“At the center of this movement is a crucial conviction, that a nation exists to serve its citizens.” – President Donald J. Trump
What do all these members of President Trump’s Administration have in common? Hint, the answer is not Goldman Sachs…
Steve Mnuchin – Treasury Secretary – Investment Banker, member of Management Committee and CIO at Goldman Sachs, hedge fund manager, purchased and salvaged IndyMac
Wilbur Ross – Commerce Secretary – Billionaire private equity investor, Leveraged Buyout (LBO), bankruptcy and restructuring expert
Gary Cohn – Chief Economic Advisor and Director of the National Economic Council – Investment Banker, President and COO at Goldman Sachs
Dina Powell – Deputy National Security Advisor for Strategy – Managing Director and Partner at Goldman Sachs
Carl Icahn – Regulatory Overhaul Advisor – Billionaire investor, Leveraged Buyout (LBO), bankruptcy and restructuring expert
Anthony Scaramucci – Communications Director – Investment Banker at Goldman Sachs, founder of SkyBridge Capital
Steve Bannon – Chief Strategist – Investment Banker, VP mergers and Acquisitions at Goldman Sachs, Executive Chairman at Breitbart News
Jared Kushner – Senior Advisor – Real Estate Investor
These senior members of Trump’s Administration all have significant backgrounds in corporate acquisitions, mergers…and restructurings. That many are from Goldman should be viewed as a plus. Goldman being the pinnacle of Investment Banks.
Instead of viewing Washington in terms of politics, try seeing it from the perspective of a business model – specifically an acquisition.
A key risk in any corporate acquisition is integration. No matter how well one thinks they understand the inner workings of an acquisition candidate, it’s always an outsider’s view. One never truly knows what they’ve purchased until after they own it.
A second key risk is maintenance of goals. The minutiae of integration leads to distractions – often at the expense of pre-set agendas and strategy. It becomes easy to lose sight of one’s objective in the depths of the process. And it always takes longer than anticipated. The unexpected abounds.
The greater the philosophical gulf between the two entities, the greater the integration challenges.
Failure rates are high.
In my experience, successful corporate takeovers follow a stereotypical path.
After a deal is finalized, transactional euphoria typically results. This is generally short-lived. It’s closely followed by the grim realities of trying to merge disparate cultures and genuinely reshape, restructure and rationalize entire operating divisions – to forge a new company from the old.
The process does not happen immediately. It’s a tumultuous, painstaking and lengthy ordeal. Old factions and divisions are, of necessity, left in place as the acquired company is intensively analyzed and new plans formulated. Employees of both companies divide themselves into one of two camps – those embracing change and the opportunities it brings – and those who are resistant, clinging to the old regime and the old ways.
New management is brought in, existing management is assessed throughout. Old players leave, some internal ones rise and a new management order is slowly established. Turnover can be high on all sides.
Operations and divisions are rationalized. Some swiftly as they are sold off – others more slowly as they are integrated and transformed. Unexpected operational strengths uncovered and corporate weaknesses exposed.
The process can become a quiet war. An inherent clash with the old while molding the new. A reshaping of cultures – a corporate blending – tediously put into place.
Often, positive internal changes begin taking hold at the very moment when corporate upheaval appears the greatest externally.
But slowly, the new wins over the old – synergies begin to appear. Political factions die and are reformed. Holdovers fall aside. Cost savings take hold and new ways of operating becomes the norm.
And so, an entirely new organization is born.
This process is exactly what I see occurring in Washington. President Trump and his Administration are unlike any other in recent history. There is no peaceful transition of power. President Trump’s Administration is a direct threat to a corrupt, incompetent and inefficient DC Establishment. An Establishment desperately in need of reform – and restructuring.
President Trump’s Inauguration was a hostile takeover.
He said as much in his acceptance speech. As I noted in a previous piece, President Trump did not single out Democrats – he singled out Washington. This was not a speech against the right or left, conservatives or liberals – this was a speech against government – an establishment grown bloated, stale and aloof – ignorant and uncaring of the daily struggles and hardships of its citizens.
This was a speech against every single politician seated behind President Trump.
The impending and unwelcome changes are fully recognized by President Trump’s acquisition target – the entrenched inhabitants of our nation’s capital. For lack of a better term, the members of the Deep State.
There are three Constitutional branches of our government – Executive, Legislative and Judicial. The Executive and Legislative are more enmeshed. The Judicial stands somewhat apart.
The Judicial branch will find itself changed from the top down with SCOTUS appointments – and from within through the filling of the roughly 130 judicial vacancies. The process will likely be slowed somewhat due to the Blue Slip Rule but real progress will be made. It is already happening and the process is inevitable. See here and here for more discussion.
The Executive Branch has already been changed – and it will continue to change as Trump’s Cabinet finds its footing. Like any good acquisition, the distractions have been legion.
The Legislative Branch is where we have seen greater lack of progress. Despite a GOP majority, President Trump remains stymied on legislation. Case in point – Obamacare and Healthcare Reform. But the balance of power has shifted and been overturned. Further changes will be coming. The GOP should be nervous. Democrats already are.
The Deep State is more difficult. Changes are analogous to shifting corporate culture at the mid-manager level – but without full authority to fire those who refuse to adapt. We have the Pendleton Act to thank for that travesty.
However, the Deep State has lost a significant advantage. They have been unmasked – Americans now know the Deep State exists. The hidden bureaucracy can no longer operate in complete secrecy.
Exposure – lifting of the curtain – has been one of the great unexpected gifts of Trump’s Presidency. And exposure is the one thing the Deep State cannot survive intact.
President Trump has been under fire from many sides. Yet most who voted for him remain unswayed – and would do so again. That is an excellent sign. His actions have been dramatically under-reported in the press. Yes, I am deeply disappointed the GOP had no plan for healthcare reform in waiting. But I don’t place that particular blame on President Trump. The fault lies with GOP leadership.
Meanwhile, de-regulation has moved swiftly ahead – at an almost dizzying pace – 16 regulations cut for each new one put into effect. A total of 860 regulations have been killed – including 179 that came from a secret Obama list – and were not disclosed. Justice Gorsuch has been placed on the Supreme Court. Lower court vacancies are being filled – with many to come. President Trump has signed almost 150 Executive Orders, Memoranda, Proclamations and Determinations – on everything ranging from trade to cutting funding for sanctuary cities. He has limited the regulatory powers of the awful Dodd-Frank Act. Illegal immigration has plummeted by 70%. Gang activity, particularly that of the Mexican Cartels, has been severely impaired.
The biases of the press have been fully exposed as well. Credibility of the MSM is all but gone.
President Trump kept us out of the disastrous Paris Accord – a non-sanctioned treaty that would have sent billions to European nations. Trump’s Middle East visit has set the stage for a true turning point in that region – an internal shift against Extremism. See here and here. Pressure on North Korea continues. Our national debt is actually marginally down – as opposed to the almost $1 trillion Obama added in his first six months. Our energy capabilities have been unleashed, resulting in dramatically lower gas prices and national energy production sufficiency. The list goes on. To view a complete list of accomplishments by President Trump, check out this Reddit thread.
On the economic front, every metric has improved sharply. Housing, manufacturing, jobs, unemployment, inflation – all have exhibited significant improvement. And stock markets have responded with unprecedented enthusiasm.
The political turmoil we are witnessing stems directly from the vast changes being propagated by President Trump and his Administration. Disruption and upheaval are the precise outcomes when a tired and bloated institution finds itself under attack from an aggressive and motivated competitor.
Try viewing this situation less as politics and more as business. Specifically a hostile takeover. It all might make a bit more sense.