Goldman Sachs lends an assist to Wall Street reform

Dodd, Reid and company got an unlikely assist from Goldman Sachs.
Dodd, Reid and company got an unlikely assist from Goldman Sachs. (Melina Mara/the Washington Post)
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By Dana Milbank
Thursday, April 29, 2010

Lawmakers have been haggling over financial reform for 18 months, but it took Goldman Sachs just one day to get it done.

Of course, the Wall Street giant wasn't intending to get the financial legislation done. Quite the opposite: Like most in the investment world, Goldman would generally prefer that regulators leave it and its billions of dollars of profits alone. But when Goldman executives faced a Senate panel on Tuesday, their performance was so obnoxious, their contempt for lawmakers so palpable, that their appearance had the effect of dissolving the Republican resistance to what Democrats are now calling "Wall Street reform."

Sen. Carl Levin (D-Mich.), who chaired Tuesday's hearing, went to the Senate floor Wednesday morning to denounce the "extreme greed" of Goldman Sachs. "What we've got to do is build defenses against these kinds of excesses," he urged.

"We heard and the nation heard from Goldman Sachs executives indicating that they had no regrets about the financial crisis, a crisis that's left 8.5 million people in this country without jobs," agreed Sen. Jack Reed (D-R.I.).

Sen. Bill Nelson (D-Fla.) followed them to the floor to denounce the Republican objections to the financial bill, "especially at a time in which we have just seen a display of extraordinarily intense, shall we say, arrogance on the part of executives at a major Wall Street firm in the way that they conducted themselves" at the hearing.

The blow inadvertently administered by Goldman proved to be the coup de grace, finally breaking the resistance of the Republicans. At midafternoon Wednesday, Mitch McConnell (Ky.), the Senate Republican leader, issued a statement of surrender, saying he would allow the legislation to go to the floor and urging Democrats to stop "the partisan gamesmanship."

A few weeks ago, prospects for financial reform were uncertain. But then two things happened: The Securities and Exchange Commission charged Goldman with fraud, rekindling memories of Wall Street abuses, and Democrats changed what they called the legislation from the banal "financial regulatory reform" to the populist "Wall Street reform." The two events set off a bit of class warfare, and Democrats emerged victorious as they forced vote after vote on the legislation on the Senate floor.

With the passage of each day this week, the Republican position weakened. On Monday the politically damaging headline "Republicans Block Action on Financial Regulation" crossed the wires. On Tuesday, the headline was twice as bad: "For 2nd Day in a Row, Senate Republicans Block Action on Financial Regulation Bill." On Wednesday the headline troubles tripled: "Senate Republicans Block Financial Bill for 3rd Time."

Opposition was crumbling. Sen. George Voinovich (R-Ohio) told reporters he thought the legislation should go to the floor. Democrats vowed that they would continue to stage daily votes and keep the Senate working overnight until Republicans relented. "If we can't get to the bill, we plan to stay in session to make the point," Sen. Ben Cardin (D-Md.) proclaimed at a hastily arranged news conference.

A new Washington Post-ABC News poll found that 65 percent support stricter regulations on financial institutions. The Goldman contretemps -- executives at the Wall Street powerhouse expressed few regrets over their role in aggravating the financial meltdown -- made things that much harder for lawmakers resisting the Democrats' reform legislation. In an interview with Sen. Susan Collins (R-Maine) on NBC's "Today" show Wednesday, Matt Lauer said the Republican position "sounds a bit schizophrenic."

On the Senate floor, Majority Leader Harry Reid (Nev.) began the day with a populist cry. "Every day they stall is a day they say to Wall Street, 'Keep up the good work,' " he said.

Republicans weren't about to defend Goldman, so McConnell tried an innovative rebuttal to Reid: He argued that Goldman Sachs was on the Democrats' side on the bill. "The CEO of Goldman Sachs was here on the Hill yesterday," he said, "and he agrees with the president, who said last week that the biggest beneficiaries of this bill are on Wall Street."

The chief executive, Lloyd Blankfein, said that he was "generally supportive" but that "there are details of it that I think I'm less sure of." The financial industry overall supports some of the provisions that increase transparency but is vigorously opposed to central components of the legislation that would regulate derivatives and create a consumer-protection agency for financial products.

But Republicans couldn't match the Democrats' anti-Goldman, anti-Wall Street demagoguery. "Each day that the Republican filibuster continues is a victory for the Wall Street lobbyists," thundered Sen. Dick Durbin (D-Ill.). Denouncing the "multimillionaires who pay themselves lavishly" at Goldman Sachs, Durbin demanded: "Did we learn nothing from the hearing yesterday?"

Sen. Tom Harkin (D-Iowa) picked up the baton. "Yesterday," he said, "we learned more about the reckless actions of traders and executives at Goldman Sachs."

"The self-appointed masters of the universe on Wall Street rewarded themselves with billions in bonuses," Harkin said, "and they've geared up to fight the efforts here to prevent this from happening again."

It took a panel of Goldman Sachs executives to do it, but the pitchforks have finally come out.

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