PUBLIC PRIVATE PARTNERSHIP

How Goldman Sachs’ Gary Cohn became Donald Trump’s top economic adviser

Obsession
2016
Obsession
2016

Real estate barons are used to turning to Wall Street to finance their grandiose ambitions, and Donald Trump is no exception.

When Goldman Sachs president Gary Cohn came into his Trump Tower office on Nov. 30 with a Wall Street-inspired plan for financing big-ticket government infrastructure investments, the US president-elect was smitten. They’ve met three times since then. That’s according to two sources familiar with the events leading up to the Dec. 12 announcement that Cohn will serve as Trump’s “top economic advisor” and chair the president’s National Economic Council, which coordinates economic policy across the various agencies of government.

Never mind the attacks that Trump leveled against Goldman on the campaign trail or his jokes about how the megabank would take over if Hillary Clinton won. Jared Kushner, Trump’s real estate magnate son-in-law and advisor, who invited Cohn to his first meeting with Trump, made a successful match.

Cohn grew up in a middle-class household in Ohio, battled dyslexia as a student, and apprenticed on the commodities trading floor before working his way up at Goldman for 26 years to the No. 2 position, where he has bided his time under his friend and CEO Lloyd Blankfein. He will be the only White House staffer named so far who isn’t primarily a creature of media—like Breitbart leader and white-supremacist hero Stephen Bannon, also a Goldman alum—or of politics—like Reince Priebus, the chairman of the Republican National Committee and Trump’s pick for White House chief of staff. Associates say Cohn’s role will be that of bond-market whisperer, and chief liaison to the business community.

“If you’re Tim Cook or Jeff Bezos, look at the line up of people, and look at [Cohn],” a former NEC staffer says. “He’s the guy to reach out to first.”

The NEC chairmanship was inaugurated by another Goldman partner, Robert Rubin, in 1993. Then-president Bill Clinton created the role, and put the NEC on par with the National Security Council in terms of stature, to help reassure bond markets about his administration’s economic measures. (This time around, it’s Republicans who need to do the reassuring.)

The role entails balancing competing voices and power centers to provide the right information to the president to make decisions about all aspects of economic policy. Management wise, it’s a step down for someone used to operating a global megabank. But the internal politics will be just as fractious.

Trump has at times seemed eager to delegate policymaking to his cabinet, but the NEC chair generally thrives under an active White House. Cohn himself is a blank slate, policy-wise—with associates saying he is as pragmatic as can be—facing an administration chock full of ideologues. We can assume he shares Goldman’s hope of lifting key financial regulations, particularly around proprietary trading by investment banks. We know he has made campaign donations to Democrats and Republicans alike.

His relationship with Trump’s pick for Treasury secretary, Steve Mnuchin, will be one to watch. Mnuchin was a member of Cohn’s 1994 partner class at Goldman. He left the firm to finance Hollywood films and commercial banks (his Dune Capital Management was a backer of big films like Avatar, and he led a takeover of the collapsed lender IndyMac). Mnuchin doesn’t have Cohn’s contacts at the highest levels of global finance. And he will likely spend the first months of 2017 in a confirmation battle that promises to be bruising during the critical months while Trump’s economic agenda is still being crafted.

Trump has made a lot of promises that would increase US borrowing, potentially spooking markets at a time when the Federal Reserve is already expected to tighten its monetary policy. Cohn understands the bond markets. Though he said in an exit interview on Goldman’s podcast that he himself hasn’t traded since 1994, his bank is one of the few firms to remain deeply committed to fixed-income trading since Dodd-Frank regulations and technological changes complicated the business for banks.

Goldman Sachs has already raised more than $10 billion in private funding for infrastructure investments since 2006, including $1.5 billion earlier this year. Using public-private partnerships for key infrastructure can be technically difficult and politically fraught, however; already Trump’s campaign plan to fund these investments with tax breaks for the wealthy rather than through lower-cost-of-capital borrowing has come under criticism as another giveaway to the rich by a government full of billionaires.

But if Cohn isn’t going to dispel concerns about the influence of the financial industry on US policy, his backers say his leadership style—frequently characterized as brash and domineering, but still suited to a partnership culture where no one leads by fiat—may be exactly what Trump’s government of billionaires needs to stay solvent.

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