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Jul. 23 2009 - 8:48 am | 47 views | 2 recommendations | 32 comments

Another Curious Obama Nomination

Key facts concerning Hormats’s role in the PetroChina IPO:

With the PetroChina IPO facing significant opposition from human rights advocates, Hormats assured members of the press that no funds from the offering would be used for work in Sudan.

These statements later proved to be inaccurate and misleading. Several large institutional investors, including Harvard, have since divested from PetroChina, citing human rights concerns.

The SEC later cited Hormats’s remarks as evidence of illegal market tampering, or “market conditioning,” in a larger case against Goldman Sachs, which the bank settled for $2 million.

via Eyes on the Ties » a blog by LittleSis » Blog Archive » New PAI report on Obama nominee’s role in PetroChina/Sudan financing.

Forgot to post this earlier, about last Friday’s nomination of Bob Hormats, a former Goldman banker, to a key post as Undersecretary of State under Hillary Clinton. Thanks to Kevin O’Connor at the Littlesis website for the heads-up.

Hormats has an odd past to say the least, and some friends of mine from my Russia days tell me I should remember his name, as he was apparently involved in the effort to get Rusia to liberalize its markets back in the Yeltsin years. The thing people are focusing on, however, is his behavior surrounding Goldman’s handling of the PetroChina IPO. In the face of public criticism of the deal, which some worried would end up supporting a genocidal regime in Sudan (PetroChina had significant interests there), Hormats lied to a number of press outlets, including the still-pissed-about-it Washington Post, saying that none of the money from the China deal would end up in Sudan.

This was later proved untrue; moreover, just by saying anything at all, Hormats violated SEC rules against public statements that might arouse interest in a deal before it is registered with the SEC. As noted above, Goldman was eventually fined $2 million by the SEC for the incident, a classic example of “regulation” — the IPO was worth $3 billion, so the cost-benefit analysis here still looks pretty good from Goldman’s end.

Goldman in that deal also got punished for sending out promotional materials about the IPO to institutional investors before the SEC registration. I mention this because these materials are very amusing — the funniest being a section on PetroChina’s earnings potential that was headlined, “SIZE DOES MATTER.”

Given everything that’s gone on recently, I just don’t get what’s going on with Obama’s appointments. You’ve got to fill a key post at State, and you can’t find someone who isn’t a former Goldman banker with a controversial human-rights profile? There are an awful lot of people on the earth; why this clown? I find it impossible to believe that the administration is not sensitive to the current unpopularity of this bank, which raises the question of what the message is here. Even leaving aside the moral aspect of this, politically it just seems like such a strange move.


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  1. collapse expand

    I remember Hormats as outspoken over the need to bail out the Mexican peso back in ‘94. Like the AIG bailout, all that was about was making sure the Mexican government didn’t default on bond payments to … can you guess who?

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    “….some friends of mine from my Russia days tell me I should remember his name, as he was apparently involved in the effort to get Rusia to liberalize its markets back in the Yeltsin years.”

    And one need only read Naomi Klein’s “The Shock Doctrine” to see how that all unfolded. Just one more example of how democracy is crushed for the sake of a dollar. “Liberalizing markets” around the world has always meant publicizing risks while privatizing profits. And now they’ve finally found a way to bring it home!

  3. collapse expand

    It doesn’t beg the question. It raises the question.

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      Fine. Are you happy now, Mr. Safire?

