Bought and Paid For Read Free

to fight the charges, or at the very least whittle them down so the firm could settle in a palatable manner.
    Blankfein’s problems were compounded because Goldman wasn’t completely out of the woods in terms of criminal inquiries, either; the U.S. attorney for the Southern District of New York, as well as New York attorney general Andrew Cuomo, were launching investigations at the same time that British regulators and even the securities industry’s self-regulator, the Financial Industry Regulatory Authority (FINRA) launched their own probes into the firm.
    With Goldman enmeshed in a huge PR and legal debacle, Blankfein knew he needed a game changer, something that put the firm back in the good graces of the government and, most important, of the man who controls the government, President Obama. For the most part, Obama had been good to the banks—really good. They’d gotten everything they wanted in terms of bailouts and handouts and reaped enormous profits because of it. But now, realizing the public’s increasing anger, Obama came to the conclusion that he needed to change his tune or risk appearing completely out of touch with the national mood. So he and his fellow Democrats made banker bashing their pet project.
    Amid this assault, ShoreBank’s demise presented a unique opportunity for Wall Street’s battered CEOs. After all, Obama hailed from Chicago, where the bank was based. He had earned his political chops there serving in local government and later as a senator. Obama had even once touted ShoreBank as doing God’s work, even though according to independent analysts I spoke to it hasn’t generated a profit in years. Judging by its financial troubles and unprofitability, the bank seemed to exist to lend money to poor people or investors who tried to spur economic growth in the inner cities, even if that growth didn’t really work out as planned. But it kept lending anyway and also began to pursue so-called green investing, or investing in businesses that are environmentally friendly even if those businesses lose money and generate few jobs.
    Blankfein knew all of this and more, namely that ShoreBank had direct ties to senior administration officials: Presidential senior adviser Valerie Jarrett sat on the board of Chicago Metropolis 2020, a civic organization run by Adele Simmons, one of ShoreBank’s directors; Obama’s own controversial green czar, Van Jones (who later resigned after reports linked him to controversial remarks about the September 11 terrorist attacks), was involved in one of ShoreBank’s many projects. Eugene Ludwig, the former comptroller of the currency under President Bill Clinton who was a former ShoreBank director, had called many top Wall Street executives, including Blankfein, and explained all the societal “good” they could accomplish if they helped bail out the struggling, civic-minded bank.
    Another layer of pressure came from Sheila Bair, the head of the Federal Deposit Insurance Corporation (FDIC), the federal agency in charge of taking over and liquidating failed banks. A Republican who was reappointed by the new president, Bair made it clear in her calls to various Wall Street executives that despite taking over more than two hundred banks since the financial crisis began, she didn’t want to liquidate this one.
    It didn’t take Blankfein long to put together the pieces. Blankfein may be brutal in front of the press of congressional committees (check out his public appearances), but he knows that in politics, sometimes it pays to play nice. In fact, one of the first things he did as the regulatory noose began to tighten was hire former Obama counsel Greg Craig as a senior adviser. Craig knows better than anyone on Wall Street whom to cozy up to in the administration.
    Knowing what he could gain from an investment in ShoreBank, Blankfein pledged $20 million of Goldman money to the troubled bank to help rescue it,