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Together with the national-security adviser, Cohn has written two editorials articulating the administration’s view of the world. (Win McNamee/Getty Images)
Together with the national-security adviser, Cohn has written two editorials articulating the administration’s view of the world. (Win McNamee/Getty Images)

analysis

With bet on Trump, Gary Cohn makes riskiest trade of career Add to ...

In more than three decades on Wall Street, Gary Cohn honed an instinct for taking risks. As he rose through the ranks to the No. 2 spot at Goldman Sachs, he weighed profit against danger, first for his own trades and eventually for the entire firm.

Now, in joining U.S. President Donald Trump’s inner circle, he has made the bet of a lifetime.

In the span of several months, Mr. Cohn has moved with disorienting speed from someone with no connection to Mr. Trump’s campaign and no experience in government to one of the most powerful people in the White House.

As Mr. Trump’s chief economic adviser, Mr. Cohn is leading the push on some of the President’s key campaign pledges, including tax changes and an infrastructure overhaul. But his influence also extends to trade policy and even foreign affairs: Together with the national-security adviser, he has written two editorials articulating the administration’s view of the world.

With the administration lurching from crisis to crisis, Mr. Cohn’s role is even more crucial. Stock markets have continued to rise despite the continuing controversy over contacts between Mr. Trump’s campaign and Russia. That is partly because investors believe Mr. Cohn will help Mr. Trump deliver on his promises to spur economic growth.

Mr. Cohn’s current job is chair of the National Economic Council, but his name is already being floated for other possible positions, including White House chief of staff and even chair of the U.S. Federal Reserve (the current chair, Janet Yellen, is due to step down next year, and Mr. Cohn is heading the search for her replacement).

At a rally last month in Iowa, Mr. Trump crowed about recruiting Mr. Cohn to his team. “He went from massive paydays to peanuts,” the President told the crowd.

Whatever the salary, Mr. Cohn is an unlikely adviser for Mr. Trump. Not only is Mr. Cohn a registered Democrat, but his career on Wall Street makes him an incongruous pick for a President who once railed about the excesses of the financial industry on the campaign trail.

Mr. Cohn was deeply involved in piloting Goldman through the financial crisis and the controversies that followed. Back in 2010, Mr. Cohn, then Goldman’s president, testified before a congressional panel investigating the causes of the meltdown. He also worked to manage the fallout when U.S. regulators charged the firm with civil fraud based on investments it sold prior to the housing collapse.

Mr. Cohn was a key figure “taking the heat from an enraged government, from a rabid press and from irate investors in the wake of the crisis,” said Charles Hintz, a former Wall Street executive and industry analyst who teaches at New York University.

Mr. Cohn’s past also puts him at odds with the populist faction of Mr. Trump’s aides (allies of Stephen Bannon, another senior adviser to Mr. Trump, call him “Globalist Gary,” according to CNN). But investors and the business community see in Mr. Cohn a highly capable and politically moderate adviser who eases their concerns about an unpredictable White House.

“The market’s willingness to look past the Trump scandals and tweets is because of Gary Cohn,” wrote Jaret Seiberg, a policy analyst at Cowen & Co. in Washington in a note to clients in May. Investors trust Mr. Cohn, he continued, and believe he “will prevent the White House from doing anything rash” on the economic front.

Mr. Cohn, now 56, grew up just outside Cleveland and struggled with dyslexia throughout his childhood. It was a defining experience, he has said, which heightened his ability to handle failure. It also allowed him to “look at most situations and see much more of the upside than the downside,” he told the author Malcolm Gladwell. “I wouldn’t be where I am today without my dyslexia. I never would have taken that first chance.”

After graduating from American University in Washington, Mr. Cohn took a job selling aluminum siding but longed to become a trader. He got his break on a visit to New York when he spent the day at the commodities exchange. He managed to share a taxi to the airport with an options trader who asked him to interview for a position the following week. Knowing nothing about options, Mr. Cohn spent the weekend cramming a reference book – and got the job.

Mr. Trump “would do well to have Gary as a chief of staff,” said Richard Schaeffer, the former chairman of the New York Mercantile Exchange, who has known Mr. Cohn for years. “He’s one of the few in that group who is an absolute builder of bridges, not someone who tears them down.”

Mr. Cohn is leading the search for the next chair of the U.S. Federal Reserve but is reportedly himself one of the leading contenders (there is a famous precedent for such an outcome: Dick Cheney was in charge of the search for George W. Bush’s vice-presidential candidate).

