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Meet Robert Rubin: The Man In Charge

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Meet the man, who many say (most of whom correctly) has been running pretty much everything from deep behind the scenes.

Rethinking Robert Rubin, by William Cohan

Bill Clinton has a favorite Robert Rubin story. It’s 1999, and the Cabinet has gathered to discuss the business of the American people. Except no one can focus because the impeachment crisis is raging, and even the most veteran Washington power players are, for lack of a better term, freaking out. “It was amazing what he did,” says Clinton of Rubin, his then-Treasury Secretary. “He often didn’t say much, and I was stunned when he wanted to speak. He just sat there and in about three minutes summed up the whole thing in a very calm way, and had an incredibly positive impact on the attitude of the Cabinet. He said, ‘What we’ve got to do is get up tomorrow and go back to work, just like we did today, make good things happen, and trust the system and trust the American people. It’s going to be fine.’ And oh my God, you would’ve thought that somebody had gone around and lifted a rock off everybody’s shoulders.”

Rubin’s knack for spreading wisdom and tranquility has been the defining trait of his professional life. Whether economies across Asia are contaminating each other like kids on a school bus or the Mexican government rises one morning and decides to devalue the peso, Rubin’s hooded eyes and perpetually mussed gray hair give him the air of an ancient Galapagos tortoise. Whatever nastiness politics or the global economy may throw at him, he abides.

Rubin in the 1960 Harvard yearbookPhotograph by Ed Quinn/CorbisRubin in the 1960 Harvard yearbook

This legendary stillness, combined with decades of economic and market expertise, keeps Rubin in constant demand. Since 2007 he’s been the co-chairman of the Council on Foreign Relations, where he maintains a disheveled office and employs his longtime assistant. He’s considered the intellectual father of the Hamilton Project at the Brookings Institution, which examines the relationship between government spending and unemployment. He’s a regular participant at the annual Bilderberg Meetings (so secretive they make Davos look like an American Idol taping) and a member of the Harvard Corporation, the discreet board that runs his alma mater. He also meets regularly with congressmen and foreign leaders and has access to the Obama administration through Timothy Geithner and other protégés. In 2010 he joined Centerview Partners, an advisory investment banking boutique, as a counselor to founders Blair Effron and Robert Pruzan.

It’s enough to keep a 74-year-old plenty busy. But not enough to shake questions about just how wise and thoughtful Robert Rubin really is, especially on the fourth anniversary of a financial crisis in which he played a pivotal, under-examined role. Rubinomics—his signature economic philosophy, in which the government balances the budget with a mix of tax increases and spending cuts, driving borrowing rates down—was the blueprint for an economy that scraped the sky. When it collapsed, due in part to bank-friendly policies that Rubin advocated, he made more than $100 million while others lost everything. “You have to view people in a fair light,” says Phil Angelides, co-chair of the Financial Crisis Inquiry Commission, who credits Rubin for much of the Clinton-era prosperity. “But on the other side of the ledger are key acts, such as the deregulation of derivatives, or stopping the Commodities Futures Trading Commission from regulating derivatives, that in the end weakened our financial system and exposed us to the risk of financial disaster.”

After he stepped away from Treasury in 1999, Rubin moved to Citigroup (C), and until 2009 he served as chairman of the executive committee and, briefly, chairman of the board of directors. On his watch, the federal government was forced to inject $45 billion of taxpayer money into the company and guarantee some $300 billion of illiquid assets. Taxpayers ended up with a 27 percent stake in Citigroup, which was sold in 2010 at a cumulative profit of $12 billion. Rubin gave up a portion of his contracted compensation—and was still paid around $126 million in cash and stock during a tenure in which his serenity has come to look a lot more like paralysis. “Nobody on this planet represents more vividly the scam of the banking industry,” says Nassim Nicholas Taleb, author of The Black Swan. “He made $120 million from Citibank, which was technically insolvent. And now we, the taxpayers, are paying for it.”

