Posted on 11/22/2008 3:35:43 PM PST by WilliamReading
The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.
Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits. Mr. Prince and Mr. Rubin both declined to comment for this article.
When he was Treasury secretary during the Clinton administration, Mr. 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. 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 since joining Citigroup in 1999 as a trusted adviser to the bank’s senior executives, Mr. Rubin, who is an economic adviser on the transition team of President-elect Barack Obama, has sat atop a bank that has been roiled by one financial miscue after another.
Citigroup was ensnared in murky financial dealings with the defunct energy company Enron, which drew the attention of federal investigators; it was criticized by law enforcement officials for the role one of its prominent research analysts played during the telecom bubble several years ago; and it found itself in the middle of regulatory violations in Britain and Japan.
(Excerpt) Read more at nytimes.com ...
Interesting that the New York Times didn’t report Robert Rubin’s connection to the sub-prime mess before the Presidential election.
Robert Rubin was Clinton’s Secretary of Treasury and also an close advisor to Obama, and forced the deregulation of the big banks and let them leverage their bets in order to make higher, more risky profits.
John McCain never understood what the heck was going on anyway, so it probably wouldn’t have done him any good in the election, though. I think the electorate viewed him as clueless regarding the economy, and voted for Obama instead.
What he did, under Clinton's orders, was to modify Community Reinvestment Act to MANDATE the number (increasing from year to year) of subprime loans that the banks were OBLIGATED to provide. Housing inflation began immediately after that (1998). Home ownership shot up from 64% to %69% in less than a decade. Now it is simply decreasing back to 64%.
way late on this story.
Published on Thursday, January 17, 2002 by Common Dreams
Rubin Shouldn’t Escape Enron Investigation
by Mark Weisbrot
One of the leading political figures embroiled in the Enron scandal is being handed a “Get Out of Jail Free” card, and he doesn’t deserve it. That is Robert Rubin, President Clinton’s former Treasury Secretary.
Rubin seems to have everything he needs to be inoculated from the scandal’s contagion: one of the most powerful and influential people on the planet, he has charmed not only bankers and political leaders of both parties, but the media and opinion-makers as well. In the press he was often portrayed as a primary architect of America’s longest-running economic expansion, in the 1990s.
A cover of Time magazine in 1999 displayed Rubin, Fed Chairman Alan Greenspan, and Larry Summers (number two at Treasury, later replacing Rubin) as “The Committee to Save the World.” But more recently he has been caught peddling his influence for the financial giant Citigroup, where he left public office to become a top executive.
As Enron’s accounting irregularities were being discovered and its fortunes rapidly sinking, Bob Rubin placed a call on November 8 to Peter R. Fisher, current undersecretary of the Treasury for domestic finance. According to Treasury, Rubin wanted to know if the Bush administration was going to intervene with the big credit rating agencies, who were about to lower their rating of Enron’s debt. Since Rubin’s Citigroup was holding hundreds of millions of dollars worth of Enron’s debt, it had quite a large stake in the outcome of any such decision.
Treasury told the press that Fisher said no, and Rubin agreed with the decision — as if this were just an informational call to discuss the pros and cons of political intervention to protect the credit rating on Enron’s bonds. But this should not be allowed to drop.
The public needs to know more about this phone call, and any others that Rubin may have made on Citigroup’s behalf. Whether or not they are technically illegal, such actions are a blatant and corrupt abuse of one of the highest offices of our government.
For those who followed Rubin’s role in the Asian economic crisis a few years ago, this comes as no surprise. If we look at what Treasury actually accomplished with a $120 billion loan package for the region, it was quite different than what Time magazine and the rest of the press were led to believe. They got the taxpayers of Indonesia, South Korea, and the other affected countries to guarantee the bad debt held by foreign corporations and banks.
Rubin and Summers did nothing to help these countries when they needed reserves to keep their currencies from falling, and we now know that Treasury’s actions actually helped cause the crisis and made it much worse. They were not “saving the world.” They were saving Citibank and others from losses due to their bad loans — just as Rubin tried to do when he called Treasury about Enron’s debt.
But these details of the Asian crisis did not get much press. That is why it is so important that the current investigations pursue the political corruption involved in the Enron scandal. Rubin is holding one of the two biggest smoking guns so far discovered. (The other is held by the Bush administration: According to former Federal Energy Commission Chairman Curtis Hebert, Jr., Enron CEO Kenneth Lay told him he would support him as Chairman if he changed his views on utility deregulation. Hebert said he refused. He was subsequently replaced by Pat Wood III, a friend of Ken Lay and George W. Bush.)
Of course most of the political casualties of an independent investigation would be in George W. Bush’s camp. After all, this is the Enron administration — the list of officials with Enron ties is long and goes right to the top, including chief economic adviser Larry Lindsey (former Enron consultant); US Trade Representative Robert Zoellick (former Enron advisory board); chief political advisor Karl Rove (investor).
But the Democrats have been unsure about whether to pursue the investigation into the political realm. Part of this timidity is a desire to avoid the appearance of partisan excess that, in the Clinton scandals, drew a backlash against the Republicans. But they are undoubtedly afraid that some of their own luminaries, Rubin chief among them, might end up on the wrong side of a subpoena. It would be a shame if these fears, and the media’s reluctance to pursue these issues independently, kept the public from learning the truth about the political corruption involved in Enron’s rise and decline.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C.
“Rubin had always been an advocate of being more aggressive in the capital markets arena. He would say, ‘You have to take more risk if you want to earn more.’ ”
It appeared to be a good time for building up Citigroup’s C.D.O. business. As the housing market around the country took flight, the C.D.O. market also grew apace as more and more mortgages were pooled together into newfangled securities.
This comes out, now that they know that Lord Burqa has picked someone else for SecTreas. And of course after the election.
Rubin, another "smartest guy in the room" turns out, like the rest of the Goldman lackies, to be the dumbest guy in the room. I found this to be telling:
Asked then whether he had made any mistakes during his tenure at Citigroup, he offered a tentative response... “I’ve thought a lot about that,” he said. “I honestly don’t know. In hindsight, there are a lot of things we’d do differently. But in the context of the facts as I knew them and my role, I’m inclined to think probably not.”
What arrogance. Not only does he not think he did anything wrong, but he doesn't even think he made any mistakes.
I don’t know how dumb he is. He made $100s of millions of dollars while working there.
very interesting, yes.
to be fair, months ago there was a sunday business article of some length with the tone of
“if you’re so smart robert, why didn’t you see this coming?”
but today’s article specifically blames charles prince and robert rubin for the extraordinary risk taking.
The real culprits here were the rating agencies, Standard & Poors and Moody’s who told the financial world that these were safe investments.
Of course, they didn’t have any skin in the game . . and were paid handsomely to rate these “securities”.
If they had assessed them properly, this whole debacle could never have gotten started in the first place.
If we bail these crooks out, I want the top 10% of their management team fired.
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