I have regularly trashed Robert Rubin in this blog for quite some time.

And while I further tarnish the name of Rubin in Bailout Nation — he is between Hank Paulson and Larry Summers in our blame list — I probably could have slapped him around even more had time and space pemitte.d

No Matter. Felix Salmon jumps into the void with this list of Rubin crimes:

• He epitomized the way in which traders ousted investment bankers and turned investment banks into systemically-dangerous institutions by making them much larger than they had ever been in the past.

• For all his vocal bellyaching about tail risk, he ultimately made his money as an arbitrageur, making leveraged bets that something with a 95% chance of happening was, indeed, going to happen. That’s a strategy which works until it doesn’t — but by the time it failed, Rubin had moved on to greater things.

• He was one of those senior men at investment banks who encouraged risk-taking without understanding the risks which were being taken.

• He was perfectly happy to see Larry Summers cheer on the single most disastrous deregulation of derivatives ever, the CFMA.

• He allowed the illegal creation of Citigroup with a nod and a wink, knowing that Gramm-Leach-Bliley was just around the corner and would make Citigroup legal in retrospect.

• He then collected his just rewards in the form of $126 million in pay from Citi, for a job which even Weisberg admits involved no managerial responsibility.

• He turned the job of Treasury secretary into a job where the first priority was to make Wall Street happy, asking for nothing but cheap debt in return.

• He institutionalized and epitomized the revolving door from Wall Street to Washington and back again.

• He set himself up as a wise expert on risk, even as he had no idea what risks his own company was running.

• He took on a job with significant power, but ducked any responsibility which might normally go with such power.

• He specifically refused to take any responsibility for his recommendations to Weill and Prince on the subject of risk-taking.

• He failed to push Prince to put in place any kind of succession plan, thereby creating a horrible vacuum at the top of Citigroup just as strong leadership was desperately needed.

• He’s slippery and unapologetic in hindsight.

Great list — thanks , Felix . . .

>

Source:
Blaming Rubin
Felix Salmon
Reuters, May 1, 2010 15:24 EDT

http://blogs.reuters.com/felix-salmon/2010/05/01/blaming-rubin/

Category: Bailout Nation, Derivatives, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

22 Responses to “Trashing Rubin”

  1. DonF says:

    The last point about him being slippery and unapologetic is spot on and incredulous. Looking at his comments, he is STILL suggesting that “no one saw this coming” as he has been saying all along. His quote was “Moreover, these losses occurred in the context of a massive decline in the home real estate market that almost no financial models contemplated, including the ratings agencies’ or Citi’s”

    Really?? I don’t even know where to begin responding to that comment. Absolutely unreal.

    With the amount of money that he walked away with, and his unwavering belief that the payment was justified, I have no idea how there aren’t stories of him being accosted in public.

  2. jz says:

    Felix got trashed on his own blog for bringing up the Robert Rubin sex er cuddling scandal. I am glad that Felix made it more about business in his next post than his first. Yes, Iris Mack, Rubin’s alleged cuddler, did make him out to be a bit of a creep, but the real issue is that Rubin converted his government position into a $100+ million position, did nothing to deserve it, and practically did no work while he was there.

    Ms. Mack states her real purpose in her last sentence, “Thank you for your service. Now you can go fishing – forever! And please take Summers, Greenspan, Geithner, Blankfein, and all your other Goldman frat boyz with you. Oh, and Hank Paulson, I’ll look for you in church!”

    To me, that is the whole point. None of these guys made the big money that they did by being particularly skilled with finance or investing. They made it by being in government, changing laws to benefit corporate America, and shoving money to Wall Street.

    As a doctor, Barry, I am sickened to no end by the Business Judgment Rule. Lawyers have no problem questioning how I treated a heart attack, but shareholders of Citibank cannot sue Citibank for giving Rubin $100+ million because of the BJR.

    When you throw in the fact that board of director members have almost no legal responsibility and corporate board elections are essentially the same as they were in the old USSR, the term shareholder becomes a bit of a misnomer. Save for the dividends, owning a share of stock is much like owning a baseball card. It has little intrinsic value; its value is what someone else will pay.