Evaluating Rubin’s role in the financial crisis is a tough task made tougher by the fact that the tortoise has retreated into his shell. Once famously adept at working the press—the author of a 2007 American Prospect profile noted that he “literally could not find a single feature piece that was, on balance, unflattering”—Rubin has turned down countless interview requests over the past four years, including several for this piece.

Which is not to say he dismissed the idea lightly. After an April event at the Council on Foreign Relations, Rubin appeared in the building’s Park Avenue lobby. His white Brooks Brothers shirt was fraying, and his gray suit looked rumpled enough that he might well have slept in it the night before. He was carrying an old-fashioned Redweld legal folder, filled with papers, when he pulled me aside. “I have been working hard to try to balance my work-life issues,” he said, explaining why he’d deliberated for months about whether to talk on the record. “I have been really busy, and I am not sure I have the right balance.” A few weeks later a representative conveyed that it was a close call, but Rubin would be heeding advisers who urged him not to speak. Instead, he dispatched his friends to speak for him.

During his 26 years at Goldman Sachs (GS), Rubin rose from trader to the corner office, and along with his partner, Stephen Friedman, helped transform Goldman from an investment bank into shorthand for financial dominance. Goldman has made thousands of people, including Rubin, very rich. But the firm’s reputation for avarice has also created a cloud that follows its all-star alumni into civic life. The case against Rubin’s performance as a public servant is mainly about that cloud. As Treasury Secretary, was he motivated by a desire to serve the people, or an opportunity to serve himself and his friends?

Rubin and Clinton worked closely together managing the nation’s economy 

“Most people see him as your sort of archetypical buttoned-down Wall Street guy,” says President Clinton, acknowledging the perception that Rubin favored the financial sector. Clinton, for one, doesn’t buy it, and cites numerous examples of Rubin advocating for policies that ran counter to his own economic interest. “When we had to give up the broad-based middle-class tax cut to reach our deficit reduction targets, he was one of the strongest supporters I had in not giving up the proposal to double the Earned Income Tax Credit. He said, ‘We can’t do that. It’ll move millions of poor people who are working out of poverty.’ You wouldn’t expect somebody who had spent a career on Wall Street, making and helping other people make millions and millions of dollars, to be in there arguing. But he was just as strong as [Secretary of Labor Robert] Reich was. He said, ‘We’ve got to keep that.’ And we took a lot of heat for it.”

Rubin’s selflessness, whether in economic policy or the day-to-day management of the Treasury, is a frequent theme of his admirers. Sheryl Sandberg, the chief operating officer of Facebook (FB), worked at Treasury after she graduated from Harvard Business School in 1995. In her first meeting with Rubin and a dozen senior staffers, she hid in the back of the room, hoping to turn invisible. “I’m young and brand new at Treasury, and I did not know much,” says Sandberg, now 43. Rubin called on her anyway. “He said, ‘You’re new. You may see things we’re missing.’ And it was a really powerful lesson, because he was showing everyone that you take opinions and you get feedback from everyone. He wasn’t going to be curtailed by hierarchy or titles.”

She says Rubin was spectacularly self-aware, and taught her that people will “overreact to things you do when you are senior,” especially in places like Goldman Sachs and the U.S. Department of Treasury. “He’d start, ‘I’m going to say this really carefully. Here’s what I mean. Here’s what I don’t mean,’ ” recalls Sandberg. “More importantly, he encouraged everyone to ask questions. He said, ‘If you have questions, come to me.’ ”

Peter Orszag, another Rubin protégé who later became President Obama’s director of the Office of Management and Budget (and is now a managing director at Citigroup and a contributor to Bloomberg View), had a similar experience as a junior White House staffer. In a meeting with Rubin, the Secretary bungled a calculation, transposing a billion dollars for a trillion. Orszag scribbled a correction on a note in an attempt to help Rubin save face. A week later, Orszag’s phone rang. “[Rubin] was abroad, like in Italy or somewhere,” Orszag says. “He called to tell me he was going through his briefcase and he came upon my note, and I was right. He just wanted to tell me that I was right. Most Treasury Secretaries would not do that.”