      In response to another comment. See in context »
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        Hi Matt, I’d like to contact you about your Goldman/Rolling Stones piece. Sorry for dropping so many unrelated comments in this blog. I wrote to the Rolling Stone, but they haven’t replied yet. Can you write me an email to b.d.s@web.de ? I promise we won’t waste your time. We translated the piece to make it available for more people to read and of course we need your OK before we can do anything with it.
        Thanks for all your reporting,
        (pls delete this comment once you’ve read it :) )

        In response to another comment. See in context »
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        I seem to recall that Safire was distracted by the misuse of “begs the question,” where the proper phrase is, apparently, “beggars the question.” The latter construction connotes an idea so plainly evident that it diminishes inquiry. I don’t really get it, but I believe that if you had originally used “beggared,” than we would recognize that the inappropriate appointment speaks for itself in its brazen inappropriateness.
        On the subject of Safire, I see that he’s humping that “kitchen debate” chestnut yet again in today’s Times. The essay refers to a photo of Kruschev and Nixon that Safire had to smuggle out of Russia in his ass. Not all that surprising given that Safire has pulled most of his most important work out of his ass.

        In response to another comment. See in context »
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        Since the days of the Roman Empire, “begging the question” (or petitio principii) has been used to denote a logical fallacy in which the proposition to be proved is assumed implicitly or explicitly in the premises. Hence the “begging” *of the question*.

        Someone somewhere once upon the time but not too long ago apparently liked that phrase so much that he/she decided to assign to it a completely different meaning, and, as often happens amongst Earthlings, the misusage caught on like wildfire. The human race has been in a downward tailspin ever since, while cognitive dissonance everywhere continues to climb to formerly unknown heights.

        In response to another comment. See in context »
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        that`s funny matt

        In response to another comment. See in context »
  4. collapse expand

    Begs the question? I think you answered the question in your July 16 post, ahem… “Goldman’s profit announcement is a giant ‘fuck you’ to the rest of the country. It is a statement of supreme privilege, an announcement that it feels no shame in taking subsidies and funneling them directly into their pockets, and moreover feels no fear of any public response. It knows that it’s untouchable and it’s not going to change its behavior for anyone. And it doesn’t matter who knows it.” Of course, you’re referring to GS and profit announcements, but hey, same crux. Can there be any doubt that the Administration is in bed with them? By acting as if perception toward GS is a non-issue, they help discredit any movement to get steam built and get this friggin nation off it’s ass to get our pitchforks and storm wall street and have our own friggin Bastille Day.

  5. collapse expand

    This was one of the reasons I initially was disappointed with the Hillary SoS appointment.

    I feared that HRC would just appoint another round of establishment “centrist” foreign policy types who hem to the status quo. i.e. Dennis Ross and Richard Holbrooke.

    Whereas I felt if Obama went with someone more “fresh,” so to speak, we’d get more mid-levels at State in the Samantha Powers, Joseph Nye, Susan Rice mold, people less constrained by history and more willing to speak uncomfortable truths, like (i) we need to get the fuck out of Iraq and Afghanistan; (ii) we really need to shut down Gitmo, and not just move it elsewhere (iii) being even handed on Israel-Palestine is a good thing (they haven’t been so bad on this point).

    Yet, I’m trying to fight the nihilism and reach the conclusion that all this talk about Change was bullshit. We have Holbrooke and Dennis Ross holding the Iran and Pakistan portfolios. Matt’s point today only builds upon one of the most grotesque examples of the Change rhetorical bullshit.

    Obama promised that no lobbyists will be allowed to serve in his administration, but, yet, they allow for some “waivers.”

    Which of these two nominees gets the waiver:

    Nominee #1: A former Human Rights Watch lobbyist who is nominated to be the Assistant Secretary of State for Democracy, Human Rights, and Labor.

    Nominee #2: A former Goldman Sachs lobbyist nominated to be the Chief of Staff to the Treasury Secretary.


    What’s most frightening in all this, and something Matt has pointed out earlier, is the damn peasant mentality of the Glenn Beck crowd and others on the right. Yah, some real bad shit is going down in this country, but, it’s not that Obama doesn’t have a birth certificate, or that he’s somehow a Socialist for trying to bring health care and lower that ungrateful piece of shit Joe the Plumber’s taxes. It’s that he’s completely beholden to the big banks.