    Summers got $5 million a year by spending one day a week in a hedge fund, and Markopolos wrote in his book about Madoff that the folks in the SEC, who were busy watching porn by the day, were there primarily as a stepping stone to a big paying job on Wall Street. This DC to Wall Street money machine needs to be stopped, and Citi’s board members need to have their asses sued off for the amount of money they gave to Rubin. Until those things change, the market is going to continue to resemble a Ponzi scheme.

  3. Mannwich says:

    The hubris and arrogance of these people is just astounding. They never see anything wrong with anything they do.

  4. The Curmudgeon says:

    America, if it ever did, no longer has any moral compass. People like Rubin, who had positions, but never really a job with accountability and responsibility for the actions of himself and others, just shows how little regard we have for any moral underpinnings. He knows it. Good times are had by all. Never mind the hangovers.

    To the point of the “business judgment rule” I’d say you answered your own complaint. The corpora-political system of plutocracy does not police itself and doesn’t allow you to do anything other than reject it its premises. Don’t buy stock unless you think you can out-think market insiders and get past the agency costs associated with managements that could care less about anything other than themselves.

  5. JustinTheSkeptic says:

    Just tell me wtf ( w, stands for when), are teh banks going to be made to mark-to-market on their real estate holdings? One other question: Could one of you real smart Harvard types educate me on how I can become a “free to do what I please business crook?” Any business Macheivellians out there who know how to join the Maggots on Wall Street, and Morones in Washington. We sure can’t beat them because capitalism and democracy our dead.

  6. chomen says:

    So, Rubin is under arrest and awaiting trial on charges of fraud?

  7. RW says:

    Terms such as Economic Rent Seeking, Crony Capitalism and Lemon Socialism are not simply pejoratives WRT individuals but increasingly recognized as accurate descriptions of systemic behaviors.

    http://en.wikipedia.org/wiki/Crony_capitalism
    http://en.wikipedia.org/wiki/Economic_rents
    http://en.wikipedia.org/wiki/Lemon_socialism

    The Goldman boyz are certainly cases in point but there are so many others in positions of influence and power (Halliburton anybody?) that it is actually more difficult to visualize significant reform than it is to imagine the line of guillotines from New York to Washington D.C. requisite to their just desserts.

    It’s really too bad the Tea Party has demonstrated such weak talent for target selection.

  8. dss says:

    I think he knew quite well the risks that were being taken, he just didn’t care as long as he and his cronies made a killing and could walk away.

    It is the same type of thing that politicians do; once elected they make a mess but then are out of office when the terrible effects of their policies fully reveal themselves.

  9. bsneath says:

    Affable, articulate, intelligent, confident, convincing, soft spoken, trustworthy….. All of the attributes of the perfect “plant”. The CIA could not have picked a better person.

  10. FrancoisT says:

    “Mannwich Says:

    The hubris and arrogance of these people is just astounding. They never see anything wrong with anything they do.”

    As The Epicurian Dealmaker wrote recently about fairness and elites’ hubris:

    And, as long as we can believe that we have a chance, too—that luck has a chance to find us and reward our own faith and effort—Americans will pull contentedly at the grindstone while simultaneously ooh-ing and ah-ing over the social and financial success of our betters. But central to this implicit social contract is the idea of fairness: that the deck is not stacked against the little guy [...]. It is not a belief in fairness of outcome, but rather one of fairness of opportunity. There is nothing that raises the cultural hackles of most Americans more than learning that the game is rigged, and that the guys at the top are gaming the system in their own favor.
    [...]

    That is one big reason why the ongoing scandals rocking the financial sector are creating such outrage and upset among the American polity. Citizens are discovering that a very large percentage of people whom they used to admire and envy for mouth-watering financial success earned a large portion of that success by cheating, by gaming the system, and by rigging the rules in their favor. What seems to outrage many Americans even more is that these very financiers do not seem to recognize that they have violated the implicit social norms almost everybody else seems to accept. They hide behind a defense of arrogance, superciliousness, and moral obliviousness which makes most Americans’ teeth grind in frustration.

