Robert Rubin Gets His Pink Slip: Good Riddance

Back in November, I asked the question: is Robert Rubin a liar or a coward or both? Today, in what should be a welcome sight to every working American, Rubin is effectively being run out of Citigroup, his reputation sullied. And, yet, he continues to obfuscate his role in the financial crisis we face.

This from the New York Times:

For Mr. Rubin, his resignation is a sobering turn in a sterling career in Washington and on Wall Street. Since joining Citigroup in 1999 as an adviser to the bank's senior executives, Mr. Rubin, 70, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has made one misstep after another.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible. During the same period, he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

In his capacity as a senior adviser to Citigroup's top executives and board, he pushed hard for the bank to step up its trading of risky mortgage-related securities and other complex investments as long as it improved oversight -- a strategy critics say sowed the seeds of the bank's current troubles. Mr. Rubin, whose contract specifically absolved him from daily operational responsibilities, has maintained that he could not have foreseen the current mess.

"This is not a decision that I have come to lightly," Mr. Rubin said in a statement released by the bank. "But as I enter my 70s and with all that is now in place at Citi, I believe the time has come for me to make these changes."

"My great regret," he added, "is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today." [emphasis added]

Rubin, though, is engaging in the strategy being employed by numerous leaders of the so-called "free market," not to mention the current president and his vice-president. They are adopting the Sgt. Schultz defense: I know nothing, I see nothing, I hear nothing.

Except it's a lie.

As I pointed out, Rubin knew very well the risks of leverage and spoke publicly about them as Treasury Secretary. But, he chose, deliberately, to ignore those dangers for one reason: profit and greed. Rubin pocketed more than $126 million in the past decade in pay and stock during his role with Citigroup. You don't get paid that kind of dough if you don't help fatten up the bottom line, no matter the cost.

Rubin's resignation is a way of avoiding taking the heat for the mess he created:

Although Mr. Rubin had been contemplating leaving Citigroup for several months, he may have hastened his departure to try to get ahead of the criticism facing the bank's board, said two people at Citigroup with knowledge of the situation. Mr. Rubin is fiercely protective of his reputation, and though he most likely would have been re-elected, he faced the potential embarrassment of a public struggle with investors who have been critical of his tenure and lucrative pay.

The downside to letting him slip quietly from his role at Citi is that he leaves with enough of his reputation intact that he still holds some sway in Washington, in particular, as part of the president-elect's transition team. Though I'm not optimistic, because you even have some liberals wanting to kiss-and-make up with Rubin, one can only hope that he will quietly be sidelined and his star diminished over time. But, that will only likely happen if a broad set of people make it their business to remind the public that Rubin failed Citigroup and failed the country.

Indeed, there is one silver lining in Rubin's reputation taking the rightful tarring it deserves: while he once served as a beacon for the political class, his slow fall from grace may give more momentum to the notion that it is time to fire the "free market" leaders who failed miserably.

Comments

[GJMandinka]

Everyone seems to be glossing over what happened or actively trying to re-write history. It is amazing to me that not one of these free-market clerics have stepped up and said, "You know, we blew it. Markets don't work this way. Unregulated markets lead to boom and bust cycles, erosion of confidence and ultimate market collapse. Government is a cultural necessity and is, of course, a factor in markets and always will be. When business buys too much influence in government, good regulation and oversight always suffer. Labor is a market factor and without strong labor you have weak consumption and markets collapse. Credit is not a substitute for wages. It was a dumb idea. Cyclical inflation is easier to manage than cyclical market collapse. We were wrong and we're sorry. Now we'll help try to correct things."
Have none of these guys absorbed the implications here? They're still trying to sell the status quo; regardless of the disaster it represents.

[marijam]

Is Phil Gramm employed?

[williambanzai7]

Dis--missed!!!!!

Colonel Klink

[Bonobo]

When I first read the title, I was happy because I thought it meant Rubin was out of Obama's advisory team. I was very disappointed to learn that he can now devote himself full time to ruining the world's economy.

[FreedomCorpse]

my initial thoughts were the same. Oh, great this loser is supposed to "help" the obama administra­tion...its more like a guarantee of utter failure.

[larry278]

Is this the start & end of a checquered career for Robt Rubin? The meltdown is having fun unexpected consequences. Rubin may fall back on consulting, speaking & a demeaning sinecure.

[schatsie]

How come personal responsibility only applies to single mothers... Why are these Cry Baby Capitalists not going to jail for Racketeering..

WHATEVER DID RUBIN DO to deserve 126 million plus his serverance payment??

[larry278]

High taxes on bonuses & golden parachutes could become law to punish people of Rubin's ilk. The one who designs & gets a bill which confiscates such windfalls passed into law will get Obamas attention but it will have to be constitutional. Obama did teach constitutional law for 10 years. That means that he knows what of look for as a bill is written, ammended & passed. Obama has let it be know that he's acquainted with the law including constitutional law. He will have a chance to establish that as a fact.

[Aaror]

Here is an easy law to help:
Any increase in compensation which would result in end compensation exceeding $500,000 (including increases when the starting compensation was over that amount) requires the approval of the shareholders, not just the board of directors.
Right now a board of fellow CEO's and celebrities who get a paycheck for always voting yes determine CEO pay.