Hillary Clinton’s Goldman Sachs speeches were released over the weekend, and the conventional wisdom is that there’s nothing in them that could be considered disastrous for her presidential campaign. You can play a kind of scavenger hunt to collect all the pundits mouthing some variation on the idea that Clinton should have just released the transcripts in the spring when Bernie Sanders asked for them.
But it may be more illuminating to look at these events from the other side, from the perspective of what Goldman Sachs wanted to get out of them. That reveals something interesting about how large corporations try to secure market advantage through their access to the corridors of power.
These weren’t exactly speeches, but question-and-answer sessions, where a representative of Goldman Sachs — on two occasions CEO and Chairman Lloyd Blankfein, and once Tim O’Neill, global co-head of investment management — discussed the issues of the day with the former secretary of state. All of the presentations took place in 2013, the year Clinton left the government. Goldman paid Clinton $225,000 a pop for these discussions. What were they after?
Well, since their top executives asked the questions, we can actually answer that question. As an example, in the first speech in June 2013, Blankfein’s first five questions were about Asia — the rise of China, whether other countries in the region would gravitate to the U.S., the situation in the South China Sea, the nuclear disposition of Japan and how to handle North Korea. Both of the other speeches cover China and the Pacific Rim extensively.
Goldman Sachs executives had a good reason to ask about Asia: They were in the process of rapidly expanding their footprint there. They redeployed resources to the region that year, poaching Morgan Stanley’s Asian investment banking head and Citigroup’s electronic trading chief. “We’re used to the economic team in China. We go there all the time,” Blankfein said in his first discussion with Clinton.
What they weren’t used to was insight into the geopolitical situation in Asia. That’s part of what they were buying from Clinton. As Goldman expanded, executives wanted to know about regional trouble spots, what countries could be in conflict, where might be a safer place to operate.
The typical term for this is political intelligence. Companies probe current or former politicians for information to help dictate where to invest. The higher-level the politician, the more valuable the information. And it doesn’t get any more valuable than the recently departed secretary of state.
A close dive into these speeches suggests that Goldman kind of got ripped off. Clinton didn’t really offer insights that were anything you couldn’t read in a Brookings Institution white paper. I don’t think there was a lot of inside dope in these speeches. But the assumption that they came from an authoritative source was enough for Goldman Sachs to drop six figures on talking to Clinton three separate times, if for no other reason than the prestige of having her in the room, giving them her perspective.
Political intelligence has in recent years been seen as dangerously close to insider trading. Third-party firms that peddle intelligence to corporate clients have been under significant scrutiny. The SEC penalized a number of these firms for transferring inside information to their clients. Iowa Sen. Charles Grassley has repeatedly introduced legislation to inject transparency into the process by forcing political intelligence firms to register as lobbyists.
I’m not suggesting that any material non-public information traveled from Secretary Clinton to Goldman Sachs. But this was a subtler form of political intelligence gathering. First of all, Goldman eliminated the middleman; instead of employing a firm it went directly to the politician. Second, instead of seeking information on active legislation or treaties, it sought the advice of someone who recently left the government. This is actually pretty common: Former members of Congress, cabinet members or even staffers have a wealth of knowledge to impart to willing corporations.
Third, Goldman wanted a broad view of the world, focused on Asia but also the Middle East and Europe, that might inform its long-term decision making, where to place its money over the next 10 or 20 years rather than a hot stock tip for the next week.
Here’s a real-world application of this: a paper from three European professors that looked at 400 British, French and Swedish firms in the wake of the Eurozone crisis in 2012. Firms that had significant economic ties inside the Eurozone were heavily engaged in monitoring the geopolitical situation and sought to diversify their systems. At one level this sounds completely intuitive: A problem inside the Eurozone necessitates the need to diversify. At another level it shows the value of political information, enough that companies thirsting for that information will pay hundreds of thousands of dollars just to get a taste.
What does this say about a future Clinton administration? I think that misses the point. We have this concentration of big firms that can summon political officials to download information to them. They are not only intertwined with the government through appointments through the revolving door, they are plugged into any changes happening within the government, and I doubt that just extends to formal discussions with former officials.
This informal merger of the public and private should concern us as a society. It should lead us to consider breaking up big firms so their political power doesn’t grow along with their economic power. It should lead to some serious questions about the financial industry’s share of the economy. It should make us probe deeper whether the U.S. is putting its thumb on the scale internationally on behalf of U.S. firms, penalizing them less for improprieties than their foreign counterparts.
The story has an amusing ending. The huge scandal with the Malaysian sovereign wealth fund 1MDB, and Goldman Sachs’ deep involvement in it, not only led Goldman’s top man in Asia to resign, but occasioned a pullback from the region entirely. One of the biggest set of questions Goldman Sachs had for Clinton in these discussions turned out to be irrelevant, made so by an unrelated corruption scandal. Maybe Goldman should have maintained a semblance of management over its foreign operations instead of sitting down with Hillary Clinton for an hour of banalities.