    This is a dangerous situation for the plutocracy. For, when you get right down to it, most Americans are not really interested in supporting a system that is designed to preserve the wealth and privileges of those who have already made it to the top. Instead, they want one that will give as many people as possible a reasonably fair shot at reaching the top themselves. That is a distinction which seems to elude many of the wealthy and powerful. They misperceive the struggle as one of capitalism versus socialism, when what it really is is a struggle for the heart and soul of capitalism in this country. On one side is a new aristocracy of money, entrenched interests, and cronyism, and on the other is an ethos of equal opportunity for all.

    Food for thought.

  11. Mannwich says:

    Speaking of criminals, Greenspan apparently wanted Fed housing bubble dissent secret. Is it any wonder why U.S. citizens are still feeling shell-shocked right now? Or so-called leaders drove us into a ditch and not only have they not been fired and held accountable, many have are still in positions of power setting our policies. How can we ever “recover” in a true sense of the word when the status quo has been frozen like this – Tyranny of the Criminally Incompetent writ large?

    http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html

  12. this, to me, is worth noting: “• He epitomized the way in which traders ousted investment bankers and turned investment banks into systemically-dangerous institutions by making them much larger than they had ever been in the past.”

    and, still, peep love to hoot ‘n howl about the ‘moral timbre of bankers’..

    Memo: there’s always been a difference between Bankers, and the psychopaths on the Trading Floor.
    ~~
    “The last point about him being slippery and unapologetic is spot on”, as DonF, notes, above..is indicative of the kind of ‘people’ we’re witnessing..

    the credo: “You Fu’k'd Up, You Trusted Us!” is one close to where their hearts would be..

  13. Mannwich says:

    @FrancoisT: I think that post hits it square on the head. It’s about the fairness of the opportunity. Most Americans can live with losing a game that has some semblance of fairness to it.

  14. dss says:

    Let them eat cake!

  15. FrancoisT says:

    @Mannwich: “It’s about the fairness of the opportunity.”

    This bit got stuck in my mind; it truly describes what’s wrong with our system right now, because this is not what we have nowadays. In fact, upward social mobility in the US has decreased in the last 15 years compared to most of Europe. (I’ll try to find the link) Yup! This same Europe happily bashed as “socialist” and “pinko commie” by certain factions of the reich wing nut jobs that populate the Homeland in too great numbers.

    As a morale destroyer, I’m reading Money for Nothing right now. :-(

  16. flipspiceland says:

    I used to think movies about the Big Con were mostly fiction, “The Sting”, being the sine qua non of this type of theft. But it now seemw clear that art was merely imitating life.

    It turns out that fraud is so pervasive it is now to be taken for granted that you simply cannot trust anyone. Nobody.

    That someone or group of men can just decide to make a product or render a service whose only objective is Epic Failure and can then get away with it because it has not been judged officially illegal is
    the whole reason lynching was invented.

    When the law fails the people it is time for the people to fail the law.

  17. Frank Dean says:

    The revelation of Rubin’s incompetence has also outed Brad DeLong as a shameless panderer and water-carrier. DeLong is happy to loudly criticize people with whom he has no relationship. But when it comes to his friends, where his criticism might actually make a difference, he eagerly engages in the same sort of intellectual dishonesty he is so ready to criticize in others.

  18. Patrick Neid says:

    I suppose it is better late than never with all this Rubin bashing but when it would have counted the voices were silent.

    Rubin was the darling of the Clinton White House, the press and the Dem party. When his critics in the 90′s said anything they were mocked. No one said a word when he pulled his Citibank stunt. No one said a word when the Dem elite shuffled back and forth to Fannie and Freddie picking up millions for nothing.

    Now these same supporters are looking for perps and Rubin fits the bill. Gag me.

  19. Moss says:

    He allowed the illegal creation of Citigroup with a nod and a wink, knowing that Gramm-Leach-Bliley was just around the corner and would make Citigroup legal in retrospect.

    This is a defining aspect of his hubris and unethical fiber. No one can dispute that it was in fact illegal at the time yet he let Sandy Weill have his way.

  20. ToNYC says:

    Well after this it’s abundantly clear that Animal House is the movie play book of Government goes Wall Street. The moral and ethical differences are non-existent.

  21. [...] people (Rubin, Summers, Greenspank, Bukkake) designed economic policies that were intended to redistribute income [...]