Did Rubin really say that?

By Felix Salmon
March 4, 2010
This Huffpo article has no byline, and the quote is mostly an indirect one, but if Bob Rubin said anything like this he deserves all the pillorying that he's getting, and more:

Much of the blame for the current crisis falls on the shoulders of the fiscal policy decisions of the Bush administration, Rubin said, under which "we lost a decade to some extent."

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This Huffpo article has no byline, and the quote is mostly an indirect one, but if Bob Rubin said anything like this he deserves all the pillorying that he’s getting, and more:

Much of the blame for the current crisis falls on the shoulders of the fiscal policy decisions of the Bush administration, Rubin said, under which “we lost a decade to some extent.”

Rubin, here, is conflating three different issues to make himself look good. It’s true that the Bush administration made bad decisions from a fiscal-policy perspective, cutting taxes massively just as it was about to spend trillions on going to war. And it’s also true that the Bush decade was a lost one. But it’s simply not true that the Bush administration can or should shoulder the blame for the crisis. Frankly, Rubin himself is much more blameworthy in that regard than Bush or any of his appointees.

There’s a lot of blame to go around when it comes to this crisis, of course. But let’s see who deserves huge chunks of it:

  • Traders at investment banks, who levered up and started making so much money that they ended up ousting the investment bankers who had historically run them.
  • Arbitrageurs who made enormous sums of money by making leveraged bets that something with a 95% chance of happening was, indeed, going to happen.
  • Senior management at investment banks, who urged their traders to take on ever more risk and leverage.
  • Senior US politicians who urged the deregulation of the derivatives industry over the objections of, among others, Brooksley Born.
  • Senior US politicians who were responsible for dismantling Glass-Steagal.
  • Senior US politicians who ran US fiscal policy for the benefit of Wall Street, while asking for nothing but cheap debt in return.
  • Bankers-turned-politicians-turned-bankers who institutionalized the revolving door between Wall Street and Washington, making it clear that if you did the banking industry’s bidding during your tenure in DC, you’d be rewarded on the other side with a highly remunerative job.
  • Senior executives at big commercial banks who had no idea what risks they were running.
  • Senior executives at big commercial banks who urged their fixed-income departments to take on ever-increasing amounts of risk.
  • Board members at big commercial banks who failed to implement any kind of succession strategy should their CEO suddenly have to leave.
  • Grandees who bullied lesser mortals into doing what they wanted just because everybody assumed they knew what they were talking about and because they were paid eight-figure salaries to just sit around and be grand.
  • People so blind to their own weaknesses that even after the crisis happened, they refused to admit any responsibility for it at all.

You’re probably getting the picture by now: Robert Rubin, Goldman Sachs arbitrageur and chairman, US treasury secretary, and Citigroup grandee, was the Forrest Gump of this crisis, turning up in all the key places at all the key times. The fact that he’s still trying to deflect blame off himself and onto the hapless George W Bush is simply pathetic. There’s more than enough bad stuff to pin on Bush that he really shouldn’t blame the crisis on him as well. Especially not when he’s so personally culpable for the crisis. Indeed, there’s probably no one individual, with the possible exception of Alan Greenspan, who deserves more blame for this crisis than Rubin does. Let’s not lose sight of that.

Update: The byline was originally left off by mistake: credit for the HuffPo article goes to Grace Kiser.


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What? No blame for consumers who spent beyond their means? Surely this is just an oversight. Personally, I think none of it would have happened if we, as individuals, acted responsibly with our personal finances. Don’t get me wrong, all the people Mr. Salmon names are predators, but we made it easy for them.

Posted by silliness | Report as abusive

Problem: when everyone is at fault, nobody is. The situation with the credit crisis is really no different than the finding that 70% of all car accidents are caused by the other driver. Most people have enough mental flexibility to grasp the concept of partial liability as it applies to someone else, but less as it applies to themselves. The implied quest of your remarks – to get people to stop pointing fingers at other – is hopeless.

Posted by Greycap | Report as abusive

Maybe a more informative (and shorter?) list would be the people who don’t share blame…

Posted by drewbie | Report as abusive

It starts with Act One: the dimension of the crisis, estimated to be a 15-figure one. From there continues Act Two wherein nobody, Rubin included, wants to be the first one tossed off the gravy train. And so in Act Three begin allegations of finger-pointing being futile. But this tragedy’s by no means over yet, and it’s downhill all the way from here on in.

There’s absolutely no way to exonerate Bush, but neither is there a point in understating the impact which decades-long bipartisan financial industry-wide overlays of implausible deniability have had, behind which lurks venality so completely stinking corrupt, nobody even remotely connected with it (and who isn’t?) wants the inevitable task of slaying the whole damn wyvern, not even for the sake of mankind.

Nope. The chorus of accomplices would rather ply it with doggie treats and take bets on who gets eaten next.

Posted by HBC | Report as abusive

There are many people and many specific policies we can blame for the recent and present crisis, but one huge factor is constantly overlooked: the Clinton surpluses. In fact, this contributing factor is now put forward by people like Rubin as the solution to our difficulties. Those surpluses are what kicked off the whole rotten affair.

When the government runs a surplus it destroys net financial assets. If the private sector desires to net save (invest) – and it almost always does – then the desired savings must be funded from some other source. In a nation with a current account deficit savings can only be funded through credit expansion or lower output. The Clinton surpluses gave us both: a recession in 2000-2001 and an explosion of private sector debt following – helped along of course by an absurd monetary policy (Greenspan) and an abdication of regulatory responsibility (Bush).

Anyone who advocates running a federal budget surplus or even a balanced federal budget in our present circumstances doesn’t know what they are talking about. The federal government should probably run a perpetual deficit as long as the private sector has a desire to net save.

Posted by Sensei | Report as abusive

At least, Greenspan was honest enough to admit, before Congress too (!), that he made a mistake. (BTW, not “mistakes were made”.) One can hardly help but respect that honesty.

Rubin, in contrast, is everything but! Why isn’t he deep in soul-searching mode, for the catastrophe he and his cohort brought onto all of us?? In fact, why should someone like him, whose economic philosophy has been proven wrong beyond doubt, still have the podium? Why would anyone listen to HIM at this point is simply beyond me!

It’s exactly like the media keeps inviting those who cheered us into the Iraq nightmare back to comment on current affairs. What on earth happened to accountability? Or have we collectively become so short-attention spanned that we can’t remember those who just punked us, like, a minute ago, and we keep buying their b.s.?? God help us, coz we’re beyond other kind of help.

Posted by jian1312 | Report as abusive

Are the bullet points cut off at the right side for anyone else?

Posted by ishmaeldaro | Report as abusive