In the WSJ former AIG CEO Hank Greenberg recently posed a question:
The recently released list of businesses bailed out by the Federal Reserve was not as surprising to me as it was to many members of the general public.
What is clear from the list is that the notion of equal protection ensconced in the Constitution was missing in September 2008. Rather than trying to spread both the burden and benefit of the bailout evenly among members of the U.S. financial services industry, key decision makers at the Fed and Treasury arbitrarily determined which companies should become wards of the federal government (AIG) and which should be permitted to live on (Goldman Sachs and Morgan Stanley). Goldman Sachs was permitted to live by enjoying markedly lower interest rates and access to credit facilities amounting over time to approximately $600 billion.
Federal decision makers had six months following the Bear Stearns collapse in early 2008 to formulate an effective response to foreseeable liquidity difficulties in the U.S. financial-services industry. Instead, the bailout turned out to be a rush for funds that benefited some and punished others. Goldman Sachs, Morgan Stanley and others were permitted to become bank holding companies and have access to cheap federal funds, while AIG was denied this opportunity for reasons never fully explained. It is important that an independent body is convened to seek reasons for these actions.
The answer is simple. Robert Rubin.
Arguably no one Robert Rubin has benefited more from the “platinum revolving door” than Robert Rubin. Rubin, Treasury Secretary under Bill Clinton, spent 26 years at Goldman Sachs and another 9 years at Gitigroup. Rubin took more than $126 million while Citigroup was going down the toilet. He and Jamie Gorelick both seem to prosper no matter how much destruction accompanies them.
As Treasury Secretary, Rubin once intervened in a Mexican financial turmoil with an interesting motive:
Another momentous event in Goldman’s history was the Mexican bailout of 1995. Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key holder. On November 22, 1994, the Mexican Bolsa stock market had admitted Goldman Sachs and one other firm to operate on that market. The 1994 economic crisis in Mexico threatened to wipe out the value of Mexico’s bonds held by Goldman Sachs.
How convenient.
In 1998 Travelers (insurance) merged with Citicorp (banking). Glass-Steagall had kept banking and insurance separate since 1933. Sanford Weill of Citicorp and John Reed of Travelers wanted Glass-Steagall dismantled or they would have had to spin off the insurance business. To help with the deconstruction of Glass-Steagall, Weill and Reed enlisted the help of one Robert Rubin.
The goal is to use your government position to advance the interests of your future employer, and Orszag and Rubin’s actions in the government and then at Citigroup provide stunning examples. As Bill Clinton’s treasury secretary, Rubin presided over the dismantling of Glass-Steagall, the legislation that would have prohibited the creation of the too-big-to-fail Citigroup. He was rewarded with a $15-million-a-year job at Citigroup, where he became a leader in the bank’s aggressive move into high-risk ventures.
Lefties are quick to blame Republicans for the repeal of Glass-Stegall but it was engineered by Robert Rubin and friends.
Those who had hoped for “Hope and Change” got precious little of that “change” when it comes to monetary matters. They’re all Rubinites:
It’s not unlike what happened after the collapse of the failed economy in the Soviet Union. The corrupt and inept communist bosses who were tossed out of power ended up back on top by stealing their way into ownership positions in the economy’s newly privatized companies.
Similarly, delivering the exact opposite of “change,” President-elect Barack Obama is putting some of the nation’s most notorious foxes in charge of guarding the chicken coop by way of a proposed economic team that Jackie Calmes, The New York Times correspondent on national economic policy, calls “a virtual Rubin constellation.”
Obama’s “choices for his top economic advisers — Timothy F. Geithner as Treasury secretary, Lawrence H. Summers as senior White House economics adviser and Peter R. Orszag as budget director — are past proteges of (former Treasury Secretary Robert) Rubin,” explains Calmes, formerly the chief political correspondent for The Wall Street Journal’s Washington bureau.
Geithner, picked to succeed Treasury secretary Henry Paulson, was Rubin’s undersecretary for international affairs at Treasury; Orszag was a dependable Rubin ally during his years at Treasury; and Summers served as deputy Treasury secretary under Rubin.
And Orszag? Following the Rubin Rule, he’s doing just fine:
On Thursday, Peter R. Orszag, President Obama’s first budget director and a protégé of Mr. Rubin, followed in his mentor’s footsteps and joined Citi’s investment banking group as a vice chairman.
