Obama’s ‘Rubin Constellation’

Member Group : Reflections

Where’s the "Change we can believe in"?

On both Wall Street and in Congress, the same old crooks and party hacks who succeeded in producing the greatest economic crisis since the Great Depression have now ended up with even more power and more control than they had before the election.

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 New York Times correspondent on national economic policy Jackie Calmes 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 protégés of Mr. 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 Robert 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.

Robert Rubin, former Treasury secretary in the Clinton Administration and currently a key economic advisor to President-elect Barack Obama, has pocketed tens of millions of dollars from now twice bailed-out Citigroup.
As chairman of Citigroup’s executive committee from 1999 until August 2008, Rubin played a key role in overseeing a period in which the bank was pushed to a point of near-collapse.

The New York Times quotes "Citigroup insiders and analysts" as saying that Rubin played a "pivotal" role in producing the bank’s current woes "by drafting and blessing a strategy that involved taking greater risks to expand its business and reap higher profits."

Earlier, as Treasury secretary during the Clinton years, "Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities," reports the Times. "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."

And Summers? "Rubin, with Mr. Summers," reports the Times, "helped tear down the regulatory walls between banks, brokerages and insurance companies, and freed them to trade in unregulated and little-understood derivatives worth trillions of dollars."

By the time it was all over, by the time all the slashing and dicing of exotic products was completed and all the toxic mortgages had been repackaged and sufficiently camouflaged, Citigroup’s stock had lost 90 percent of its value, 75,000 jobs at the bank were lost, America’s taxpayers were guaranteeing a total of $306 billion of the bank’s pool of troubled assets against losses, and Robert Rubin had pocketed $115 million in pay from Citigroup for his nine years of poor planning and inadequate oversight.

Last January, Rubin, speaking as a Citigroup director, claimed that the growing problems in the financial sector were just "part of a cycle of periodic excess leading to periodic disruption."

Rubin’s remark "seemed glib given that the financial world looks very much ready to melt down," reported Fortune magazine’s Katie Benner at the time. Citigroup had already written down more than $24 billion in losses.
To the extent that there were any problems, Rubin, rather than blaming anyone on Wall Street, pointed to the need for a "more educated electorate" and more income redistribution.

On the latter point, on creating more "fairness" in the distribution of wealth and income, Rubin did more than his share at Citigroup, except in the opposite direction of what Obama is preaching, by pocketing $115 million while 75,000 people lost their jobs.

On the night of June 3, after the last primaries, Barack Obama took his promise of "hope" and "change" to its highest level. "This was the moment," he declared, "when the rise of the oceans began to slow and our planet began to heal."

How about if we just forget about the hot air and miracles and just try to hire someone for a "change" who isn’t a crook?

Ralph R. Reiland is an associate professor of economics at Robert Morris University in Pittsburgh.
Ralph R. Reiland
E-mail: [email protected]