By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, April 29, 2010; 12:58 PM
Until a few years ago, Goldman Sachs operated a sleepy lobby shop in the nation's capital.
But now, faced with fraud charges, investigations, a firestorm of criticism and a regulatory overhaul bill that could seriously damage its profitability, the venerable Wall Street firm is assembling a team of veteran lobbyists, well-connected former Hill staffers and top public relations strategists to confront what is arguably the most traumatic moment in its 140-year history.
Over the past two years, as it emerged from the financial crisis with a reinforced image as Wall Street's top bank but also the No. 1 target of public ire, Goldman has built up a 12-person government affairs office in Washington to help the firm get its message to legislators and regulators.
The team has gotten down in the trenches with the other large banks, meeting multiple times in recent months with members of key House and Senate committees working on the regulatory overhaul. Earlier this month, for example, Goldman sent executives from New York to Washington, where they accompanied the firm's lobbyists to a meeting with the staff of Sen. Blanche Lincoln (D-Ark.), chairman of the Senate Agricultural Committee and author of a proposal that would force banks to spin off their lucrative derivatives-trading desks.
Goldman's former lobbyists, as well as Congressional staffers and industry lobbyists who have dealt with the firm, say the company's government relations staff had traditionally maintained a low-key presence inside the Beltway and elsewhere, focusing on building goodwill and long-term relationships. Over the years, it has hosted training sessions at its New York headquarters for regulators and government officials, including managers at the Securities and Exchange Commission and those coming up the ranks in foreign regimes.
As head of its government affairs office in Washington, Goldman has installed Michael Paese, a former top aide on the House Financial Services Committee to Chairman Barney Frank (D-Mass.) and more recently an industry lobbyist. (Frank has barred Paese from lobbying his panel for two years, longer than what ethics rules require.)
Paese reports to Faryar Shirzad, a top adviser to President George W. Bush on economic affairs. On their team are Eric Edwards, a former staff director of a House Financial Services subcommittee; Joyce Brayboy, a former chief of staff for Rep. Melvin Watt (D-N.C.); Joe Wall, aide to former vice president Dick Cheney on legislative matters; Kenneth Connolly, formerly with the Senate's environment and public works committee; and Michael Thompson, who worked for Sen. Mike Enzi (R-Wyo.).
The bank also has in place an external roster of high-powered lobbyists, including Richard Gephardt, the former Democratic House majority leader; his former aide Stephen Elmendorf, now of Elmendorf Strategies; Kenneth Duberstein, who served as Ronald Reagan's chief of staff; Harold Ford Sr., a former representative from Tennessee; and Richard Roberts, a former SEC commissioner who has also served as the top aide to Richard Shelby, the ranking Republican on the Senate banking committee.
Perhaps more telling of the urgency of Goldman's efforts are recent additions who technically aren't lobbyists but have deep ties to Washington. This month, the firm hired high-powered public relations professional Mark Fabiani, whose clients are often large corporations in crisis mode. Dubbed the "Master of Disaster" for his handling of the Whitewater scandal during the Clinton administration, Fabiani is advising Goldman on a number of fronts, including public image strategy. Stephen Labaton, a veteran former regulatory reporter for the New York Times, has also been brought on as full-time consultant.
Rounding out the team is Gregory Craig, President Obama's former White House counsel and now a partner in the Washington office of the law firm Skadden Arps, who will be working on litigation advice and related matters.
Together, the team is plowing forward with a more aggressive lobbying and public relations campaign, one aimed at making sure that when the history books are written, Goldman's side of the story is told. One focus will be the Financial Crisis Inquiry Commission, the independent group set up by Congress which is putting together a massive report on the causes of the financial collapse.
Goldman has also increased its political spending. The firm's lobbying expenditure was $1.15 million for the first three quarters of this year, up 72 percent from the same period last year. While other major banks have increased their spending, Goldman's increase was the sharpest.
Goldman's team will have its work cut out for them. With the SEC charges looming -- charges that the firm has vehemently denied -- Goldman has become "radioactive," in the words of one prominent financial industry lobbyist.
Lincoln said this week that she will donate to charity the $7,500 she received from Goldman's political action committee during the current election cycle. Rep. Mark Kirk (R-Ill.), who is running for Senate, also said he will return contributions from Goldman.
Goldman declined to comment on its lobbying activities.
"They can't conduct business as usual," said Steve Fraser, author of "Wall Street: America's Dream Palace." "I don't think any more secretaries of Treasury are about to come out of Goldman for quite some time. Democrats, even Republicans, will have to be crazy to name some ex-CEO as his next head of Treasury or the Fed."