It’s not his personality that riles critics of Rubin’s four-and-a-half-year tenure at Treasury. It’s his failure to tame the 1999 repeal of Glass-Steagall and the wild expansion of over-the-counter derivatives, which were traded between banks, out of the public eye. “The changes that Robert Rubin drove through in the 1990s certainly helped plant the seed for [the] collapse,” says Angelides.

Rubin’s legion of defenders stir at any mention of Glass-Steagall, the 1933 law that separated the activities of commercial and investment banks. “There is an assumption that Bob was pushing hard for the repeal,” says Michael Schlein, a former chief of staff at the Securities and Exchange Commission and a former Citigroup executive. “I was there. That’s not the way it happened.”

In testimony before the Financial Crisis Inquiry Commission in March 2010, Rubin conceded that he “was an advocate of rescinding Glass-Steagall.” But: “By the time we rescinded it, there were no restrictions left in it at all except for the insurance underwriting, which had no relevance to anything that has happened since then.” What Rubin meant was that commercial banks had long been able to underwrite debt and equity and advise on mergers and acquisitions, and they had been buying investment banks through much of the 1990s. Rubin told the FCIC that ditching Glass-Steagall removed the “cumbersomeness” experienced by banks already in those businesses. In other words, he argued, he pushed for the removal of a law that was a phantom.

“Of course, it would have been better if we’d had the foresight and political strength to put in place the protections that were put in place in 2010 after the financial crisis occurred,” says Larry Summers, Rubin’s friend and successor as Treasury Secretary. “But this does not relate to the repeal of Glass-Steagall. There were virtually no restrictions on the investment banking activities of the major banks after the Federal Reserve’s undertakings during the decade before Glass-Steagall was repealed.” Speaking at a CNBC forum on July 18, Rubin said simply, “It is a myth that the repeal of Glass-Steagall contributed to the financial crisis.”

This is no longer the consensus. Aside from Paul Volcker, several of Rubin’s ex-Citigroup colleagues have recently revised their opinions. In an October 2009 letter to the New York Times, John Reed, the co-chief executive officer of Citigroup from 1998 to 2000, wrote: “As another older banker and one who has experienced both the pre- and post-Glass-Steagall world, I would agree with Paul A. Volcker (and also Mervyn King, governor of the Bank of England) that some kind of separation between institutions that deal primarily in the capital markets and those involved in more traditional deposit-taking and working-capital finance makes sense.” Richard Parsons, the former Citigroup board chairman, told a Washington audience this past spring that “to some extent, what we saw in the 2007-2008 crash was the result of the throwing off of Glass-Steagall.” Most famously, Sandy Weill told CNBC in July 2012 that the law’s reinstatement in some form is necessary to restore confidence in the financial system. “Have banks be deposit takers, have banks make commercial and real estate loans,” Weill said. “And have banks do something that will not risk taxpayer dollars.”

With Greenspan and Summers on the cover of ‘Time’ in February 1999Summers dismisses this as revisionism, warped by hindsight and political convenience. Instead, he offers a syllogism: If permitting the combination of commercial and investment banks caused the financial crisis, why was fixing it so dependent on commercial banks buying investment banks? True enough, many companies that took advantage of Glass-Steagall’s repeal (Citigroup, JPMorgan Chase (JPM), Bank of America (BAC)) still exist. Souvenirs from the standalone investment banks (Bear Stearns, Lehman Brothers, Merrill Lynch) are available on EBay (EBAY).

In part because of its complexity, less attention has been paid to Rubin’s role in the unleashing of the over-the-counter derivatives market. In March 1998, Brooksley Born, chairman of the CFTC, wanted to release a “concept paper” that would raise a series of questions about the possible regulation of derivatives. “I was very concerned about the dark nature of these markets,” Born told the Washington Post in 2009. “I didn’t think we knew enough about them.”

