Robert Steel was Vice Chairman of Goldman Sachs for 30 years, then helped Henry Paulson mismanage the financial crisis at the U.S. treasury, then headed to Wachovia, where he used his Treasury connections to negotiate a sweet merger with Wells Fargo, who then accepted $25 billion in taxpayer-funded TARP dollars. Steel served on the board of Wells Fargo until July 2010, when he headed for a post with the city of New York. He was called one of "America's Ten Most Corrupt Capitalists" by AlterNet.
- 1 Goldman Sachs (1976-2004)
- 2 U.S. Chamber of Commerce and Bush's Treasury
- 3 Wachovia, Wells Fargo, and the Taxpayer-Funded "Stealth" Bailout
- 4 Related Sourcewatch
- 5 External resources
Goldman Sachs (1976-2004)
Steel spent nearly 30 years at Goldman Sachs, rising to vice chair. He also co-headed the firm’s equities and trading business with Goldman CEO Lloyd C. Blankfein, who sold securities designed to fail (and will still receive a $100 million bonus this year).
'(For more information on the role Goldman Sachs has played in the financial disaster, check out our Goldman Sachs entry.)
U.S. Chamber of Commerce and Bush's Treasury
Steel served as co-chair of the U.S. Chamber of Commerce "committee on capital market regulations"-- the powerful lobbying group's anti-regulatory crusade--  before being appointed Under Secretary for Domestic Finance under Henry Paulson in George W. Bush's Treasury Department, where he served from 2006-2008. Paulson and Steel had a "Batman-and-Robin-like relationship," according to the Washington Post.
Wachovia, Wells Fargo, and the Taxpayer-Funded "Stealth" Bailout
Steel departed from Treasury just before the Wall Street meltdown, then took the helm at Wachovia. As Wachovia was failing, "the FDIC wanted to put the company through receivership—shutting it down and wiping out its shareholders. But Steel's buddies at Treasury and the Fed intervened, and instead of closing Wachovia, they arranged a merger with Wells Fargo at $7 a share—saving Steel himself $7 million." Wells Fargo accepted $25 Billion in taxpayer-funded TARP bailout dollars, and Steel sat on Wells Fargo's board until July 2010.
CBS Evening News on Wachovia's "Stealth" Bailout
In February 2009, CBS Evening News made the following report:
- Troubled Wachovia has been bought out by Wells Fargo for $12.7 billion, creating the nation's second-largest bank in terms of deposits. But it might not have happened without the generous support of the federal government and your tax dollars.
- Here's how. Last fall, in the span of just six days, Wells Fargo flip-flopped: first rejecting then accepting a deal to buy Wachovia.
- What changed so drastically in less than a week? Two things.
- First, Treasury Secretary Henry Paulson quietly issued a document revising the tax code, giving enormous benefits to some banks that buy other banks. For Wells Fargo, it could be worth up to $25 billion.
- Then, Congress passed the giant bailout that would provide $25 billion in direct funds to Wells Fargo.
- The very same day the bailout passed, Wells Fargo announced the surprise turnaround to investors: It would buy Wachovia after all.
- On a call, Richard Kovacevich, the chairman of Wells Fargo, said: "This is of course a very exciting moment in the long history of Wachovia and Wells Fargo."
- Wells Fargo became one of nine banks to receive bailout money and quickly close deals with other banks. The takeovers are so politically dicey that a Wells Fargo executive assured Congress his company did not use bailout funds to buy Wachovia.
- "We completed our own capital raise to assure that we have the appropriate levels of capital to complete that transaction," said Jon Campbell, the CEO of the Minnesota region of Wells Fargo bank.
- But nobody from Wells Fargo would explain how that squares with their press release from two weeks earlier. It says money raised by issuing stock and "the capital investment from the government" - that's the taxpayer bailout - "will enable us to finance the Wachovia acquisition."
Zach Carter of AlterNet's Take on Steel's Corrupt Role in the Bailout
Zach Carter, AlterNet economics editor and fellow at Campaign For America's Future, reported on Robert Steel's testimony in front of Congress' Wachovia and Lehman Brothers hearing on September 1, 2010. He stated the following:
- I need to say a few words about Bob Steel, Wachovia's CEO at the time the bank went under. Steel joined Wachovia in the summer of 2008, with the financial crisis in full swing, but well before its peak in the Lehman aftermath. When Wachovia picked Steel, he was doing upper-level work at Treasury, and had even been involved in the Bear Steans bailout. I was working in a financial newsroom at the time, and everybody who covered banking was amazed. The revolving door between Wall Street and Washington has been a huge problem for years, but picking Treasury's bailout negotiator as your CEO in the middle of a financial crisis was a pretty shameless move. Nobody in the newsroom could prove corruption, so it didn't get much coverage, but everybody knew what was going on.
- Steel just told the FCIC that he does not know how much money Wells Fargo saved under the special tax deal the IRS arranged for the merger. That means that Steel is either lying or completely incompetent. He served on the Wells Fargo board after the merger. This was the largest transaction in the history of the bank. He has to know what it cost and where those costs came from. He also said that he had never heard of any discussion about the tax code for bank mergers when he worked at Treasury (IRS is a division of Treasury).
- Whether Steel is lying to the Commission-- and whether he's guilty of criminal corruption -- is almost immaterial. There's a very clear perception of corruption in Steel's move between Treasury and Wachovia. A financial system cannot operate effectively or efficiently under the conditions where some firms are perceived to have special perks that are not available to others. Banks will be able to raise money more cheaply and investors will be willing to take bigger risks when companies are viewed as having a direct line to taxpayers.
- There's been a lot of talk about breaking up the big banks, and it is very important that we do so, whatever the inclinations on Capitol Hill. But it's equally important to crack down on the revolving door. Officials shouldn't be able to move from Wall Street to Washington, or the other way around, without a very long waiting period. So long as top officials can shift from Treasury to a bank, or vice-versa, investors will expect bailouts, and the system won't work.
Wachovia's Loan to the NRCC in the Midst of the Crash
In the midst of Wachovia's failure, while it was freezing customer's assets and refusing credit to small businesses, it extended an $8 million loan to the National Republican Congressional Committee to help out House Republican candidates in the final weeks of the 2008 elections.
- America's Ten Most Corrupt Capitalists, Alternet.Org, May 21, 2010, accessed September 20, 2010.
- About, American Action Forum, accessed December 23, 2011.
- "Prominent People", Futures Industry, accessed September 20, 2010.
- In Times of Crisis, Treasury's No. 2 Plays a Pivotal Role, David Cho, Washington Post, Feb. 12, 2008.
- Sharyl Attkisson, Following the Bailout Money to Wells Fargo, CBS Evening News, Feb. 9, 2009, accessed September 20, 2010.
- Zach Carter, Sept. 1, 2010, Liveblogging the Wachovia and Lehman Brothers Hearing (at 10:50), Campaign For America's Future website, accessed September 20, 2010.
- Chris Kromm, Investigation: Wachovia's $8 million bailout to the GOP, Institute for Southern Studies, Oct. 9, 2008, accessed September 20, 2010.