    “I feel like I’m taking crazy pills!” – Jacobim Mugatu

  6. collapse expand

    Combined with the administration’s shrinking inability to confront the health-care establishment and its congressional mouthpieces, these kinds of moves are really creating a challenge for Obama to square with the promises he made (and that many of us voted for). Between the continuing connection to the finance world that grew up under Bill Clinton and W, and the ties placed on him by moderate Democrats, I begin to wonder where Obama’s heart really is in the end.

    I don’t want to wonder this, because I do think he’s got principles he’d like to bring into policy. But these are not those principles. So I’m starting to wonder, b/c as you say Matt, with everyone out there, why this guy?

  7. collapse expand

    From http://edupreneursvkleptobankers.wordpress.com/

    “Canonical research findings suggest that American entrepreneurs who establish popular online markets for customized education will catalyze the creation of many good jobs in America, and will end the reign of America’s kleptobankers. Some of the researchers: Clayton Christensen, Paul Romer and Paul Krugman.”

  8. collapse expand

    Spelling error – it’s “Russia”.

  9. collapse expand

    Did you catch Obama saying the Cambridge police were stupid? He said that without knowing the facts about the incident. But he sounded so glib and knowledgeable when he said it. He’s a great salesman. But is ignorant otherwise. Same thing when he talked about saving money with health care reform. He said that if someone had type 2 diabetes they wouldn’t have to wait until their foot was cut off to save them if his health care plan passed. But that’s nonsense because they don’t have to do that now. It just goes to show what he actually knows about what he is talking about. As for GS, they paid for access and they’re getting it. That’s why Hormats got the job.

  10. collapse expand

    Matt, thank-you so much for your work. Normal Joe Schmoes(not Joe the f*&#head plumber) really don’t want to get involved in all this financial crap. But now they have to, now that they realize they are being f#@%ed over so hard. I know it is not your area, but my big question is WHAT DO WE DO? OR WHAT CAN WE DO? And never voting again seems a little too passive agressive for me…

  11. collapse expand

    Hey, whatever happened to Neal Kashnkari? He, who had to ask his wife if it was okay to stay on longer? He, who was a Goldman grad too. He, who was in charge of giving away the TARP money? Did he go to get his reward from Goldman or is he still hanging around Treasury?

  12. collapse expand
    deleted account

    I’m about to take up a job at thinkprogress, matt. Whatever stuff I can get an editor to approve I’d like to put up about these nomination shenanigans. It’s stuff almost no one’s talking about. Except for you and maybe Durden, who have somehow become Goldman’s worst nightmare.

  13. collapse expand

    It’s only appropriate that Goldman Sachs is given a token number of appointments in a new administration.

  14. collapse expand

    Hey I just sent this letter to Time, what do you think?

    Goldman Sachs are receiving enormous bonuses that can be directly linked to the $13 billion dollars laundered through AIG from the American tax payer. This is robbery in broad daylight. Goldman Sachs use governmental influence, manipulation, and opportunism of business failure to maximize their returns while minimizing risk. Goldman Sachs has unfettered access to huge piles of cash from the productive sector of the economy which they steal from every day. Goldman Sachs neither make or improve tangible stuff or help society in general whatsoever. I don’t how they live with themselves as they conspire to conceive of the next creative financial instrument to steal from people that do real work. All that they do may be legal, but it is not moral. Enjoy that big fat bonus and the ticket to hell that goes with it.

  15. collapse expand

    How about the fact that Morgan Stanley posted a loss yet are shelling out billions in bonuses? When the hell is this going to end?

