Gary Cohn, president and chief operating officer of Goldman Sachs, was spotted at Trump Tower, Tuesday (Nov 29), to meet President-elect Donald Trump. Cohn potentially could make tens of millions of dollars if he lands a job. (Photo by Drew Angerer/Getty Images)
The gold rush will start on day one, thanks to a little-known law designed–ironically–to ensure government integrity.
Under the law, cabinet officials and other government officials are required to sell assets, like stocks, bonds and other financial investments, to avoid a potential conflict of interest with their government duties.
The only other option to divestiture is to establish a “qualified blind trust” but such trusts are only allowed under certain circumstances.
The course they’re allowed to take varies according to the office they hold and the duties they preform.
But if they choose, or are forced, to divest assets, they can defer capital gains taxes on the sale until after they leave government service.
Currently, qualified dividends and long-term capital gains are taxed at 15 percent to as much as 20 percent, depending on income. High-income earners pay an additional 3.8 percent surtax on net investment income to help pay for the Obama administration’s Affordable Care Act, according to Forbes.
Under normal circumstances, the ethics provision really wouldn’t be an issue.
During the campaign, however, Trump promised–among other giveaways to the rich–to slash the top tax rate on capital gains. The cuts would benefit mostly the richest 1 percent of households, or those with incomes of at least $490,000 per year, according to the estimates.
That means high-rolling Trump cabinet billionaires, who sell their investments now, will likely pay far lower rates when it comes time to pay the tax.
Republicans in Congress have vowed to repeal all Obamacare taxes and some are even talking about abolishing capital gains taxes, all together. So the windfall could be even greater.
One Goldman Sachs banker, in particular, is raising eyebrows over his jockeying for a Trump cabinet post.
Goldman Sachs President and Chief Operating Officer Gary Cohn is reportedly angling for a job and has been mentioned as a possible choice to head the Office of Management and Budget.
Trump met with Cohn this week at Trump Tower, GOP officials confirmed to CNN.
If he’s nominated and approved by the Senate, he’ll be able to sell his Goldman Sachs stock and options stockpiled over a lucrative 25-year career without paying capital-gains taxes, according to Empire Report, a New York web site that was the first to single out Cohn.
The site noted that Cohn, a life-long Democrat, could save hundreds of millions of dollars with the move.
Meanwhile, Trump is under fire from Democrats for tapping Wall Streeters to fill his cabinet. He slammed rival Hillary Clinton during the campaign for receiving six-figure speaking fees from top Wall Street firms like Goldman Sachs.
In fact, one of Trump’s closing campaign ads, warning about the influence of the “global power structure,” featured an image of Goldman Sachs Chief Executive Lloyd Blankfein.
Among his more outlandish campaign claims, Trump accused Clinton of meeting “in secret with international banks to plot the destruction of U.S. sovereignty.”
But since the election, he’s named former Goldman Sachs partner Steve Mnuchin, now a billionaire investor, as his Treasury Secretary.
His chief White House adviser, Steve Bannon, who ran the hard-right Breitbart News Service, before joining his campaign, worked at Goldman Sachs in the 1980s.
“On the campaign trail, he ripped Wall Street and vowed not to let Wall Street control the country. Yet he picks a former Goldman Sachs partner as Treasury secretary,” Jaret Seiberg, a Cowen & Co. analyst, wrote in a note this week, according to CNN.
Of course, having Goldman Sachs executives occupying the highest non-elected positions in the land is no guarantee against disaster.
Former Goldman Chairman and Chief Executive Henry “Hank” Paulson, was U.S. Treasury Secretary in the Bush administration from May 1999 until June 2006.
He was asleep at the switch and failed to take action to prevent the Wall Street’s financial meltdown and the onset of the Great Recession of 2008.