With Greenspan and Summers on the cover of ‘Time’ in February 1999

Born’s plan was to have the CFTC oversee these new, often inexplicable financial products. Rubin, Summers, Federal Reserve Chairman Alan Greenspan, and Securities and Exchange Commission Chairman Arthur Levitt countered that Born was out of her depth. (Levitt is a board member of Bloomberg LP, which owns Bloomberg Businessweek.) They argued that the CFTC, created in the 1970s to regulate futures contracts bought by farmers, didn’t have the authority or expertise to regulate complex derivatives in a fast-expanding market. Born was no match for their firepower. They persuaded Congress to ignore her.

 

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Thu, 09/20/2012 - 13:13 | 2815470 Dan Conway
Dan Conway's picture

He said, ‘What we’ve got to do is get up tomorrow and go back to work, just like we did today, make good things happen, and trust the system and trust the American people. It’s going to be fine.’ And oh my God, you would’ve thought that somebody had gone around and lifted a rock off everybody’s shoulders.”

Translation:  You political tools go back to doing what you do (lie, do interviews, leak confidential info, yell fire in a crowded theater, etc.) and provide me the cover I need to continue my plan to steal the nation's wealth and give it to my Wall Street friends.  I trust the american people to be distracted by whatever you fools say or do.  And oh by the way Bill, keep up the good work creating all of these distractions!  You would make a fine first lady someday (wink wink). 

Thu, 09/20/2012 - 13:26 | 2815504 JR
JR's picture

And the thing is, it never happened; Clinton can’t tell the truth. And only Clinton could make Bob Rubin look good.

Thu, 09/20/2012 - 13:28 | 2815513 lynnybee
lynnybee's picture

this is an excellent article, excellent comments with great added info reading & educating those who are clueless.     i have linked it & sent it to many of my friends & family.    thank you for posting this article.   

Thu, 09/20/2012 - 13:34 | 2815537 neutrinoman
neutrinoman's picture

Yep, that's the problem with the Democratic-slanted, conventional journalism that's ruled in the American media since the Kennedy years -- Cohan's is a textbook example. When Democrats make catastrophic mistakes like this, or like Vietnam, it's "tragic." When Republicans do some small fraction of this, it's "greed," "hypocrisy," the "dark side of American politics," and so on.

Rubin's case is a very important linchpin of understanding how the financial bubble of the 1990s-2000s arose, not just from the derivatives angle, but what was driving the need for complex and opaque derivatives in the first place. It was the need to mask and shift risk, specifically the large risks associated with subprime mortgage lending and embodied in CDOs, CLOs, etc. Derivatives of an older vintage have been around for a century or more (like futures and options), but these are transparent and impose limited and known risks. The CDO revolution mass-produced new-fangled and untested derviatives on a large scale, with no mark-to-market reality check. Instead, complex and ultimately worthless mathematical models were devised to "prove" the "answers" that had already been predetermined.

And Rubin put into practice at Citi what he helped to foist on the public at large, along with Sandy Weil and others. Of the large commercial banks just before the crisis, Citi was the only one in real trouble, with its large swamp of bad mortgage loans. The others only got into trouble because they bought the trouble when they acquired (or were forced to acquire) bankrupt outfits like Countrywide, WaMu, Merrill Lynch, and so on. TARP and the larger bailout steps unfairly tarred all the large banks with the same brush. I suspect that was partly to hide the facts that the trouble was highly and unevenly concentrated in certain institutions. To prevent those particular institutions and associated personalities from being the focus, the trouble was declared "systemic" -- somehow everyone's fault, and no one's in particular. The role of Democratic politicians (Clinton above all) in unleashing the feel-good politics of artificially cheap and adundant credit -- and all its consequences, from inflated state and municipal budgets to an auto industry inflated by home equity credit -- has largely been ignored.

(Notice how the collapse of MF Global was associated with Corzine, but carefully isolated by the media from Obama and the Democratic party and the open cronyism of the SEC and the CFTC.)

What strikes me as odd is the way that Republicans get sucked into defending, or at least being associated with, toxic Democratic mistakes. Somehow the Republicans are presumed to be the "party of racism," the opposite of historical truth, and paid disproportionately (because of Nixon) for the Vietnam war, which was, after all, a mistake of Kennedy and Johnson's. Something like that is still going on as the ever-more liberal-left political media keeps up the drumbeat of falsehoods of where the financial crisis came from.

