Robert Rubin: 'Virtually Nobody' Saw Crisis Coming, Bush Deserves Much Of The Blame

Robert Rubin, the former Clinton-era Treasury Secretary and noted champion of deregulation, told a New York City audience last night that "virtually nobody" -- himself included -- foresaw the financial meltdown.

In a discussion at the 92nd Street Y cultural center, Rubin touched on the financial crisis, Obama's economic policies and America's potential in the new global economy -- but not on financial reform or the deregulatory agenda of the 1990s. The former Citigroup director, gloomy about the country's short-term economic prospects, cautioned against taking too seriously some recent positive economic indicators -- such as the country's 5.9 percent growth last quarter.

Rubin, who has also served as chairman of Goldman Sachs, said that while he became concerned about market "excesses" in 2005 and 2006, he failed to take account of all of the factors that would coalesce into the crisis. During his time at Citigroup, Rubin reportedly pushed the financial behemoth to take riskier bets, including investing in the subprime mortgage market, which imploded in 2007 and instigated the crisis. Next month, Rubin will be grilled by the Financial Crisis Inquiry Commission, which is investigating the causes of the economic slump, notes Bloomberg News.

Much of the blame for the current crisis falls on the shoulders of the fiscal policy decisions of the Bush administration, Rubin said, under which "we lost a decade to some extent." The country faces "tremendous headwinds," Rubin added, including mounting foreclosures, a "paucity of credit" for small- and medium-size enterprises, a jobs crisis, income inequality and declining infrastructure.

But now, post-crisis, Rubin said that Obama's economic policy team is caught between two imperatives: an escalating deficit and a pressing need for further stimulus. Policymakers must find "some way to move on both fronts at the same time," he said, but ours is "as uncertain a time as I can recollect." Though he hasn't been a visible player since offering advice to Obama during the transition in late 2008, Rubin told the audience that he regularly talks to White House economic adviser Larry Summers.

President Obama's failed proposal for a deficit commission was the right idea, Rubin said, arguing that government needs a way to both expand its stimulus program and simultaneously outline a credible long-term plan to reduce the deficit.

The market-centric confidence Rubin was known for during his days as a member of the "Committee To Save The World" -- along with Alan Greenspan and Summers -- was generally subdued. "Whatever your judgments," he counseled, "be careful with your conclusions. Attach a much higher level of uncertainty than you normally would."

Comments

[old timer 37]

06:42 PM on 04/15/2010

Dear Robert Rubin:
Yes, much of the blame for the crisis does fall on the Bush Administration, but you and your Goldman Sachs cronies are part of the problem. You helped to deregulate the financial industry, which was as patently stupid and destructive as had you deregulatee the transportation industry by removing all traffic lights and signs, removing lane markings, speed limits, police and traffic courts and replacing driver education by throwing sets of car keys at teenager and wishing them good luck in the free markets of the highway system.

That you didn't and still can't see the inevitability of this collapse shows that you are either terribly stupid or self-servingly oblivious, like the Pope and Cardinals are about their roles in the sex-abuse scandal.

You, like all of us, have to justify yourself both to the world and to your own system of beliefs. But either come up with a credible defense or have the humility to admit your personal culpability and then move on to help with a solution.

I saw this coming and wrote about it in October 2004 (Why I won't Vote for George Bush) predicting a major calamity "probably within 5 years"... for the basic reasons it came about. I'm just an engineer, not a financial guru like yourself. Ask yourself in a quiet moment of personal introspection: what makes you so blind? If you can't answer that question you should get out of the kitchen, and take Larry Summers with you.

[Craig Travis]

04:13 PM on 04/11/2010

This guy ought to be in jail instead he's rich beyond belief.

[Jorge Serrano]

04:40 PM on 03/27/2010

Watch the Frontline episode called The Warning and see how this clown and the other idiots in the Obama administration knew what was coming.
http://www.pbs.org/wgbh/pages/frontline/warning/view/

[johnb123]

03:00 PM on 03/26/2010

He can say that because he lives in a virtual world.

[nogimmicks]

09:21 PM on 03/19/2010

Is there a free bed next to Bernie Madoff? They will have a lot to talk about.

[Seneca]

02:25 PM on 03/18/2010

We do not need a new regulatory structure. Yes, the Republicans are full of it. But Dodd, Barney Frank and the Administration are, respectively, naive, cynical, and clueless both on the politics of financial regulatory reform and, especially, on the substance. Their bills do not address the cause of the crisis. And they know it. All that is needed is to enforce vigorously current rules on risk management and safety and soundness standards -- in addition, those unregulated lenders who remain should be covered. Do not promulgate new rules or pass laws that do not address the cause of the crisis. An independent consumer protection agency would only make a complex web of financial regulation worse, not better. Consolidating all regulatory agencies would also fail to cure what caused the crisis. We don't need to move the deck chairs around, the ship will sink anyway unless we plug the holes in the hull. One of the holes is caused by the failure of the existing system to blow the whistle on lenders exceeding the greed limit -- nothing new needed besides the will to enforce the rules we have. Perhaps the biggest hole is caused by the Fed -- make it more transparent and accountable, for we know not what, if anything, they do. To protect consumers, then direct OCC and OTS to do that job. The House bill is a cynical, politically expedient sham. Barney and Dodd agree to abolish the OTS merely because it doesn't cost anything politically.

