This page has been archived and commenting is disabled.

The Man Who Risked The World

Tyler Durden's picture




 

Zero Hedge is starting to run a series of profiles of one of the most influential living people in the world. The man in question is former Secretary of the Treasury, and the man who made Goldman Sachs into the hedge fund quasar and uber-prop trading desk (rhymes with Hedge Fund Tsar, a position Barack Obama may or may not be contemplating) that it is now, Robert Rubin. Rubin redefined the term risk arbitrage (or as some would say, riskless arbitrage, thanks to the helpful nudge here and there of whoever may have been in a position of "puppet" power at any given moment) by being among the first to discover (and definitely the first to repeatedly bet the farm, making boatloads when successful, and somehow not losing when not) the amazing synergies provided by Goldman Sachs' numerous relationships as they may pertain to the firm acting in proprietary trading capacity.

If one were to claim that Goldman Sachs is a cephalopod of some nature, than Robert Rubin is the beating heart (and soul) of such an animal. A mere listing of the people the were Rubin's proteges while at Goldman should be enough to send shivers up the spine of any University of Chicago efficient market hypothesis fan. The names of Rubin's most well-known underlings include (and this is not a comprehensive list):

  • Larry Summers: needs no introduction
  • Thomas Steyer: founder of multi-billion hedge fund Farrallon Capital
  • Sylvia Matthews Burwell: President of the Global Development Program at the Bill & Melinda Gates Foundation
  • Eric Mindich: Youngest Goldman partner in history (27) and founder of multi-billion hedge fund Eton Park
  • Richard Perry: Founder of multi-billion hedge fund Perry Capital
  • Frank Brosens: Co-founder of multi-billion hedge fund Taconic Capital
  • Edward Lampert: Founder of multi-billion hedge fund ESL Investment

Another way to visualize Rubin's relationships is courtesy of Muckety:

 

Yet taking a more detailed look at Rubin's accomplishments reveals a less than flattering picture. Some relevant episodes taken from Rubin's career:

1979 Arb desk losses on oil:  Head Rubin "Remaining detached was often no mean feat. For one thing, Rubin, as part of his job, was sometimes gambling with a third of his partners' retirement money. In 1979, for example, he took a number of arbitrage positions that depended on the expectation that inflation and oil prices would continue high. When oil prices and inflation dropped, many of his investments plunged. "We had one month in which we lost more money than the firm made in any prior year," he remembers. "But most people had internalized this sort of thing and the senior management, particularly, was very good about saying, Look we understand once in a while things like this will happen. It doesn't mean people weren't nervous because they were -- hell, I was nervous."  From the NY Times,  see also Big Deal:  Mergers and Acquisitions in the Digital Age, by Bruce Wasserstein, page 574.
 
1986 fixed income division losses on interest rates: Co-head Rubin "had learned his lessons in risk from the financial markets. In 1986, as losses at the fixed income division of Goldman Sachs mounted to $100 million, Rubin discovered that there are implicit interest rate options embedded in many fixed income products. If the rates drop then homeowners would refinance their mortgage at lower rates and corporations would exercise their call provisions to refinance their bond debt."  Risklatte see also Fischer Black and the revolutionary idea of finance, by Perry Mehrling
 
1992 losses on Mexican bonds before Rubin joined the Clinton Administration in 1993: "From 1992 to 1994, [Goldman] had purchased $5.2 billion of Mexican bonds on behalf of its clients or its own portfolio, one-fifth of the total.  These were the very bonds that Rubin's bailout was to salvage." From Blood Bankers, by James Henry, page 296.
 
2002 Citi bad loans to Brazil and Enron: 

"American banks have about $25.6 billion in outstanding loans to Brazilian borrowers. Citigroup, the biggest lender to Brazil, has $9.7 billion in Brazilian loans." That's right. Forty percent of the U.S. bank exposure in Brazil is the fault of America's biggest and dumbest bank. And who is the resident financial wizard at Citigroup? "Robert H. Rubin, who was treasury secretary under President Clinton and engineered international rescue packages for Mexico, Russia and many Asian countries, is now a Citigroup director." From The American Cause

A common unifying thread is the repetitive, spaced out by 5-10 years on average, spectacular blow up, the result of the bursting of yet another bubble of his own creation, for which not only would Bob not get punished, but would either frame, or be the beneficiary of, policies that would provide a generous backstop, and would subsequently progress to ever loftier positions of responsibility, both private and public.