There is the Tea Party to hold the Republicans' feet to the fire and not become the "me-too" party of bailouts and TBTF (or "so astonishing that it has to be covered up with bailouts instead of being allowed out in open bankruptcy court"). But the Republicans seem incapable of shaking off the role of stupid  patsy. For this reason, we have at most a 1.5-party system, instead of a real opposition with real answers to our problems.

Thu, 09/20/2012 - 13:51 | 2815580 ZeroAvatar
ZeroAvatar's picture

.

Thu, 09/20/2012 - 13:54 | 2815591 GreatUncle
GreatUncle's picture

Legislation or no legislation, money moves for best return and now it can move globally.

At that point legislating against any bank in any one country hands the advantage over to another. Somewhere along the line all these banks and government treasuries had to fuse together or be compared. That was part revealed in 2008 and the disparity in the global economy even though you may not want to admit it it was completed.

All the creations and manipulations prior to that were intended toward merging into one. This merging though has revealed the true state and there is just not enough to go round anymore and currently it is frowned upon to exploit another nation etc. 

You are stuck now, you cannot progress as the only progression left is for the solitary global economy to start devouring itself to maintain its supposed worth. Really you got 200 trillion to cover the derivatives market?

Nah didn't think so. Looking foward to how this plays out because all the points I would consider to be partial fixes or improvements are denied.

Thu, 09/20/2012 - 13:57 | 2815601 tradewithdave
tradewithdave's picture

What's it going to take to get a Banzai Masterpiece from the Ritz Carlton Pool Event at the DNC?  I already offered up the Iris Mack as Pamela Anderson Baywatch lifeguard concept as copyright free.  Mathematically speaking, how long does it take for a dark pool to reach equilibrium when the amount of water absorbed from one man's suit is removed unexpectedly?  It's like a flash crash of liquidity that can only be resolved by the Depository Trust and Suit Cleaning Corp.  

 

If we only had Glass-Steagall back, at least Sandy could walk across the pool like in the old days and not get his Gucci's wet.  Between chalking the sidewalks in front of the TBTF bank offices, private school fundraisers selling Chase Burning oil paintings and "accidentally" pushing CEO's in the pool at parties, looks like We Are Change(ing our clothes).org could have a busy holiday party ambush season.  It may be time to buy a waterproof case for the Iphone 5.  Are those out yet?

www.tradewithdave.com

Thu, 09/20/2012 - 14:17 | 2815666 Floodmaster
Floodmaster's picture

The committee to save the world, WHAT A FUCKING FARCE !, You Should Have Read,The committee to save the BANKS. Clinton is a Bankster Puppet who repealed the Glass-Steagall Act. Bunch of crooks.

Thu, 09/20/2012 - 14:29 | 2815690 Ludwig Van
Ludwig Van's picture

 

Sample article excerpt --

"In his testimony to _______, Rubin disputed _______’s recollection. He claimed his intent was to _______ ...."

 

Last (after the jump) paragraph --

People like Rubin—brilliant, powerful, and fueled by certainty—will always exist. They’ll act selfishly and selflessly. They’ll advance whole societies and their own interests, and their paradoxes will be endlessly debated. “This is a guy who is as controlled as any human being I know,” says Sandy Lewis, who as an arbitrageur worked with Rubin at Goldman Sachs. “He’s pleasant company. He’s compulsively dishonest in a certain way, and compulsively honest in other ways.” Nobody’s perfect....

 

Rubin is a CFRer, a Bilderberger, but that's just what is admitted to.

 

I get the same sense reading this article as I got last week watching *2016: Obama's America.* The protagonist is presented as flawed, bad; the presentation postured as a slam, i.e. the guy is bad and here's why. But it's a sleight: The depth of Bad presented obscures the leagues of Bad unseen.