Unlike most previous Fed chairs, Mr. Cohn is not an economist. The next leader of the central bank will also face the difficult task of unwinding years of unprecedented monetary stimulus. But if the administration’s troubles deepen, a move out of the White House could hold some allure.

A White House spokesperson said that Mr. Cohn is “focused on his responsibilities as Director of the National Economic Council.”

Back in New York, there is a degree of disbelief at Mr. Cohn’s new incarnation. People who know him say they didn’t realize a move to politics was on his radar screen, and certainly not Republican politics. One Democratic fundraiser remembered meeting Mr. Cohn – and being impressed by him – at an event for major Wall Street supporters of Barack Obama held shortly after he was first elected President.

Mr. Cohn continued to support Democratic candidates but soured on the party’s approach to Wall Street. In 2010, Mr. Cohn attended a fundraiser in New York for Democratic Senator Harry Reid, then the majority leader in the chamber. Mr. Cohn and other Goldman executives expressed frustration with the criticism of their industry, according to a person with knowledge of the event who spoke on condition of anonymity.

Goldman has a tradition of executives leaving to work in the public sector, earning it the moniker “Government Sachs.” But until Mr. Cohn’s fateful meeting with Mr. Trump last November, there was little sign he would follow that trajectory.

Another acquaintance recalled having dinner with Mr. Cohn two years ago where he discussed potential options for life post-Goldman. Politics didn’t come up. “Look, this is a historic moment and you don’t know how it’s going to turn out,” the person said. “I could understand how it would have appeal for him.” (Six people who know or worked with Mr. Cohn spoke with The Globe on the condition they not be identified.)

For Mr. Cohn’s former colleagues at Goldman, his choice to leave the firm has its own logic. Mr. Cohn joined the investment bank in 1990 as a metals trader and ascended the hierarchy in tandem with Lloyd Blankfein, now Goldman’s chief executive. When Mr. Blankfein assumed the top job in 2006, he made Mr. Cohn – both a close friend and a trusted lieutenant – his No. 2.

However, in recent years, Mr. Blankfein has shown no inclination to relinquish his post, even after a bout with cancer. Mr. Cohn’s seemingly perpetual wait to lead Goldman prompted one newspaper dub him the “Prince Charles of Wall Street.”

“If you’re not going to run the firm, why not sell all your stock tax-free and work for a guy in Washington for a couple of years?” one of Mr. Cohn’s former colleagues said. “It’s a great exit strategy.”

Upon leaving Goldman, Mr. Cohn received a compensation package worth $285-million (U.S.), most of it in stock. Because such shares must be sold to comply with conflict-of-interest rules, the government allows new executive branch officials to defer capital-gains taxes indefinitely if the proceeds are reinvested in bonds or mutual funds. Mr. Cohn’s timing was perfect: In January, the bank’s shares were trading near their highest point in a decade.

For years, Mr. Cohn crisscrossed the country and the world advancing Goldman’s interests. Several former colleagues described him as an aggressive, hard-charging executive. Mr. Cohn is a “very smart, very savvy guy, but he is a blunt instrument,” said one person who worked with him, who added that he has little patience for those who disagree with his views. A White House spokesperson declined to comment on that characterization.

Mr. Cohn can also display a softer side at work. One Goldman alumnus recalled an episode where Mr. Cohn intervened to protect a junior employee from bearing the brunt of an unintentional mistake that nearly cost the firm money.

Watchdog groups say that Mr. Cohn brings too much Wall Street baggage to his new role, which includes co-ordinating a possible rollback to the financial regulations instituted in the wake of the financial crisis.

“There is really nothing he has said [so far] on financial matters that he would not have said in his capacity as president of Goldman,” said Dennis Kelleher, president of Better Markets, a non-profit organization that supports strict regulation of the financial industry.

Mr. Kelleher, a former senior aide to a senator, also questioned how well Mr. Cohn’s skills will transfer to the capital. “If Wall Street is a land of numerical clarity, Washington is a land of ambiguity and fog,” he said.

But for Mr. Cohn – in keeping with the philosophy that has guided his whole career – it is a gamble worth taking. Even during the depths of the financial crisis, in a commencement address at his alma mater, he urged young people to stand out from the crowd by taking risks.

“Failure is not a problem,” Mr. Cohn told the assembled graduates and their families. “In fact,” he continued, “95 per cent of my great decisions started out as bad decisions.”

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