Is this the same theme now seen with now only the five core TBTF firms, but mostly with Goldman Sachs? Is it surprising that moral hazard has now enveloped the very fabric of finance, after one of its core progenitors has been pacing the halls of both Goldman (and now nationalized Citi) and numerous administrations over the past 40 years?

More on Robert Rubin and his multi-billionaire hencheman as we delve deeper next time.

h/t Richard

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 10/13/2009 - 17:58 | 98087 Anonymous
Anonymous's picture

Its all coincidental of course...where the best and brightest get together to take theirs!

Tue, 10/13/2009 - 19:04 | 98144 wackyquacker
wackyquacker's picture

eventually the 'best and brightest' are going to GET theirs....it's coming for you Mr. Rubin, bigger than Butch...

Tue, 10/13/2009 - 18:15 | 98102 Anonymous
Anonymous's picture

But how is it, why is it, that he wields this power / influence --- he controlled WJC and HC --- but now, also,
BO --- what gives?

Tue, 10/13/2009 - 19:23 | 98159 lookma
lookma's picture

The plunge protection team and Gibson's paradox should be on the radar.

Tue, 10/13/2009 - 18:20 | 98112 Anonymous
Anonymous's picture

Bravo!

Tue, 10/13/2009 - 18:36 | 98128 Anonymous
Anonymous's picture

Eric has his talons deep in the hide in the very beast that funds his future.
http://www.sasac.gov.cn/n2963340/n2964712/6361985.html

Wed, 10/14/2009 - 08:22 | 98538 Chumly
Chumly's picture

Yes, the World Leaders are at the beckon call of Mystery Babylon (GS).

Tue, 10/13/2009 - 18:36 | 98129 Anonymous
Anonymous's picture

Tyler,

For many years now I have known about Rubin and his involvement in just about everything. I guess those close to him felt that if there was a potential big score for themselves personally, why not go for it??

In the end, it is all about the almighty buck for some.

Now I know that the central figure in this painting has a name....

http://www.mcnaughtonart.com/page/view_collection/Most%20Popular?artpiec...

Tue, 10/13/2009 - 19:59 | 98184 pinkboxtrader
pinkboxtrader's picture

nice link hijack and the derivative work > original.

Wed, 10/14/2009 - 20:21 | 99420 Spiro
Spiro's picture

Damn that is funny!

Tue, 10/13/2009 - 18:36 | 98130 TraderMark
TraderMark's picture

sweet muckety

 

p.s. I did some back research on Rubin and he literaly resigned the next day from Treasury Secretary once Congress passed repeal of Glass Steagal

http://www.fundmymutualfund.com/2009/06/bloomberg-volcker-marginalized-m...

You can't make it up - its as if he had one goal, get that repealed and he was out of there.

"If you want the dirty details the "repeal" bill passed in the House May 6, 1999. In the Senate July 1, 1999.

Robert Rubin's work was done. He resigned. July 2, 1999. (1 day after the Senate passed the bill) He went off to work for Citigroup, collecting well over $100M in compensation in the coming decade. Yes the same Robert Rubin lauded as one of our best Secretary Treasuries and a great steward for Citigroup. He's got Goldman blood in him! Must be brilliant!"

Really this is the type of stuff the main stream media should be pre-empting dancing with the stars with to tell the american people what is going on.  That said, MSM is owned by corporate interests so why would they bother.

 

 

 

Tue, 10/13/2009 - 23:15 | 98395 ZerOhead
ZerOhead's picture

Robert Rubin is the principal architect of the financial neutron bomb that has hit this planet.

He and his proteges are currently in full control of the Obama administrations economic and financial policies.

He and his proteges are the enemy.

Wed, 10/14/2009 - 08:51 | 98550 Anonymous
Anonymous's picture

Classic anti-Semitism!

