Gary Cohn has left government, but he continues to provide the American people with invaluable services. He is no longer in the position to shield the country from President Trump’s worst impulses, but he is perfectly situated and surprisingly willing, to help the American public understand just how remorseless the titans of Wall Street are with respect to their roles in creating one of the greatest financial calamities in the history of capitalism.
In an interview Tuesday with Reuters, Cohn reflected on the 2008 financial crisis with the same bravado, and lack of introspection, that he brought to the Financial Crisis Inquiry Commission eight years ago, when he laughably argued that because Goldman Sachs lost money on its mortgage residential mortgage-related activities, it couldn’t have been guilty of fraud. Goldman Sachs, of course, later admitted to defrauding its investors when it attested to the soundness of the mortgages backing securities it sold in the run-up to the crisis, in a civil settlement with the Justice Department announced in 2016.
Despite this admission of guilt, Cohn was positively indignant at the suggestion by his interviewer that the public is reasonably angry that so little was done to hold financiers criminally liable for the $20 trillion in lost wealth and the destruction of tens of millions of Americans’ financial wellbeing that was the result of the crisis. “Who broke the law?” Cohn demanded. “I just want to know who you think broke the law . . . I don’t know what law was broken.”
The answer to this question is readily available should Cohn ever care to challenge his own self-righteousness. In a 2014 article in the New York Review of Books, Jed Rakoff, a federal judge of Southern District of New York, writes that the findings of the Financial Crisis Inquiry Commission show that signs of criminal fraud were “were everywhere to be seen.” While few observers accurately predicted the timing and magnitude of the financial crisis itself, it could not have occurred without many instances of the willful misleading of counterparties. “Mortgages of dubious creditworthiness increasingly provided the chief collateral for highly leveraged securities that were marketed as AAA, i.e., securities of very low risk,” Rakoff writes. “How could this transformation of a sow’s ear into a silk purse be accomplished unless someone dissembled along the way?” The burden of proof in any specific case of criminality lies with the government. But Cohn’s argument that an FBI, equipped with the resources and will to prosecute criminal fraud, would have found none at all, is ridiculous.
But the real story is that the FBI doesn’t have the will or the resources to do this, and that’s just fine with Gary Cohn. Though Cohn’s tenure at the White House was portrayed as an insurgency, because Cohn disagreed with the president on trade and climate change, the Reuters interview underscores the many, more substantive ways Cohn, Trump, and the rest of the Republican Party are in perfect agreement. One such area is the belief that white collar crime isn’t the sort of crime we need to really be concerned with, as evidenced by the 17 percent cut in the IRS budget over the past eight years, and statistics that show that the Trump Administration is prosecuting white-collar crime at the lowest rate in thirty years.
The other significant illusion that Cohn shares with his fellow Trumpers is the idea that the lackluster economic recovery that followed the financial crisis was the result of overregulation and over-taxation of corporations. Economist Carmen Reinhart and Kenneth Rogoff performed an exhaustive study of the global history of financial crisis and used that research to predict the weak trajectory of the recovery even before President Obama took office. The fact is that economies take a very long time to recover from financial crises, regardless of those countries’ regulatory stance or its tax policy. This hypothesis is confirmed by the fact that every advanced economy, from Japan to Germany to the United States suffered sluggish growth since 2008, despite their very different public policy regimes.
The most impressive aspect of Cohn’s career in government is the way in which he took his mainstream Republican views and succeeded in getting the press to portray him as a Democrat working inside the Administration to babysit a dangerous president. Here are the facts: The American people bailed out the U.S. financial system ten years ago, ensuring that Gary Cohn’s stock in Goldman Sachs was worth the hundreds of millions of dollars he sold it for last year, in order to join the government. After pocketing a massive tax break following that divestiture, he joined an Administration he thought to be a moral horror show in order to promote the interests of his industry and his class. Now he’s free to pursue more money making opportunities while owning the admiration of both anti-Trump Democrats and the Republican donor class. The man may not be admirable, but his ability to slither away, unscathed, from such calamities as the financial crisis and the Trump Administration sure is impressive.
Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.