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April 20, 2010

Obama's Goldman Sachs problem

Obama has a problem, and its a big one. GS donated almost a million bucks to teh One during 2008, and ~$400K to Hillary. McLame only tapped GS for $230K in 2008. McLame, Romney, and Rudy combined only tapped GS for $576K, so its pretty clear who GS was backing in 2008.

Now, one doesn't spread around $1.4M in campaign contributions without expecting a little quid pro for their quo, which is Obama's problem.

Does he give back the ~$1M in donation money, thus demonstrating to any future corporate contributors that he won't stay bought (my definition of an honest politician/judge is one who stays bought), or is he an unreliable weasel that you can only rent by the hour like rooms at a hot sheets motel,where clean sheets are going to cost extra?

Its clear someone needs to go down over the GS scandal. At minimum, for appearance sake, someone has to go to prison for a couple of years and some fines have to be levied. With the discontent over their flash trading activities and other sketchy stuff, even GS knows they can't possible skate completely free.

The question will be one of degree.

If Obama gives the cash back and goes "all in" unleashing the Kraken on GS, then clearly his corporate fund raising ability for 2012 will be severely impacted because donors will know he's unreliable. They'll flee in droves, and with ObaMania melting like a Sno-Cone on a hot summer day, the vaunted NutRoots/OFA machinery is unlikely to ever match what it did in 2008 since he seems to be irritating almost every special interest group out there these days.

GS would also make a formidable political enemy for Obama should the punishment be deemed too stiff by GS. Would he really want them throwing their considerable weight behind a Republican in 2012 if they felt betrayed?

The only way for him to solve that thorny aspect would be to drag this out as long as possible through the 2012 election, thus keeping GS donations in the radioactive category for everyone concerned, but again that kind of move would not play well with other corporate donors.

I noticed that GS has retained Sullivan and Cromwell as outside attorneys for this thing. S&C were outside counsel for Microsoft in many of the various lawsuits they faced. I've worked with the S&C people, they're damn good. I also expect they're there to broker an acceptable settlement that "looks good", but doesn't cost too much. I'd predict some sort of consent agreement with GS might be part of the "penalty". Consent agreements don't cost much but can be spun by the government as having resolved the internal GS "problems" that allowed this situation to happen.

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posted by Purp at 03:33 PM

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