Tue, 10/13/2009 - 18:44 | 98133 Anonymous
Anonymous's picture

Nirvana - The Man Who Sold The World
http://www.youtube.com/watch?v=209ArurxVG4

Tue, 10/13/2009 - 20:21 | 98204 Anonymous
Tue, 10/13/2009 - 19:43 | 98176 ayanni
ayanni's picture

got to love it!  This gets at the heart of the change in what has happened in recent years - for the worse.  Connect the dots.  Well done.

Tue, 10/13/2009 - 20:05 | 98190 Bear
Bear's picture

How much do you think his Blackberry is worth?

Tue, 10/13/2009 - 20:52 | 98245 Altan311
Altan311's picture

1,000,000,000$: over or under? I go over

Tue, 10/13/2009 - 22:57 | 98378 agrotera
agrotera's picture

He and all of his bankster friends probably use prepaid, and easily disposed of blackberries...one that comes out for 'everyone else" and one that is for the cartel members only.

Tue, 10/13/2009 - 20:11 | 98195 Narcolepzzzzzz
Narcolepzzzzzz's picture

Gotta love Muckety!

Here's another great research site:

http://littlesis.org/person/1164/Robert_E_Rubin

Tue, 10/13/2009 - 20:28 | 98211 Anonymous
Anonymous's picture

that's a great site...thanks for posting

Tue, 10/13/2009 - 20:28 | 98212 Anonymous
Anonymous's picture

Do not let this series continue or conclude without writing about Trojan Horse Director at Citi demanding that Thomas G. Maheres write credit default swaps using Citi as a conduit to destroy GSA competition and also profiteer on the Greenspan Put that was a crisis by design to transfer boomer wealth to GSA / Bankster pockets.

Tue, 10/13/2009 - 21:49 | 98321 monmick
monmick's picture

Bob Rubin: The original 'Ratoureux', with special emphasis on the first 3 letters...

Wed, 10/14/2009 - 05:33 | 98500 Anonymous
Anonymous's picture

Robert Rubin, Sire of the Vampire Squid.

Folks, we need stakes anointed with holy water.

2nd option, we need Buffy to slay the Vampire Sire.

Tue, 10/13/2009 - 22:15 | 98346 newera22
newera22's picture

Rubin and Paulson should both go down as the 2 worst GOVERNMENT-STATIST robbers of American taxpayers. Those 2 are among the most dishonest people on the planet that have used government authority to make so much money for themselves to the detriment of free markets. I despise them.

Tue, 10/13/2009 - 22:55 | 98377 agrotera
agrotera's picture

RUBIN--SCUMSUCKER OF SCUMSUCKERS.

Tue, 10/13/2009 - 23:08 | 98388 Anonymous
Anonymous's picture

You could've shortened the whole piece with the following -

Robert Rubin, incompetent crook extraordinaire.

On a different note:

One day a co-worker received an email from a gentleman that appended his name with the word 'Esq' for esquire. I then told my co-worker I also held the title of JAE.

When asked what the title JAE stood for I promptly informed my unlearned associate that it stood for Jack-Ass-Extraordinaire.

I now pass that title along with all Honors, Rights, and Privileges of JAE to Robert Rubin.

Tue, 10/13/2009 - 23:49 | 98423 Anonymous
Anonymous's picture

For the record, our Top Ten villians list: Robert 'The Bagman' Rubin, Larry 'Little Bagman' Summers, Phil 'Senator Enron' Gramm, 'Easy Al' Greenspan, 'Baghdad Ben' Bernanke, 'Hanky Panky' Paulson, Christopher 'See No Evil' Cox, Barney 'It's Not My Fault' Frank, Chris 'I'm a Believer' Dodd, Franklin 'Mojo' Raines.

I think all of these worthy gentleman need to hear a little guillotine music..................