Mr. Orszag, 41, is the second cabinet official to join Citi this month, and his appointment comes days after the Treasury Department’s $10.5 billion stock offering helped further extricate the bailed out bank from Washington.
snip
Inside Citigroup, the guessing games have already begun about how many zeros will appear on his paycheck — as well as the requisite jokes about whether his package would pass muster with the federal pay czar. Such a job typically pays at least $2 million to $3 million, according to bankers.
So Rubin makes Citigroup too big to fail, Orszag bails out Citigroup with our out with our money and in return Citigroup rewards them very handsomely.
Dodd-Frank is an absolute farce, thanks to these fine gentlemen:
The failure to provide serious regulation of the financial industry to avoid future downturns is documented in devastating detail in a Dec. 28 Bloomberg report by Christine Harper: “The U.S. government, promising to make the system safer, buckled under many of the financial industry’s protests. Lawmakers spurned changes that would wall off deposit-taking banks from riskier trading. They declined to limit the size of lenders or ban any form of derivatives.”
Rubin wasn’t alone in pushing for the repeal of Glass -Steagall. There’s another name you might find familiar:
The reason for that failure is obvious from the president’s choice of advisers, featuring Rubin acolytes from the Clinton years. Harper writes: “While Obama vowed to change the system, he filled his economic team with people who helped create it,” referring to, among others, Timothy F. Geithner, who had gone from the Clinton Treasury Department to head the New York Fed, where he presided over the salvaging of Citigroup and AIG. As Obama’s treasury secretary, he was quick to appoint a Goldman Sachs lobbyist as his chief of staff. Geithner’s subservience to Wall Street was reinforced by White House top economic adviser Lawrence Summers, Rubin’s deputy and then replacement in the Clinton administration, who pushed through the repeal of Glass-Steagall and fought against the regulation of derivatives.
Fought against the regulation of derivatives? Anyone remember the role of derivatives in the current financial crisis?
And that guy Geithner at the Treasury? Guess what his job was while at the NY Fed.
He was supposed to keep an eye on……………guess who?
As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn’t take on too much risk. But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history. Now, the 47-year-old Geithner heads to the Senate in coming days as President-elect Barack Obama’s nominee for Treasury secretary. He’s won accolades for his expertise and work ethic, but there’s been little attention to his record as a Fed watchdog.
Geithner failed to do his job at the NY Fed and Obama rewarded that failure in making him Treasury Secretary of the United States. I am going to stick my neck out here and prognosticate that when he leaves office, Geithner will find employment immediately at….
Citigroup.
But we’re not done yet.
As a pretext for financial reform, the SEC filed fraud charges against Goldman. In the settlement that followed, Goldman paid a $550 million fine but admitted no wrongdoing. It has been noted that while this appears to be a large sum, it was but two weeks profit for Goldman.
At the American Thinker, Fred Sauer shows us just what Obama’s financial reform has brought us:
The real crime of the matter is revealed by our discovery of exactly the nature of Goldman Sachs Mysterious Business. Quite simply, the Mysterious Business is the largest highly leveraged hedge fund in the world that is run exclusively for the benefit of the employees of Goldman Sachs. All risks are absorbed by the Federal Reserve System with the U.S. taxpayers standing by at all times as ultimate guarantors.
Rubin’s handiwork opened the doors for financial disaster and his progeny continue his legacy to this day. They’ve help destroy this country while setting the stages for their respective financial futures and it all comes at our cost.
DrJohn has been a health care professional for more than 30 years. In addition to clinical practice he has done extensive research and has published widely with over 70 original articles and abstracts in the peer-reviewed literature. DrJohn is well known in his field and has lectured on every continent except for Antarctica. He has been married to the same wonderful lady for over 30 years and has three kids- two sons, both of whom are attorneys and one daughter on her way into the field of education.
DrJohn was brought up with the concept that one can do well if one is prepared to work hard but nothing in life is guaranteed.
Except for liberals being foolish.
excellent collection of our doom. I double down on my disgust of democrats . If I was french, I would fart in their general direction and spit on them.. alas, I’m not french.
Good article on Rubin, drj. Might I just add that you inadvertently missed Rubin’s single largest contribution to current economic woes? As I pointed out in both my Jan 2009 post on Rubin, and in my Perfect Storm of events post on the housing mess, Rubin was Clinton’s tool for the back room, 12th hour CRA regulations changes on the eve of the GOP taking power in 1996.
