tall order in a divided, election-year Congress.
Sen. Bob MenendezRobert (Bob) MenendezBiden, don't punish India Democrats reject hardball tactics against Senate parliamentarian Biden threatens more sanctions on Ethiopia, Eritrea over Tigray conflict MORE (D-N.J.) said Thursday he would need more facts before considering whether to take another look at Goldman.
“I read it, but it seems to me that you know, I’d like to know all of the other underlying facts. Sometimes I think doing a little research before you call for hearings is important,” he said in an interview with Bloomberg Television.
Bernie Becker contributed to this report.