Wed, 10/14/2009 - 02:21 | 98479 windiepink
windiepink's picture

....this American puzzle me to no end? This Rubin fellow reminds me of a financial, Dr Jekel and Mr. Hyde

None the less, as i follow along as to just how you are sorting this financial mess out, i found these interesting educational links.

http://www.subsidyscope.com/projects/bailout/federal-reserve/

As worth a read is, "Inconsistencies in Treasury's Description of TARP's Warranty Policy"

In the actual contracts signed between Treasury and companies receiving TARP funds, the strike price is apparently calculated using the average of closing prices on the 20 trading days before the company applied for the TARP funds.

http://www.subsidyscope.com/projects/bailout/tarp/warrants/calculation/

And you might be very interested in this link

http://www.subsidyscope.com/projects/bailout/tarp/warrants/

Based on the closing prices on October 13, 2009, only 32 of the 214 warrant transactions listed on Subsidyscope are in the money. Some of the biggest recipients of TARP funding are in the most difficult financial situations. For example, Citigroup's closing stock price of $4.83 on October 13 is 73 percent below the strike price of $17.85 of the warrants the government received on October 28, 2008.

Source: http://www.subsidyscope.com/
Fri, 09/11/2009 - 00:15 | 98492 kevinearick
kevinearick's picture

We had the information economy up and running,

then the holding co., inverse pyramid, builders

stepped in and...

stupid move #1

replaced the kernal economy programmers with hacks;

stupid move #2

had the hacks write programs to replace the programmers;

stupid move #3

built an education system to dis-assemble education;

stupid move #4

built larger and larger applications on top of one another;

stupid move #5

built cookie-cutter enterprise systems on top of those;

stupid move #5

pretended that they knew something about economics.

and stupid move #6

prosecuted the kernal programmers.

yes, they created a herd that knows even less than they do, and where did that get them? They are all dependent on something they know nothing about.

What a show.

 

(stupid - stubbornly ignorant)

(insane - expecting a different outcome)

whisper: if you have muckety go back to after the oil embargo,

and draw a similar chart, you will see the investment holding co.s

the saudis, the defense manufacturers, and IBM, among others.

Microsoft was spun out of IBM, which became a ward of

government subsidized demand, and General Dynamics was

experimenting on govt transfer payments relative to co. operations,

especially in the area of population density. They were talking

back of the envelope and MS-Dos built in a garage nonesense,

etc. In San Diego, they were building economic prototypes for

national rollout. Fast forward to the experiment in Argentina,

population control under conditions of social safety net removal,

which failed, and you have what you have.

Wed, 10/14/2009 - 05:10 | 98494 Anonymous
Anonymous's picture

Well, what a load of rubbish.
Rubin lost money, he took risks? So what does that prove? Thousands of CEOs, entrepreneurs, financiers, whatever, have lost money. If you take risks you can lose money, that's the essence of capitalism. Oh yeah, sorry, I missed the crucial logical step. The smoking gun. The fact he made the money back proves he is "corrupt". This is obscurantism , ignorance and reverse engineering at its finest.

You present a series of events as evidence, when anyone who knows anything about financial history can see plain as a house that all the "Rubin events" are 100% correlated with the major financial events over the last 30 years. Obvious that anyone in finance who is successful today and was involved in markets went through some if them, lost money and recovered. Ever heard of sample selection bias? Oh i forgot, conspiracy theories leave no room for rational thinking. Only reverse causality and mistification.

Some of the articles here are intelligent. But when i read this stuff i wonder why you waste our time. You want to prove Rubin is satan? Go ahead, be my guest. But find something real.

Wed, 10/14/2009 - 06:54 | 98518 Anonymous
Anonymous's picture

What you guys have done in their position? The cruelty and dishonesty has been prevalent in mankind throughout history.

Would you have done your bit for the American people?

Yeah, exactly.

Wed, 10/14/2009 - 08:27 | 98541 Anonymous
Anonymous's picture

He sold all of his Citigroup stock for $55 per share in late 2007. It is from SEC public disclosure records.

Has anyone asked for insider trading investigation? As a chairman of Citi, he must have known their troubles, so he sold out leaving others to hold the bag.

Wed, 10/14/2009 - 08:34 | 98543 Leo Kolivakis
Leo Kolivakis's picture

At the end of the day, Goldman Sachs made a killing in the last six months. They took the risk and it paid off for them. Was this all orchestrated by Hank "the tank" Paulson? I don't really want to give him that much credit. In fact, the man makes me sick to my stomach. He's the furthest thing from an American patriot, if there are any left among the power elite.