Yes, Rubin is the mentor of the terrible trio… Geithner, Summers and Rubin. All with ties back to the Clinton admin, and all with this bizarre approach to the economy. They laid the groundword for the easy money, ignored the events that transpired, and yet all went on to yet more power and money.
Those are great articles, Mata. Thanks!
DrJohn, didn’t you just last week claim OVER AND OVER AND OVER again that derivatives had NOTHING to do with the meltdown? Even as I pointed out that CDOs/securitization and credit default swaps (the very product that crook Hank Greenberg’s AIG was selling and not reserving on) were responsible for the bank holding companies and brokerage houses problems, you said that there would not have been a meltdown if not for Fannie and Freddie and CRA. But now you are claiming, based on the musings of disgraced CEO Hank Greemberg, the one who refused to have sufficient reserves to back his credit default swaps, now we are supposed to believe that Bob Rubin and the Dems and derivatives are to blame? Who are you going to blame next week, DrJohn? The “union bosses”?
Look, if you are going to pretend to do an analysis of the problem, you need to pick a horse and ride it: either derivatives had nothing to do with the melt down (your position last week) and the CRA/Washington Dems were responsible, or derivatives and Bob Rubin are responsible. Now how Dems are responsible for Bear Stearns and Merrill Lynch (all GOPer led) imploding . . . maybe that will be next weeks’ project?
Another thing Hank Greenberg does not seem to grasp — Goldman Sachs and Morgan Stanley were NOT similarly situated to AIG on a number of very basic levels. For one, in September 2008 . . .THEY WEREN’T INSOLVENT! AIG, in comparison, had already had billions of federal dollars pumped in because of the gross mismanagement and financial shenanigans that crook Greenberg has engineered. And another difference — Goldman and Morgan were NOT INSURANCE COMPANIES. It is one thing for a brokerage/investment bank to change its form and another thing for an insurance company. For one, they are not regulated by the same agencies and, second, AIG was a collection of hundreds of smaller insurance companies, some state chartered. So for DrJohn to seize on this article as the capstone of his screed against Bob Rubin is flat out hilarious.
Need your help, Brob, for a link.
Robert Rubin should be exiled to Siberia. Instead of whining, make an argument.
Actually, brob, Greenberg was ousted by Eliot Spitzer and the sharks prior to the collapse. He is a pirate and proud of it, but this 2008 mess is not his. Also, not quite sure where you are getting the thing that Bear or Merrill are evil GOP – no doubt there are republicans in the closet of all of the firms, just as there are closeted conservatives in the ivy league, but the firms have been liberal for some time. DrJohns post on the oligarchy of liberal wall street is sadly correct.
Oh, what a tangled web we weave… Inasmuch as I liked the read, since the title of the article includes Obama’s corrupted change… Not one of the Financial institutions, but significant just the same is Gores Climate corruption… Obama jumped on his band wagon. Gore looks down his nose at the wee ‘little people’ with his climate triple speak as though we are ALL so gullible. Scientist who can dispel the Gore Climocorruption are simply dismissed. I am not understanding how so many ‘tree huggers’ fall for this and yet say nothing about all the ‘ money’ Gore will make by “duping” not only the tree huggers (who deserve what they get) but those who have no choice (me and my ilk) who are ‘forced’ into it. Typical Liberal “Never let a good crisis go to waste and If there is no crisis – create one!” Then make Millions of dollars off of it on the American Citizens… Makes me want to stick a Fork in my eye..
Obama, like Bush II, supports endless Wars for Israel, it all started nearly a decade ago under a false flag attack.
9/11 and Israel, here:
http://www.iuniverse.com/Bookstore/BookDetail.aspx?BookId=SKU-000190526
You mean like advocation of removing Mubarack, the Egyptian leader responsible for keeping the peace between Egypt and Israel? Or advocating the removal of both Gaddafi and the Yemen prez… both of who were allies in terror that aims it’s assault against Israel and the west?
Evan, your logic and talking points leave much to be desired in the world of reality….
Corruption brought Obama. Usually, if there is a nongermaine personal problem, a thoughtful judge will sign to keep a RECORD CLOSED. OBAMA’S HEALTH, EDUCATION, WORK HISTORY AND HIS BIRTH CERTIFICATE WERE ORDERED CLOSED BY…GET THIS. THE CIA who employed Obama and his mother.