  16. collapse expand

    I may have stumbled upon a part of the problem yet to be discussed. I was trying to learn what I could about Hormats/Goldman/the U.S. government and, in doing so, reading about Goldman’s exploits going years back, I realized that there may be no meaningful way for the majority of US citizens to understand what all this means or how to comment on it. The Goldman people and the reporters, contributors and commentators across the Internet clearly have a solid basic understanding, some more than others, of how the investment world works and makes its money and why some of this stuff is simply wrong. Unfortunately, Americans, for the most part, are an under-educated people in spite of all the money spent on education here. It is my understanding that most read on a 4th-6th grade level of comprehension. When anyone begins a discussion of “hedge funds” “shorting” (this term came up regarding how Goldman made money off the bad mortgages when others did not) and many other terms that I encountered while trying to learn just who Mr. Hormats is (so I could make a decent comment), I realized that I was in over my head. Maybe it would be helpful to create a glossary of market terms but the definitions themselves, often, are mystifying and unfathomable to those of us who simply have never raised our financial wherewithal to a degree high enough to warrant delving into the morass that is investment banking, investing, buying and selling stocks, puts and calls, to name a few. But anyway I looked up Mr. Hormats who is not listed with Wikipedia. However, Goldman International came up and it was there that I became disoriented and unable to gain purchase on any true understanding worthy of a comment. And, then I thought, this is the problem – most Americans do not understand any of this and do not have the time it would take to attain some reasonable level of understanding it. So, this may be not so much the poor vs. the wealthy; or the haves and the have-nots, but this could be the financially swift vs. the financially slow or illiterate. The gap may ever widen rather than ever diminishing. Therefore, in addition to reinstating some meaningful regulation of the markets, preventing large corporate interests from also participating in the very government that should be regulating them, there must be required courses that provide, as clearly and simply, the basis for the market, how it operates, what the various terms mean, who gets to play and why and who doesn’t and why. So, I don’t appreciate that O’Bama has let me and others down by allowing Goldman to call in all its favors and place key former members of their firm in high government places. But I am even more concerned that we cannot get enough people charged up about this because it is simply too confusing and beyond average ken. I’m following Matt because I think he is on to something and I want to be there as he makes progress. I appreciate his making the journey to clarify and make known, in his distinctly articulate style, what is happening and has happened to our way of life and our country. It is the most important story there is to tell (and to follow) at this time.

  17. collapse expand

    Matt…Just saw you on Bill Maher. What a waste of your time. When are you going to be able to discuss “Bubble #6″ at length? Were you as disappointed as you looked at the close of the show? I knew he would have you on…then he does not interview you or let you talk….what a dick.

  18. collapse expand

    Andrew Cockburn of Counterpunch has also highlighted the appointment of Robert Hormats in an article titled “The Wall Street White House“. He also mentions Michael Froman in that article. Froman is interesting because he has worked for former Goldman Sachs CEO Robert Rubin. He also knew Obama from working on the Harvard Law Review. According to Cockburn, Froman introduced Obama to Rubin. That’s interesting because that may have been the beginning of the Obama-GoldmanSachs connection. It’s no secret that GS was one of Obama’s biggest political campaign contributors early on. (See my article “The Tom and Baracky Show” about an early GS event featuring Tom Brokaw and Barack Obama in May 2007.)

    Froman’s current position is Deputy Assistant to the President and Deputy National Security Adviser for International Economic Affairs. According to the “Who Runs Gov” website Froman hooked up with Obama back in 2004 when he was running for the Illinois Senate. I guess when you’ve been around that long you get paid off with two jobs instead of one.

    “In 2004, Froman heard his long-lost buddy was planning to run for the Illinois Senate. Froman called up Obama and offered his help, which Obama accepted.

    The offer of assistance would continue throughout the 2008 presidential campaign, as the Citigroup manager had a long list of New York finance friends who would be willing to part with some cash for the right cause. Froman helped to get Obama in the door, and even persuaded certain financiers, who had strong ties in the community, to support Obama.”

  19. collapse expand

    It’s consistent with all his other appointments: Henry Kissinger as special envoy to Russia, Diana Farrell (the primo jobs offshoring specialist in North Am. – read the book she was editor of – OFFSHORING), also another Goldman Sachs alum, Laura Tyson (full-on supporter of NAFTA), Richard Holbrooke, Summers, Geithner (BlackRock – now could that be a play on Blackstone?), and lest we forget, Eric Holder & Chiquita?

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