Wednesday, April 21, 2010

Mr. Rubin and the Definition of Morally Bankrupt

Robert Edward Rubin currently sits on the board of Harvard, Mount Sinai, and Council on Foreign Relations. To put it mildly, he is a big deal. He is the ex chairman of Citicorp, Ex Secretary of the Treasury and of course sine qua non – ex chairman of Goldman Sachs.

He is a key player in both the deregulation run-up to the American financial meltdown and its current incarnation as a circus of bailouts and “gosh, I didn’t know” statements by people alleged to be brilliant and talented. They say you cannot judge a man’s life until he has lived it all. So I will withhold my judgment on his talent. Although he will need a great many “up” years to make up for crashing Citigroup, not to mention his key part in deregulation which led directly to the meltdown of the entire economy.

Robert Rubin spent most of his early life working his way up through Goldman Sachs. He joined in 1966 to work in the area of risk arbitrage. Over the next two decades he climbed the Goldman ranks to become Chairman.

In 1992 he joined the Clinton administration as Secretary of the Treasury. He was a strong advocate for deregulation and globalization. Under his watch the safeguards put in place after the Great Depression were dismantled. Between Robert Rubin and Phil Graham basically all the FDR era regulations were swept aside as part of Rubin’s financial modernization. The key piece – the Glass Steagall Act which created FDIC insurance and strictly separated banking from financial speculation was repealed in 1999.

When Rubin resigned as Bill Clinton’s head of Treasury, Clinton called him the “greatest Secretary of the Treasury since Alexander Hamilton” In fact, Mr. Rubin liked that epithet so much he founded The Hamilton Project. Said project has as it goal: “to help build an economy that benefits more Americans” Lovely mission statement. Recent papers include a call to reduce taxes on corporations, and one declaring the meltdown a “panic” caused by unsophisticated citizens failing to see the real economy. If this is Hamiltonian economics then it single handedly justifies that little trip to the oaks with Aaron Burr.

After leaving the administration, Rubin joined the board of Citigroup in 1999. By 2001 he was named in a scandal over a phone call he made to Moodys to try and prevent them from reducing the debt rating of Enron. Does Enron ring a bell with anyone? Rubin carved out a position in Citigroup as senior advisor and chair of the executive committee. 2007 he stepped into the Chairman’s seat. In 2008 under his direction Citigroup was on the verge of bankruptcy and received 45billion in direct bailout and government guarantees against 300 billion in the sort of leveraged debt Rubin has been touting for years. In that same year, Mr. Rubin received over 17 million dollars in salary and over 33 million in stock options. He resigned in January, 2009.

Having resided over the meltdown of the 3rd largest American bank and profited mightily from it, one would think Mr. Rubin would have the grace to be humble. Far, far from it – he has stated that we need a more educated population to be able to address these issues. He even told congress that as the senior advisor to Citigroup he had no idea – none what so ever, about what they were doing with the very type of “investments” he specialized in while at Goldman.

But the pinnacle of his hubris was surely reached this month while speaking at his very own Hamilton Project forum. On April 20th 2010 he told reporters from the Huffington Post that he had been a supporter of regulation all along. With a straight face he stated that "I thought we should regulate derivatives; I thought so when I was at Goldman Sachs and I thought so afterwards," The Huffington article by Dan Froomkin is terse clear and shocking. Rubin is so glib and so unflustered by his part in the disaster that he makes a concerted effort to prove he was for regulation his entire career. Fortunately, Froomkin smashes that rhetorical edifice with some real world facts. Pointing out that when regulation of derivatives was brought up by the Futures Commission both Rubin and Greenspan called the idea caused "…grave concerns about this action and its possible consequences,"

The story of Robert Rubin’s life is one of influence and applause for his talent and intelligence. But if we balance his losses with his successes the net results would indicate a man whose central idea has been an unmitigated disaster. In a few months or collective reality, all the spun sugar financial empires built up by Rubin and his followers have vanished. Huge profits remain in the hands of a very few, but America as a whole is much diminished.

So, if you can define a man by his history and his works – this is Robert Rubin. He has provided that testimony over 40 years in business and government. My title proposes a link to moral bankruptcy. Here unfortunately Robert Rubin has also defined that term with his words and testimony over the last year.

By the way, on April 18, 2010, speaking on ABC’s “This Week” Clinton said Rubin was wrong to advise deregulation and that he was wrong to accept that advice. That is something we used to call – responsibility, it is an antonym of morally bankrupt.


Huffinton Post – Dan Froomkin

Fortune --- Rubin said part of the problem is that we need a "more educated electorate"

Senate investigation into Enron and Citigroup

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