Robert Rubin returns
www.politico.com
By: Eamon Javers
April 8, 2010 04:49 AM EDT ________________________
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Former Treasury Secretary Robert Rubin — who watched his reputation as an economic titan shatter after he left the Clinton White House — is decidedly out of favor in the nation’s capital.
Except for one place — the Obama administration.
Behind the scenes, Rubin still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team. He speaks regularly to Treasury Secretary Timothy Geithner, who once worked for Rubin at Treasury.
According to Geithner’s public calendar, the treasury secretary spoke or met with Rubin at least four times in the first six months of Geithner’s tenure. Three of those chats, including an hourlong session in Rubin’s New York office, came before President Obama released his Wall Street regulatory reform proposal in June 2009.
Rubin’s is a discreet kind of influence, though, because the veteran Wall Street hand is still dealing with the fallout from his post-White House career. He took a job at Citigroup, where the bank’s collapse was averted only by the injection of $45 billion in taxpayer bailout cash.
And on Thursday, he had to answer for his actions at Citigroup before the congressionally created Financial Crisis Inquiry Commission, which is exploring the roots of the 2008 global meltdown.
Rubin said he “deeply regrets” that he didn’t see the financial crisis coming in his role as a $15 million per year senior financial statesman at Citigroup. “Almost all of us involved in the financial system, including financial firms, regulators, ratings agencies, analysts and commentators missed the powerful combination of forces at work and the serious possibility of a massive crisis,” Rubin said. “We all bear responsibility for not recognizing this, and I deeply regret that.”
But it’s not just his time at Citigroup that has tarnished Rubin’s image. Some of the ideas he espoused at Treasury in the go-go 1990s — such an aggressive push to deregulate financial markets — were blamed by some people for the recent financial meltdown.
And as Obama battles critics on the left who believe his financial reform push lets Wall Street off the hook, his team can’t afford to be seen taking advice from Rubin — who won a reputation among his party’s liberals as too pro-market and too anti-worker.
“The people whose careers he cultivated are now doing all these things, but Rubin can’t be the kind of sounding board he had been,” said a senior administration official.
“Rubin’s being a lot more careful about who he talks to in government and what he talks about,” the official said. “But it’s not like you can say, ‘Oh, I’m never going to talk to that guy again.’”
Still, with his legion of former employees and regular phone calls, Rubin remains influential in the capital.
The long list of Rubin acolytes working for Obama includes National Economic Council Director Larry Summers, Geithner counselor Gene Sperling, Budget Director Peter Orszag, Deputy Assistant to the President Michael Froman (who worked with Rubin at Treasury and at Citigroup), National Economic Council official Jason Furman, Deputy National Security Adviser Tom Donilon and Gary Gensler, the head of the Commodity Futures Trading Commission. Summers and many of the other officials also get regular phone calls from Rubin.
Also, many of the basic assumptions underlying Obama’s approach to the economy can be traced to Rubin’s ideas about the way capitalism should work, say former colleagues.
Although Obama’s team faces very different economic circumstances than Rubin did at Treasury, “the basic philosophy of free-market liberalism is still there,” said Alice Rivlin, who worked with Rubin when she ran Bill Clinton’s Office of Management and Budget.
“If I were running things again, I would certainly want to know what Bob Rubin thought,” Rivlin said. “I wouldn’t necessarily do it, but I’d want to know what he thought.”
Rubin’s critics say they see his fingerprints on proposals in Obama’s regulatory reform agenda. Obama would force derivatives trades onto a public exchange — but still leave Wall Street free to keep “nonstandard” trades hidden from public view. And critics complain that the administration’s resistance to calls to break up the too-big-to-fail banks is classic Rubin. Rubin declined to comment.
Rubin’s tattered reputation is a far cry from where it stood a decade ago, when Rubin, then-Federal Reserve Chairman Alan Greenspan and then-Deputy Treasury Secretary Larry Summers appeared in an iconic image on the cover of Time magazine after the successful bailout of the Mexican economy, under the headline “The Committee to Save the World.”
Greenspan testified Wednesday before the crisis committee, saying he was right 70 percent of the time during his 21 years in public service. That’s a humbling admission from the man once lauded in a book by Bob Woodward called “Maestro.”
Rubin’s record, too, has been tarnished, to the point that it raised eyebrows inside the Obama administration when CFTC chief Gensler invoked Rubin’s name in a recent interview. “What’s so marvelous about Bob,” Gensler told The New York Times in March, is that “he fostered in people the ability to think. He wanted to hear differing ideas.”
That’s not something many others will say out loud. Gensler “was one of the few people willing to go on the record saying he likes Bob Rubin,” said the senior administration official. “But privately, there’s still a huge amount of respect for Rubin’s thinking.”
The mere mention of Rubin’s name invokes cringes on the political left — where “Rubinomics” is derided as an approach that coddles Wall Street at the expense of Main Street.
“This is the guy whose policies basically allowed Wall Street to play Russian roulette with our future, and now millions of Americans are out of work as a result,” said Daniel Pedrotty, director of the AFL-CIO’s office of investment. “He took his money and fled the scene of the crime.”
Executive pay is one area in which Rubin is very likely to come under fire from the commission. New York Times columnist Andrew Ross Sorkin excoriated Rubin on Tuesday for giving outgoing Citi CEO Chuck Prince a $12.5 million bonus even though the company was nearly destroyed under Prince’s leadership.
In his book “The Sellout,” Charles Gasparino argues that Rubin was largely responsible for driving Citigroup’s appetite for risky trades into dangerous territory.
But sources close to Rubin say the former treasury chief isn’t the type to sweat such criticism. Famous for drawing out the pros and cons of any issue on a yellow legal pad and methodically working out the best course of action, Rubin has always been able to maintain a level of intellectual detachment.
“I get the sense that he’s comfortable with his role at Citi,” said a financial industry executive who knows Rubin. “There’s not a lot of angst there. He’s an extremely calm guy.”
Kenneth Posner, the former head of Morgan Stanley's financial services research group and author of the book "Stalking the Black Swan," said he’s wary of placing too much blame on any one of the officials who held office before the crash. “I don’t think it’s about Rubin, or even Greenspan,” Posner said. “The price we pay for a market economy is uncertainty and even surprise.”
Today, Rubin spends the bulk of his time in an office he pays for himself at the Council on Foreign Relations headquarters in New York’s Upper East Side. As co-chairman of the board, he spends his time talking about China and Russia with Henry Kissinger and African development ideas with Kofi Annan. He is the chairman of the Local Initiatives Service Corp., a community development organization. He’s also vice chairman of Mount Sinai Hospital, sits on Harvard’s governing board and oversees the Hamilton Project, an economic initiative of the Brookings Institution.
And in December, he wrote a lengthy article for Newsweek in which he urged Washington not to give up on the global economy. Very few global prognosticators, he wrote, foresaw the possibility of a “megacrisis.”
“I regret that I, too, didn't see the potential for such extreme conditions despite my many years involved in financial matters and my concern for market excesses,” Rubin wrote.
And he warned of a new crisis stemming from a massive federal budget deficit that has grown under Obama. “This cannot continue indefinitely,” Rubin wrote, “and change can occur with great force — and unpredictable timing.”
Alexandra Arkin contributed to this report.
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Unfreaking real. Hope & Change? GMAFB!