Wed, 10/14/2009 - 17:50 | 99285 Anonymous
Anonymous's picture

I am sure ZH will be getting to this in the subsequent profiles..... Frank Brosens was tapped to follow in Neel Kashkari's footsteps and administer TARP --- that was his "reward" for being a big Obama fundraiser. At the time of announcement Goldman fatigue was at its highest after revelations of NY Fed head Friedman BUYING and SELLING GS shares while privy to all of that inside information ---- the GOVT would allow GS to survive --- so Brosens declined the position. Brosens stumped mightily for Obama, even inviting clients of Taconic funds to "contribute" to the campaign by paying to attend at least one fundraising breakfast. There may have been other events, but this was the one email of which I was made aware.....

Wed, 11/10/2010 - 06:18 | 715613 cheap uggs for sale
cheap uggs for sale's picture

It’s a interesting news,i like it.Additionally,wellcome to my website prettyboots.org ,here are so many UGGS On Sale such as:UGG Elsey wedge|UGG Elsey wedge black|UGG Elsey wedge chestnut|UGG Elsey wedge espresso|UGG Langley|UGG Langley black|UGG Langley chestnut|UGG Lo Pro Button|UGG Lo Pro Button black|UGG Lo Pro Button blue|UGG Lo Pro Button cream|UGG Mayfaire|UGG Mayfaire black|UGG Mayfaire chestnut|UGG Mayfaire chocolate|UGG Mayfaire sand|UGG Mayfaire red|UGG Nightfall|UGG Nightfall black|UGG Nightfall chestnut|UGG Nightfall chocolate|UGG Nightfall sand|UGG Sundance II|UGG Sundance II black|UGG Sundance II chestnut|UGG Sundance II chocolate|UGG Sundance II sand|UGG Ultimate Bind|UGG Ultimate Bind black|UGG Ultimate Bind chestnut|UGG Ultimate Bind chocolate|UGG Ultimate Bind sand|UGG Ultra Short|UGG Ultra Short chocolate|UGG Ultra Short sand|UGG Ultra Short black|UGG Ultra Tall|UGG Ultra Tall chestnut|UGG Ultra Tall sand|UGG Ultra Tall balck|UGG Ultra Tall chocolate|UGG Suede|UGG Suede black|UGG Suede chestnut|UGG Suede sand|UGG upside|UGG upside black|UGG upside chestnut|UGG upside mocha|UGG Roxy Tall|UGG Roxy Tall black|UGG Roxy Tall chestnut|UGG Roxy Tall chocolate|UGG Roxy Tall sand|UGG seline|UGG seline black|UGG seline chestnut|UGG Corinth Boots|UGG Liberty|UGG Liberty black|UGG Liberty cigar|UGG Highkoo|UGG Highkoo amber brown|UGG Highkoo espresso|UGG Highkoo grey|UGG Highkoo black|UGG Knightsbridge|UGG Knightsbridge black|UGG Knightsbridge chestnut|UGG Knightsbridge grey|UGG Knightsbridge sand|UGG Knightsbridge chocolate|UGG Adirondack|UGG Adirondack brown|UGG Adirondack chocolate|UGG Suburb Crochet|UGG Suburb Crochet black|UGG Suburb Crochet chestnut|UGG Suburb Crochet chocolate|UGG Suburb Crochet grey|UGG Suburb Crochet white|UGG Kensington|UGG Kensington black|UGG Kensington chestnut|UGG Roseberry|UGG Roseberry black|UGG Roseberry sand|UGG Gaviota|UGG Gaviota black|UGG Gaviota chestnut|UGG Gaviota chocolate|UGG Desoto|UGG Desoto black|UGG Desoto chestnut|UGG Desoto chocolate|UGG Brookfield Tall|UGG Brookfield Tall black|UGG Brookfield Tall chocolate|UGG Gissella|UGG Gissella black|UGG Gissella chestnut|UGG Gissella espresso|UGG Payton|UGG Payton black|UGG Payton chestnut|UGG Payton red|UGG Bailey Button Triplet|UGG Bailey Button Triplet black|UGG Bailey Button Triplet chestnut|UGG Bailey Button Triplet chocolate|UGG Bailey Button Triplet grey|UGG Bailey Button Triplet sand|There are so much style of cheap uggs for sale ,so once you go to my website you will be very surprise.

Do NOT follow this link or you will be banned from the site!