 

 

Thu, 09/20/2012 - 14:27 | 2815705 common_sense
common_sense's picture

rubin = god = asshole

Thu, 09/20/2012 - 14:28 | 2815708 Don Diego
Don Diego's picture

I would love to have Rubin bound on a chair, inside a lonely house, and a couple of tools: an electril drill and a tape recorder. I am sure he has a couple of good stories to tell!

Thu, 09/20/2012 - 15:16 | 2815873 Roandavid
Roandavid's picture

Torture doesn't work.

Thu, 09/20/2012 - 14:43 | 2815749 Floodmaster
Floodmaster's picture

... in less than 200 years our descendants will be working in the fields to furnish them substance ... 1787 ... Benjamin Franklin

Thu, 09/20/2012 - 14:55 | 2815793 waterhorse
waterhorse's picture

"Rethinking Robert Rubin" - Hmmm.   I still think he's a smarmy, sociopathic scoundrel and this putrid puff piece made me gag.

Thu, 09/20/2012 - 15:02 | 2815809 waterhorse
waterhorse's picture

What's next, a sycophantic revisionist do-over on Angelo Mozilo?  Ken Lewis?  Jamie Dimon?  Dick Fuld? 

Thu, 09/20/2012 - 17:18 | 2816293 theprofromdover
theprofromdover's picture

I don't care who writes grovelling sycophantic drivel about Rubin, he stays on the list.

Thu, 09/20/2012 - 17:48 | 2816362 Heyoka Bianco
Heyoka Bianco's picture

If permitting the combination of commercial and investment banks caused the financial crisis, why was fixing it so dependent on commercial banks buying investment banks? Oh, is that how it got "fixed"? I was under the impression, apparently flawed, that the commercial banks were merely the conduit to funnel billions in taxpayer money to rescue the bankster idiots at the investment banks. At least we can all sleep soundly knowing the problem is now solved. Talk about revisionism and warped hindsight.

By the way something, if Glass Steagall was already "dead", why did they need a bill to finish it off? And if you're going to blame other "bad practices", why weren't you doing something about those, you stupid douches? Don't try to tell me it all happened on Bush's watch. Enron sits squarely on Billy Boy and his minions' shoulders.

I hate those stupid sports apologies where they say "I take full responsibility", but at least, even in their insincerity, they're light years ahead of these fuckwads, who take no blame, ever, for anything.

Thu, 09/20/2012 - 18:04 | 2816396 GoingLoonie
GoingLoonie's picture

These 3 advisors (pictured on time) by ending Glass -Stegall, handed our Government over to the banks to be manipulated and corrupted as desired.  All three should be in jail.

Thu, 09/20/2012 - 20:29 | 2816614 steelrules
steelrules's picture

Just another of the myriad of Jews that have taken the once greatest most beloved and respected nation in the world the USA. and turned it into the most hated and corrupt proxy of the Knesset.

 

Fri, 09/21/2012 - 01:28 | 2817019 Jena
Jena's picture

If Robert Rubin were Catholic, Bono may be ready to lobby the Catholic Chruch to look into making him a saint upon his death for his work in helping to raise funds for AIDS in Africa.

Bono wrote this in the July 2007 issue of Vanity Fair as part of an article announcing:     http://www.vanityfair.com/magazine/2007/07/bono200707

"(Product) Red) - which piggybacks the excitement and energy of the commercial world to buy lifesaving aids drugs for Africans who cannot afford them."

A few years ago I was with the great Robert Rubin, former U.S. Treasury secretary under President Clinton. He said if we are serious about our stuff we will have to improve on two fronts: (1) communicating to America the scale of the problem, and (2) convincing America that the problem can be solved. He added the challenge that we would need the kinds of marketing budgets Nike and Gap have at their disposal."

 

It's not that I disagree with giving money to other countries to fight certain infectious diseases.  AIDS in Africa was a horror to even know anything about thought the late 1990's and early 2000's, just as it was a nightmare here and some other places in the late 1980's and early 1990's.

But given the totality of the man's life, how much of this was to make up for all the bad that he has done over the years?

Sun, 09/23/2012 - 22:28 | 2823286 wo09
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