Hormats and Internet hormones

Attention blogosphere: By attacking Hormats, you’re going after the wrong man.

Once again, it’s time to slow down the blogosphere and wait for the facts to catch up to another story. (I’m starting to conclude that despite all the technical evidence to the contrary, the Internet actually runs on hormones rather than electrons.)

This time the story is about the nomination of Goldman Sachs International Vice Chairman Robert Hormats to be Under Secretary of State for Economic, Agricultural and Energy Affairs and the allegation by several small advocacy groups that he is somehow tainted by some brief comments he made about a Goldman deal that pumped cash into a division of a Chinese company whose parent organization had some ties to bad guys in the Sudan.

The problem is that in going after Hormats, they are likely going after one of the people most likely to be an effective ally for the alleged goal of these groups to further constrain any sort of private funding that might support genocide anywhere in the world.

Now as any reader of this blog knows, I am no fan of the oversized role Goldman Sachs has come to play in shaping economic policy in America. I am on the record as saying that far too many senior Goldman executives have played top roles in the United States government. I am also deeply concerned at the lack of progress the world has made to contain genocide or threats of future genocides. To me, it should — along with combating the proliferation of weapons of mass destruction — be a top priority of the entire international security community.

What readers of this brief post should also know is that I have known Bob Hormats for many years and that while we probably should be entering a phase in which we bend over backwards to dial down the number of Goldman appointments, this is certainly a case where an exception is warranted. I’d go further, it is a case where an exception should be actively sought.

Let’s frame the question in the words of one of the appointment’s critics, journalist Matt Taibbi who wrote the scorching Rolling Stone attack on Goldman that I recommended to readers very recently. He writes:

“You’ve got to fill a key post at State, and you can’t find someone who isn’t a former Goldman banker with a controversial human-rights profile? There are an awful lot of people on the earth; why this clown?”

Well, let’s take his questions one at a time. First, he suggests Hormats has a controversial human-rights profile. his is clearly a reference to the current dust up in which several small groups including the Genocide Intervention Network, Investors Against Genocide and the Public Accountability Initiative all suggest that Hormats is at fault because in 2000 he made two on the record statements asserting that precautions had been taken in an upcoming PetroChina financing to ensure funds did not go to its parent company CNPC which had dealings in Sudan.

Here’s what Hormats said to the Wall Street Journal at the time: “Sudan should not be an issue because of extensive legal firewalls in place to ensure that IPO proceeds are used domestically in China.” But later the SEC fined Goldman $2 million for a number of minor securities law violations suggesting they had improperly promoted PetroChina stock including a reference to statements from an unnamed executive who might be Hormats that the SEC felt might have prematurely promoted interest in the stock. The statements in question were allegedly those made to the Journal and to the Washington Post by Hormats concerning the firewalls between PetroChina and CNPC.

As a result of the above and invoking the horrors in Darfur throughout, these advocacy groups have determined that Hormats nomination should be called into question. At least, they suggest, when he comes before the Senate in early September, he should face tough questioning on his views on these issues. I say, by all means question him, because I think this is what they will find:

1. Hormats statements to the press in 2000 were, as such statements always are (and as the SEC acknowledged they were) simply lawyer language provided to Hormats by Goldman attorneys. He was saying what the firm requested him to say. And furthermore, he was not only articulating what the firm saw as the truth but he was reflecting efforts by Goldman to try to keep proceeds of the financing away from operations of CNPC that might impact Sudan. Finally the IPO was, to my knowledge, structured in strict compliance with U.S. sanctions law at the time of filing.

2. That despite the implications in almost all the releases that what Goldman did is somehow connected to Darfur, the financing was in 2000 and the genocide in Darfur did not start until 2003.

3. That Hormats involvement in the deal beyond the statements he was requested to make was virtually nil.

Of course, what they will also find is that Hormats is, sorry Matt Taibi, no clown. First, he probably has one of the most exceptional records of public service of any nominee to high office in this administration. He has served in four different prior administrations for both parties. He has served as both Deputy United States Trade Representative (under Jimmy Carter) and as Assistant Secretary of State for Economic and Business Affairs.

He has managed international economic issues on the National Security Council. He has also got a long background of work on Africa and I know him to be highly sensitive to the issues of the sort raised by these advocacy groups. (He spent a year working on development issues in Kenya and Tanzania.) I have known him over 20 years and I can say also that he is undoubtedly one of the most decent (not to mention intelligent and capable) guys I have ever met in any line of work.

I’m all for going after half-baked appointments of money guys. I do it all the time. But this is actually one of the good guys. My guess is that he would give these genocide groups one of their best advocates in the administration… and that working with an administration with real sensitivities in this area, they could significantly enhance safeguards against all forms of support of genocide.

But there is an easy way to find out. They should ask him during the hearings. And if his answers are as his life’s work suggests they will be, they should recognize the wisdom behind this particular nomination and support it without reservation.

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