[faultroy]

03:15 PM on 03/10/2010

As much as I am not a fan of Rubin, I have to conclude the policy suggestions are spot on. The only argument I would have with him is his assessment that the Bush Administration caused this crisis.If you look at Rubin's role as written by Matt Tabbai of Rolling Stone Magazine, Rubin was one of the main Architects that set up this "Perfect Storm."

[jabailo]

01:32 PM on 03/10/2010

There are always going to be crises. That's why we have an Executive Office -- to deal with them...whether the crises are natural or manmade.

Even if (and I disagree) the problems were caused by some past administration, the job of the current Administration is to solve them.

If the experts such as Rubin can only finger-point, then they have no special expertise and hence should not be paid consultants.

[olympus6]

05:28 PM on 03/05/2010

Hey Bob, better make sure your Dubai home has a moat.

[Kahill]

03:14 PM on 03/05/2010

Robert Rubin is no innocent bystander! In an interview on NPR, Robert Rubin was asked by Michelle Norris about the mortgage mess:
Michelle Norris: ‘I ask the question not necessarily because your hands were on the levers, but you're seen as one of the wisest of the wise men on Wall Street. And I wonder if you ever wish that you had perhaps spoken up or raised this issue?’ Robert Rubin: ‘I actually did raise them for years in my speeches. If you go back over the speeches I gave for the three or four years before this occurred, you'll see a lot of reference to the underweighting of risk and the developing of excesses. But if you're running trading rooms, you've got to run them every day and you've got to be in the business every day. And the kinds of views that others have around you of that kind may factor into what you're doing. But fundamentally, you can't go out of business. You can't stop doing business. And that's how the system just continues to move along that way...................but if you're actually running businesses, which I did at one time [20 or more years ago], you can listen to all that but fundamentally you've got to be in there every day, engaging in what's going on. Otherwise, you're not in the business.’
In other words, Robert Rubin was just going along with the system with business as usual, while collecting big bonuses!

[doneflyin]

12:17 PM on 03/05/2010

Rubin and his fellow supporters of deregulation, will continue to spout this nonsense because they can. They have not been held accountable for all the havoc they have created. They have been very well rewarded for what in a more sensible time would be considered criminal behavior. It not that at least they would be considered extremely incompetent.
When the Obama administration put these same discredited people back in power, I was shocked and disappointed. How could he do that after all this economic carnage?
I knew then there would be no change. The beat goes on, the pillaging continues.

[Linda from Deerfield]

11:59 AM on 03/05/2010

I consider myself a Democrat, but I've grown to hate Robert Rubin, along with Larry Summers. At the time they helped start us down the primrose path to oblivion, I thought it was a combination of

1) giving business everything they wanted to allow them to prove once and for all that government was not the obstacle to their success, and
2) bipartisanship taken to extremes because, since the Repubs regained control anyway, Democrats might as well put a positive spin on it.

Now I'm not so sure. The disaster that ensued -- not just the meltdown but the steady destruction of the nation's economy -- is hardly more tolerable simply because the Republicans have been wildly enthusiastic about enabling the path and have taken every opportunity to make themselves even more guilty.

Summers has opened the door to humility and moving forward based on reality, just barely. Rubin doesn't, or maybe he can't because he drank so deeply from the trough himself in private life that it borders on culpability. In both cases, true leadership seems to escape them and leaves them each looking like just another shallow ego. Some may not like my politics, but I would challenge them to try as hard as I am trying to avoid intellectual dishonesty.

[studmoose]

11:53 AM on 03/05/2010

There must be millions of 'No Ones' in this country, including Financial Professionals.

Even a blind man could see that accident approach!

[RationalThinker77]

11:48 AM on 03/05/2010

His statement is absurd. Plenty of people saw it coming, they were just marginalized and ignored. In regard to Bush, I've blamed Bush as much as the next person, but enough already. We're beyond that stage. Stop playing the blame game and help come up with viable solutions. I know it's easier said than done, but at least show that you are expending some energy on that front instead of channeling it all on finger pointing.

[Radar423]

10:51 AM on 03/05/2010

There is a bill in Congress right now that would do more for the American economy than all the stimulus funds have so far. It is HR 2568 The Fairness and Transparency in Contracting Act.

It would remove publicly traded companies from receiving small business contracts, ending the fraud in this area and putting 100 billion a year back into small businesses and the middle class economy.

Small business has created every net new job in this country since 1977, but they don't make big political contributions....so the only way this passes is with a swell of public outcry for it.

Check it out