Goldman Sachs (NYSE: GS) was everywhere, at least in when it came to U.S. government appointments, said Rolling Stone reporter Matt Taibbi.

The previous U.S. Treasury Secretary was Hank Paulson, the former CEO of Goldman Sachs.  Robert Rubin, Clinton's former Treasury Secretary, spent 26 years at Goldman. President Bush's former Chief of Staff (Cos), Joshua Bolton, was also a Goldman Sachs alum.  So is William Dudley, the current President of the New York Federal Reserve.

Before the financial crisis, it was politically feasible to appoint so many Goldman Sachs executives because the public had this sort of reserved awe for the bank, which was called the 'most successful company in the world' by some people.

It's kind of like how many Americans currently view the Chinese government:  a little suspicious, a little resentful, but jealous (and respectful) of their economic success and often using it in comparison to the U.S. government in order to criticize and shame the latter.

After the financial crisis, Goldman Sachs became the public whipping boy of Wall Street and appointing its former executives to government positions became political suicide.

There are a few reasons for this. One, Goldman Sachs is allegedly the bank that benefited the most from bailout money. Two, the aforementioned Goldman Sachs alums in government were allegedly too generous with their former employer at the expense of taxpayers.

There are also tangential issues like a number of lawsuits against Goldman Sachs alleging wrongdoing during the financial crisis and Goldman CEO Lloyd Blankfein's comment that he's just a banker doing God's work.

That blunder -- along with BP's (NYSE: BP) ex-CEO Tony Hayward's I'd like my life back comment -- ranks as the worst unnecessary corporate PR disaster in the last ten years and is one reason that Blankfein is the most hated banker in America.

Politicians are aware of this.

There is no way that President Obama will appoint Blankfein to any important government posts, let alone as Treasury Secretary, even though Goldmanites were a very popular choice for the job before the financial crisis.

President Obama just named William Daley, a J.P. Morgan Chase executive, to be his White House CoS.  It wouldn't matter if a Goldmanite was better qualified for the job; there is no way Obama would risk public outrage by associating himself with Goldman Sachs.

Even for the private sector, affiliating with Goldman carries reputational risk. For example, Facebook CEO Mark Zuckerberg recently received a swelling wave of backlash for 'friending' Goldman Sachs.

The U.S. Treasury, on the other hand, was wiser in choosing Morgan Stanley (NYSE: MS) -- along with Bank of America (NYSE: BAC), UBS (NYSE: UBS), and Wells Fargo (NYSE: WFC) -- to handle its financial transactions in connection with the selling of government-owned shares of Citigroup (NYSE: C).

So who will be the next Treasury Secretary after Tim Geithner?

A leading candidate is Jamie Dimon, the CEO of JPMorgan (NYSE: JPM). Indeed, the reputations of both Dimon and J.P. Morgan emerged from the financial crisis much better than Goldman Sachs and the hated Lloyd Blankfein. In fact,  someone even wrote a book titled Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase.

J.P. Morgan was seen as the strong, steady bank that stood firm during the financial crisis while the rest of Wall Street teetered on the brink of bankruptcy and would have imploded were it not for government intervention.

Dimon was seen as the leading banker and the elder statesman that guided the whole industry through the debacle and saved (bought) failing rivals like Bear Stearns and Washington Mutual.

So, while Goldman Sachs is now the most hated bank in America, JPMorgan's reputation remained intact and probably improved on a relative basis.

Politicians, of course, now prefer to appoint former JPMorgan executives rather than their Goldman Sachs counterparts.

There are two reasonable explanations as to why politicians even need to appoint so many bankers to important positions in the first place. It could be that the government truly needs their expertise. An alternative explanation is that banks are powerful enough to steer political appointments in their direction.

Whatever the reason, one thing is clear:  if the government will continue to appoint bankers, they will chose executives from JPMorgan rather than commit political suicide by going with Goldman Sachs.

 

Email Hao Li at hao.li@ibtimes.com

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