Why D.C. loves Goldman Sachs

It has been a good year for Goldman Sachs, and not just because the venerable investment bank has enjoyed a 50 percent stock increase.

Last week, Henry Paulson, the firm's former chair, was sworn in as Treasury secretary. Back in March, President Bush selected Josh Bolton, a former Goldman Sachs managing director, as his chief of staff. And Mr. Paulson's arrival coincides with the departure of Deputy Secretary of State Robert Zoellick – for Goldman Sachs.

Goldman executives have always been favorites to fill White House advisory posts, but the revolving door between Washington and Wall Street has been especially busy of late: Paulson joins Reuben Jeffery, chair of the Commodity Futures Trading Commission, and Stephen Friedman, who led Bush's National Economic Council before moving over to the Foreign Intelligence Advisory Board.

Nor is Bush alone in his preference for Goldman bigwigs: Robert Rubin and John Fowler were Treasury secretaries to Bill Clinton and Lyndon Johnson, respectively; John Rogers served as deputy Treasury secretary under Ronald Reagan; and John Whitehead was deputy secretary of State under Mr. Reagan. Countless others have worked on advisory boards, congressional staffs, and political campaigns.

"If you go to the 30th floor of 85 Broadway" – the firm's headquarters – "there's a pantheon of former heads of the firm, and as you walk down the row you can name one by one the public service they went on to after Goldman Sachs," said Lisa Endlich, a former vice president at the firm. All of which raises the question: Why is Washington so enamored with Goldman Sachs?

One reason is that Goldman has long been aggressively international in its operations – some 30 percent of its employees are overseas, and many of those are Americans who rotate through different posts on their way up the firm's ladder. Even those who don't spend time abroad experience a varied career path, working stints in arbitrage, fixed income, and in mergers and acquisitions. So when politicos come to Wall Street looking for insight into international finance or geopolitics, Goldman executives are often the most prepared to provide the best advice.

The firm also makes itself available to Washington in a way that others don't. It is far and away the most politically active investment bank – its employees gave over $6 million during the 2004 election cycle, almost twice the amount given by the next-highest contributing firm, Morgan Stanley.

Goldman's status as the Street's longest-lasting partnership (it only went public in 1999) is also a major factor, having created a culture that prizes teamwork over self-promotion and competitiveness.

Indeed, while politically active, Goldmanites are not particularly ideological. Paulson was both a cochair of the 2004 Republican National Convention and an informal adviser to Al Gore in 2000. Messrs. Corzine and Friedman cochaired the firm even while active in Democratic and Republican causes, respectively. As a result, nominees from Goldman are popular consensus choices, heralded by both sides of the aisle and guaranteed a breezy trip to confirmation.

There is also, of course, the money. Goldman Sachs is the wealthiest of the Wall Street firms, and many of its executives retire early and with enough money to do whatever they want. Paulson left Goldman with some $700 million. "It gives you the option of moving on and taking another job," says a Goldman insider. After all, once you've conquered Wall Street, why not take a shot at changing the world?

• Clay Risen is the managing editor of Democracy: A Journal of Ideas.